The Big Question: Will appointing a new chairman be enough to end ITV's problems?
Thursday 19 November 2009
Why are we asking this now?
Britain's biggest commercial broadcaster yesterday unveiled its new chairman, Archie Norman, the former Conservative MP and chairman of the Asda supermarket chain. He described the job as an "irresistible challenge" and will replace Michael Grade, who steps down as executive chairman in January.
What was the reaction in the television industry and in the City?
Largely enthusiastic, thanks to Norman's reputation for turning around struggling businesses. The future of ITV remains in doubt but investors were encouraged and the share price for ITV plc climbed to its highest level since September on the back of the news. Sky News business presenter Jeff Randall described the appointment as "a bit of a coup".
Television production companies seemed heartened by the arrival of someone with a business track record in giving the consumer masses what they want. And with the Conservatives ahead in the polls, and threatening to impose cuts on the BBC, some observers – including David Elstein, the former chief executive of Channel Five - thought ITV had been smart in appointing a renowned Tory. Norman, briefly a shadow cabinet member, was a major force in the early days of the party's modernisation project.
Was Norman the obvious choice?
Not at all. The process of filling this apparently prestigious post has bordered on the farcical. The former BSkyB chief executive Tony Ball had been expected to take the role but, after endless negotiations, ITV decided they were unable to meet his pay demands. Sir Michael Bishop, the founder of the BMI airline, was another who turned down the job, as did Sir Crispin Davis, the former head of the global publishing company Reed Elsevier. Bob Wigley, a former Merrill Lynch banker, was reportedly heading a new shortlist, and so Norman's appointment came as something of a surprise. Channel 4 have endured similar difficulties in finding a chairman, finally taking on Lord Burns earlier this month.
What will a new chairman mean for programming at ITV?
Well, Archie Norman has no experience of working in broadcasting, but that doesn't necessarily matter. For that, he has Peter Fincham, the ITV director of television. The broadcaster's flagship channel, ITV1, is already enjoying a remarkable resurgence, especially at weekends, and is the only terrestrial channel to have increased its share of peaktime viewing this autumn.
It benefits hugely from its relationship with Simon Cowell and Fremantle Media in producing The X Factor, which, despite being in its sixth series, is dominating the weekend schedule. On Saturdays, helped by the ongoing drama around the twin contestants John and Edward Grimes, it has beaten the BBC's Strictly Come Dancing in the ratings battle, with over 14m viewers. Even bigger audiences – peaking at 16.6m – are tuning in on Sundays for the follow-up results show, with around 10m staying with the channel for the reality show I'm a Celebrity... Get Me Out of Here, which dates back to 2002 but is benefiting this year from the return to the jungle of the model Katie Price.
Although these are long-running formats, Fincham has been able to put their popularity at the core of a wider marketing strategy that bills ITV1 as "the home of entertainment". Those shows have also been crucial in driving audiences to the digital channel ITV2 and to itv.com.
Isn't that mostly about Simon Cowell?
Obviously Cowell is very important. That's why he's on a £20m "golden handcuffs" deal that runs to the end of this year and makes him the highest paid British television star of all time. In the spring another Cowell show, Britain's Got Talent, will give ITV a further lift. But the broadcaster argues that it also has the five most-watched new dramas of this year.
What does the public make of all this?
Michael Grade's claims that the relentlessly downbeat press commentary that haunts ITV does not reflect the business he has been running didn't convince the media industry. But ITV is still generally well thought of by the mass television audience. A recent poll by the Fresh Minds consultancy and Marketing magazine made it Britain's most loved media brand, with 73 per cent of respondents saying they either "love" or "like somewhat" ITV.
So does that mean ITV's fortunes are finally and definitely improving?
To some degree. The broadcaster announced recently that it expects advertising revenues to grow next month, for the first time in 18 months. The chief operating officer, John Cresswell, predicted a 4 per cent year-on-year growth and said that "ITV is continuing to outperform the market", though he was not sufficiently confident to say the company was definitely on an upward curve.
The BBC welcomes a stronger ITV – which helps to counteract the idea that the corporation has grown too big – and believes it is playing an active role in the commercial broadcaster's improved fortunes, such as by not scheduling competitively against The X Factor's Sunday results show. But in many areas, such as news and current affairs, ITV clearly struggles to compete with its old rival. It even failed to provide live coverage of the inauguration of Barack Obama.
What's the bigger picture?
Still not good. Despite the green shoots, ITV made a pre-tax loss of £105m in the first half of this year. Though the share price was 53.75p at close of trading yesterday – from 23p in February – it once stood at 148p, when Carlton first merged with Granada more than five years ago. At the start of this year it was forced to slash 1,000 jobs, including 430 in the news division, in a bid to save £75m by next year. With advertising revenues in freefall, Rupert Howell, the experienced adman who is ITV's managing director of brand and commercial, admitted it was "scrapping for its life".
ITV is laden with debt. Its £2.1bn pension scheme had a funding deficit of £646m when it was last valued in December and ITV has agreed to pay £150m into the fund over five years. Although the company recently announced it would raise £120m by issuing bonds to lift debt, and has decided against selling off SDN, its digital channel operator, the outlook remains bleak. It has a €500m bond due for payment in 2011.
Media analyst Patrick Yau told this newspaper last month that ITV had "little strategic option but to continue cutting costs and hope for a recovery". Such a policy would clearly further threaten ITV's production arm, ITV Studios in Manchester, which has already made a series of cutbacks. And the weakness of the amalgamation of broadcasters that constitutes ITV has been further demonstrated by STV suing it for £35m.
What will Norman do next?
His first task will be to fill the vacant post of chief executive. That's not as easy as it sounds - ITV began the search last April.
Are there grounds for thinking ITV still has a bright future?
* With Archie Norman at the helm it has a leader well qualified to turn the business around
* The television advertising market is finally picking up, offering ITV some respite from the financial gloom
* Audiences of over 16m for X Factor show that ITV1 is once again the home of television entertainment
* The company is in severe financial difficulty, with crippling debts and impending funding deficits
* Inevitable future cuts mean that the long-term outlook for programme makers remains grim
* The ITV model no longer works, and the stations that constitute it will inevitably split apart
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