600 jobs to go as ITV slashes costs

ITV confirmed today it is axing 600 jobs and selling its Friends Reunited social networking website.

The company, which has been hit by a fall in advertising, said it planned efficiency savings of £155m this year, rising to £175m in 2010 and £245m in 2011.

Executive chairman Michael Grade said the cuts were due to the "short-term horrors" of the economic downturn, which had seen advertising deteriorate significantly from the end of last year.

He said: "The tough actions we are taking have to be seen against that backdrop. These are unprecedented and extremely difficult times. We have to be focused more on our core business."

Mr Grade said the savings would ensure ITV is in the "best possible shape" when the recession ends.

He maintained that ITV had made "significant operational progress" over the past year, audience share was "inching upwards" and the broadcaster was increasing its advertising market share.

Drama output on ITV will be cut from eight hours a week to seven, but the broadcaster will still be investing a "huge amount" in drama, said Mr Grade.

The company reported pre-tax losses of £2.73bn after it wrote down the value of assets on its balance sheet. Stripping out the exceptional items, profits were down 41 per cent at £167m.

The company also axed the payment of a final dividend to shareholders.

Gerry Morrissey, general secretary of the broadcasting workers' union Bectu, said he was "outraged" at the scale of the job cuts.

"We will do everything we can to protect our members and we will protest to Ofcom about ITV's claim to be investing more in programmes when they are cutting back.

"Michael Grade has abrogated his responsibility to ITV's staff. We desperately need a new management model."

ITV said it would not be giving any details of which programmes or other areas would be affected by the one-hour-a-week reduction in drama.

The firm has already announced it will be scaling back production of Heartbeat and The Royal, which will lead to the closure of one building at its Leeds studios.

Around 150 of the 600 job losses will be in Leeds, it was revealed.

But most of the cuts will be in London, affecting every department and accounting for around 15 per cent of ITV's 4,500-strong workforce.

Jobs being axed include production and back office roles.

Bectu said it believed one-off drama programmes planned from this autumn would now be shelved because of the production cuts.

Changes have already been announced to The Bill, while ITV is believed to have two years of Heartbeat and The Royal episodes in stock.

The union said it believed one of the main studios in Leeds will now be mothballed, with Emmerdale being the only programme produced on the site.

The confirmation of plans to sell Friends Reunited comes little more than three years after ITV bought the business for an initial £120m from founders Steve and Julie Pankhurst, the husband and wife team who set up the website in 2000.

Under the deal, first announced in December 2005, ITV was due to pay up to £55m more this year depending on the performance of the business.

Friends Reunited delivered around half of ITV's £36m online revenues in 2008, but saw its own revenues fall by £4m over the year due to the loss of subscription income as the reunions site relaunched on an advertising-funded basis last May.

Martin McNulty, of online marketing agency Trafficbroker, said: "The shrink in ad revenues at ITV isn't simply the result of a global deterioration in the economy, but reflects a fundamental change in the mindset of advertisers.

"ITV's biggest competitor these days is Google and that's a major cause for concern. Increasingly, companies are switching to performance-based advertising models that remove risk entirely.

"They are demanding to pay for results rather than upfront for an advertisement that may or may not convert. At a time when every penny counts and marketing budgets have to be justified, performance-based channels such as online search and affiliate marketing can save hundreds of thousands of pounds a year."

Staff arriving for work at the studios in Leeds said they had yet to be informed of any job cuts, but many were fearful for their futures.

One woman said: "I don't know anything yet. There's going to be a meeting today and hopefully I'll find out more.

"I'm fairly new so it could be a case of last in, first out."

Another worker said: "We have been expecting this for quite a while, it is not a huge surprise.

"It's pretty gloomy in there but we'll have to wait and see what happens. No one has been told what jobs are going yet."

The leader of Leeds City Council, Andrew Carter, said it was a sad day for the region.

"Unfortunately, this decision isn't a great shock - the rumour mill has been working overtime for several weeks, but I am surprised at the scale of the cuts ITV has announced," he said.

"This is a very sad day for Leeds and Yorkshire as a whole. Our city has had a long association with the production and broadcast of many high quality television programmes and the decision to end that is very disappointing.

"I am pleased that Emmerdale will not be affected and it will continue to be filmed here.

"Today's announcement serves to further prove the massive effect the recession is having and that no sector is immune from problems.

"Obviously, the council will do what it can to help ITV staff find alternative employment and support the continuation of ITV in Leeds."

Speaking outside the Leeds studios, Emmerdale star Chris Chittell, who plays Eric Pollard in the soap, said: "It's a dreadful state of affairs - 34, 35 years of making tremendous programmes here. It's a shame."

The ITV Yorkshire regional news programme Calendar reported on its lunchtime bulletin that 192 jobs would be lost at the site when the television centre was closed.

It said a 90 day consultation process would begin on Friday.