Conor Dignam on Broadcasting
With Sky out of the way, all eyes now turn to Michael Grade's ITV
Monday 04 February 2008
Sky's reaction to last week's government ruling that it must cut its 17.9 per cent stake in ITV back to less than 7.5 per cent was one of barely concealed corporate fury.
The Secretary of State for Business, John Hutton, made an enemy of the Murdoch empire for life when he backed the Competition Commission's ruling that Sky should get rid of the shares it acquired for almost £1bn in November 2006.
Sky is spitting feathers at the finding and has until the end of February to appeal, but the most likely outcome is that it will now be forced to sell most of its shares back to the market. The immediate impact of this will be a loss of something like £250m, based on what Sky paid for the shares 14 months ago – and how far ITV's share price has dropped. The shares were bought, of course, by James Murdoch as part of a strategy to wreck a bid by Virgin Media (then known as NTL) to buy ITV.
Many struggled to see the logic of the deal, but the thought of the cable company buying up the UK's biggest commercial free-to-air broadcaster clearly worried Murdoch (at that time Sky's chief executive and now its chairman) enough to provoke a dramatic response.
But in the fallout from all of this, who are the real winners and losers? Sky's aggrieved reaction is more about how the regulators and government are behaving towards it, than the outcome of the transaction itself.
And looked at objectively, one has to have some sympathy for Sky's position.
Murdoch and his team were acting well within the letter of the law when they swooped down and took 17.9 per cent of ITV. The Communications Act had relaxed cross media ownership laws which meant Sky could buy up to 20 per cent of either ITV or Five. Murdoch simply exercised that option and then found that the competition authorities had moved the goal posts. They decided that what really mattered was whether the size of Sky's stake had the potential to undermine ITV's corporate independence and at some point could act to block ITV's board from making a big and bold strategic or investment move. In the meantime, Sky offered to be a passive shareholder, giving up voting rights and any claim to a seat on the board. Unsurprisingly, the competition authorities viewed this offer as a little like putting a sleeping Rottweiler outside ITV's boardroom, promising it was perfectly safe and, perish the thought, would never wake up and bite anyone.
For all the huffing and puffing, Sky emerges from the affair a little bruised but still a winner. It saw off Virgin Media's bid for ITV and the cost in the end may be worth paying.
For Virgin, it looks like the moment has passed. A credit-crunched economy and a slump in media shares suggests there won't be a repeat bid for ITV anytime soon from the cable and mobile company. So Virgin still looks like the biggest loser, in the fallout of its frustrated bid for ITV. And then there's ITV itself. Executive chairman Michael Grade is a man known for his good luck. He certainly had a touch of it when Murdoch decided to invest in ITV shares. The move helped buy time for Grade to get his feet under the desk at Gray's Inn Road and to begin to make his mark. Without Murdoch's intervention it is entirely possible that his first few months in the job could have been taken up with fighting off an unwelcome bid – or his tenure at ITV might have ended almost before it had begun, if the deal had succeeded.
Instead, Grade has had time to work with director of television, Simon Shaps, and put a new strategy for ITV's schedule in place. He has been able to recruit the likes of Dawn Airey to head up ITV Productions and Rupert Howell to look after the commercial side of the business, both highly regarded and likely candidates to become chief executive. He has also been able to get on with doing this while being free of constant speculation about where the next bid for ITV might come from.
Either way, Grade owes Murdoch a debt because Sky's investment has bought him time and space in his role at ITV. Grade's response, of course, has been to lobby the Government to force Sky to dispose of its ITV stake holding.
But they say you should be careful what you wish for – and that could now apply to Grade. He wanted Sky out of the way and it looks likely he will get his wish. But the City, which for the last few months has been preoccupied with the issue of Sky's stake in ITV, will sharply turn its focus back to ITV's performance once the Sky issue is resolved. If ITV wanted to be free of Sky in order to make big and bold decisions – where are they? Restoring News at Ten might grab the headlines, but it doesn't qualify as the kind of move that will really change ITV's fortunes.
Grade has been in his job a year, but with Sky gone , the spotlight will fall on his performance – and where ITV goes from here.
Devolving power, not production, is the key The money's still in London
BBC director general Mark Thompson last week told the Nations and Regions Conference in Salford that by 2026 half of all BBC productions will be made outside the M25. That compares, he said, to broadly a fifth of all production in the mid-1990s.
Half of all BBC staff will also be employed outside London. No one can argue with sentiments and policies that make Britain's national broadcaster truly more national in terms of production, but that is only half the story. Regional production can mean lots of different things. If the crew and cast of a drama arrive in Liverpool or Manchester or Edinburgh and then once the shoot is finished decamp back to London, is that a regional production? Well, it is at the moment.
There's also the question of who will lead the creative exodus out of London. A few years ago there was talk of a big broadcasting figure becoming a "DG of the North", leading the move of BBC staff to Salford and being given a seat on the main BBC board to reflect the importance of the role.
That idea has gone quiet now, and while a creative leader is still being sought, it doesn't look like the role will have quite the same status.
The most serious flaw in the BBC's approach is that TV commissioning decisions and commissioning money still remain in London. The move of key BBC departments and 1,800 staff to Salford does not include any of the BBC's main TV channels: BBC1, BBC2, BBC3 and BBC4 are staying in London. Truly sustainable production centres are built around the key decision making and commissioning money – not just the production work itself, which is why more than 80 per cent of the independent production sector is based in London.
If Thompson really wants a regional revolution he should devolve power, not just production, and move some of these channels out of London. BBC3 and BBC4 in Salford? Now that would be a really significant statement of the BBC's intent. Unless that happens, the real focus of power will remain with the TV commissioning money – back in London.
An absurd plot, but I love it ... Oops!
Am I mad, in a coma, or have I gone back in time? I'm only asking because tonight (BBC1 9pm) Ashes to Ashes arrives bringing the return of Detective Chief Inspector Gene Hunt (Philip Glenister) last seen with his sidekick Sam Tyler (John Simm) in the brilliant Life on Mars. Hunt is now strutting his stuff in London in the Eighties rather than Manchester in the Seventies and Tyler has been replaced by Keeley Hawes as police psychologist Alex Drake. But hang on a minute, weren't Hunt and his police pals all figments of Sam Tyler's imagination? And didn't Tyler, erm, die in the last episode of Life on Mars? So how can Gene Hunt be back and relocated to another city and decade? Oh, it seems that Alex Drake was the psychologist treating Sam Tyler when he came out of his coma – so she knows all the characters – and, you've guessed it, she goes into a coma and meets them all in her own adventures.
It sounds absurd, but I have a feeling it will still be brilliant. I'll be watching it – just to see if Gene Hunt still has "oops" for his tea.
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