It’s a long way down 

7 August 2008 tbs.pm/931

Viewpoint: Ofcom is key player in ITV drama

So Michael Grade is threatening to hand back ITV plc’s Channel 3 regional licences since it’s now claimed that under the current setup they are starting to become unworkable, but whether or not this is actually an idle threat remains to be seen as to how important Channel 3 still is to ITV.

It’s fair to say that if ITV plc were to carry out the threat of handing back its Channel 3 licences it would make life more uncertain both for itself and for the STV, UTV and Channel licencees that rely on ITV plc’s offerings for the bulk of their output. A Channel 3 ‘vacuum’ in England and Wales would have to be quickly filled by someone at short notice.

If the likes of Coronation Street and Emmerdale were to suddenly go walkies from their Channel 3 position then it could theoretically make the digital switchover process far more painless, but it could alienate a fair number of viewers and the government may not relish the prospect of some voters taking out their grievances at the ballot box come the next election.

The main problem still relates to the infamous contract rights renewal deal (conceived by Granada and Carlton’s previous management in order to allow the Granada-Carlton merger to take place) that was drawn up with the expectation that it would keep ITV in check as a dominant commercial television player.

Unfortunately this prevents ITV plc from making more money when advertisers are deserting the channel during economic hard times, and BSkyB’s shareholding screwed up any quick fix takeover that something like Virgin Media could have performed. But underlying problems would still exist and may have dragged down any potential purchaser.

It’s also hard not to ignore the fact that although regional television production may be highly desirable from a public service perspective, it’s easy to perceive it as an additional overhead from an accountancy viewpoint – Ofcom seems to concur with at least some of ITV’s ongoing desire to cut costs.

However ITV plc’s economic crisis is now starting to reach the stage where fundamentals may start to suffer if the underlying problems aren’t addressed properly; some of these problems (as well as CRR) predate Michael Grade’s appointment, and this certainly helps to complicate matters as to formulating a workable turnaround for the company.

The message from all of this seems to be clear. Michael Grade seems to be trying to use a Channel 3 withdrawal threat as a crowbar in order to try and force the timetable on CRR reform; he’s banking on someone at Ofcom being awake enough to realise this, but the problem seems to be that ITV appears to be crying ‘wolf’ based on its past form.

There’s the real danger for Grade that both Ofcom and government ministers will call ITV’s bluff on this issue, especially as Channel 4 is somehow still managing to make ends meet despite having fewer viewers (and a stronger public service remit), together with the danger that someone else could still profitably take up the Channel 3 franchises.

Perhaps Michael Grade ought to seriously contemplate other radical measures for ITV plc such as splitting the company into production and broadcast divisions and/or splitting ITV1 away from ITV’s other channels, delisting the company from the stock exchange or even the perhaps unthinkable step of handing back selected regional Channel 3 licences.

For one thing, ITV will inevitably have to face up to the fact that the “single ITV experiment” of merging Granada and Carlton under the current terms has ended up being a complete failure because the underlying attitude behind the merger was predominantly financial as opposed to making better television programmes.

The merger resulted in Channel 3’s network programmes either staying the same or getting worse, and ITV plc now has virtually all of its eggs in one basket; when that happens you have to be really sure of what you are doing, and commercial considerations have precluded stronger corrective measures in terms of programming output.

Another conclusion we can draw from this ITV1 fiasco is perhaps surprising but encouraging at the same time, namely that UK television viewers appear to be more discerning than what many people within the media industry still give them credit for.

Expensive acquisitions such as Trinny and Susannah (a very high risk move) have failed miserably for ITV because the cheap ‘knock off’ copies of the BBC’s What Not To Wear format shown in peak time were exactly that and many viewers treated them with equal disdain. (The Emperor’s New Clothes, perhaps?)

Hence restoring ITV’s reputation in terms of programming you can trust has become an even greater uphill struggle – notwithstanding the recent quiz/premium rate fiascos (such as ITV P(l)ay) that have affected everyone – and it’s this combined with the aforementioned other factors that conspire against a recovery within a reasonable timescale.

And it’s also hard not to conclude that if an ITV takeover goes ahead before specific underlying problems are properly addressed, then ITV1 will just end up with bland identikit programming served up by a disinterested parent company that will continue to struggle within a multichannel environment.

So no change there then.