The AFP alternative to dodgy phone calls

To take up where we ended last week, more good news for Channel 4’s Andy Duncan. Not only have Sir Richard Branson’s antics continued to grab the headlines for Virgin Media, so masking his own recent travails, but there has been a shift in gravity over the growing premium interactive services scandal – and it’s in his favour.

Any consternation caused by what may or may not have happened on the Richard & Judy show has been overshadowed by a rash of suspected malpractice on ITV programmes. Icstis, the premium rate phone lines regulator, has launched an inquiry into Ant & Dec’s Saturday Night Takeaway, while ITV has felt compelled to suspend premium interactive services across all its channels until further notice.

These developments could not have unravelled at a worse time for ITV: the eve of its preliminary results announcement. Newly installed chief executive Michael Grade will have been hoping to paint a broadly upbeat vision of ITV on the path of recovery. Instead, he faces a tiresome distraction.

In fact, more than a distraction. These premium interactive services form an increasingly important part of ITV’s revenue diversification strategy (much more important, for example, than the corresponding revenue strand at C4). The fact that they have been beached temporarily is certainly a setback, but matters less than the flaw exposed in ITV’s strategy.

A squeeze on spot revenues, exaggerated by the growing liability of contract rights renewal, makes diversification understandably attractive. But it has been a highly selective diversification; one which has preferred, as if fixing on some cheap drug, the apparently low-cost blandishments of phone revenues over ostensibly more difficult choices.

One of these alternatives has been advertiser-funded programming (AFP). Grade’s distaste for the subject was clear at last week’s Thinkbox Experience TV conference. "We don’t tell you how to make commercials," he thundered, "and you don’t tell us how to make programmes." Of course, at one level he is quite right to be hostile. Advertiser participation in the creation of content does indeed run the risk of programme contamination. The danger lies not in the obvious area of crypto-product placement but in a clash of strategic objectives. While programme makers peddle excitement and entertainment, advertisers peddle sales – which can be a pretty stultifying turn-off for the viewer.

Even so, Grade’s attitude has a whiff of yesteryear about it. The expansion of multichannel, and the relative dearth of new content, makes some sort of compromise inevitable. That doesn’t imply AFP on peak-time terrestrial TV perhaps, but it could increasingly mean such content on digital channels, where the viewer profile is more focused. An example of this prospective collaboration may be found at UKTV Food (co-owned, interestingly enough, by the BBC) which expects to be 20% advertiser-funded by 2010.

A nice little alternative earner in the making, and one unlikely to involve a full-scale investigation into malpractice.