Michael Grade and ITV in the firing line over annual results

120x120_1ITV executive chairman Michael Grade is likely to face some tough questions when he unveils his second set of annual results today.

The man expected to “save” the broadcaster has endured a rollercoaster ride since arriving at Grays Inn Road in January last year. The latest twist in an ever-convoluting plot, that would not look out of place in one of ITV’s own soaps, was the ousting of content director Simon Shaps last week in favour of Peter Fincham, the BBC1 controller who fell on his sword last year over the “Crowngate” affair.

Shaps, who apparently had a hand in choosing his successor, is said by the broadcaster to have only ever wanted to do three years in the role. But others caustically suggest his departure is due to “disappointing” figures for heavily hyped new shows – the cornerstone of Grade’s content-led recovery. That Grade made the announcement last Thursday ahead of today’s results is telling. One source suggests he wanted to allay City criticisms ahead of their arrival. Others point to the other, seemingly less remarkable aspects of Thursday’s announcement. Grade himself has agreed to stay as executive chairman until the end of 2010, one year longer than his original three-year term.

ITV has also promoted – perhaps as a sop for Grade’s year-long extension – managing director of brand and commercial Rupert Howell and Dawn Airey, managing director of global content, to the board. They join chief operating officer John Cresswell, himself relieved of his finance director duties, in what one observer describes as a “Machiavellian” move on Grade’s part to ramp up the battle for his succession.

One rival broadcaster says: “Airey is a breath of fresh air – blustery, noisy and not afraid to make changes. Howell thinks differently. They’ve been good appointments for ITV, but Grade has set up a Machiavellian struggle between the two and Cresswell, which will be interesting to watch. These are three people who really have to work together – and at least two of them are hugely ambitious and want that top job at all costs.”

However, another argues that such a power struggle could take focus away from the business. “He [Grade] has promised another year of politicking,” says the source, adding that Fincham will himself ask for a year’s grace before he should be judged.

It is interesting, notes another, that all three of Grade’s major appointments – Fincham, Airey and Howell – have been executives out of jobs at the time he picked them. As one City analyst says: “Grade has bought himself some time.”

Fincham left the BBC last year over a “fake” trailer, supposedly showing the Queen storming off. He paid the price for almost a year of controversy across the broadcasting industry, which saw all the main players attacked for fakery and fraudulent behaviour in either programme editing or unfair premium rate competitions.
At the same time Shaps was labelled the “luckiest man in TV”, keeping hold of his job, despite calls for his head, following the Deloitte review into ITV’s activities, which uncovered a number of mistakes involving some of the broadcaster’s top shows and presenters.

The analyst says that Fincham brings with him a reputation, but he worries that this focuses on light entertainment, rather than the “quality drama” he believes the broadcaster should be investing in.

He says: “This content-led revolution has been promised time and again. But it doesn’t seem to be able to do it – it can’t wean itself off the cheap fix. That low-quality but low-cost product is a short-term fix in terms of audiences, but provides little in terms of value. You have to leverage your unfair advantages in this world, and for ITV it’s the ability to outspend its commercial rivals on content.”

Grade set out his three- to five-year strategy, focused on leveraging content in September last year. But ambitious projects, such as the interlinked drama and soap Moving Wallpaper/Echo Beach, failed to gain big audiences, which some suggest is because they were being aired on the “wrong channel”. One industry executive says: “ITV can’t do postmodernism like Channel 4 does, and nor should it – it’s a great, loveable beast.” He suggests a concentration on a “sassy, ensemble drama in the mould of Cold Feet” is where ITV should be aiming.

Another suggests that Grade is “stuck in the Eighties” and that, ultimately, is where his content-led revival is going wrong: “It was all about News at Ten and the soaps – like reading a newspaper from ten or 20 years ago. You cannot lead a content strategy with a scheduling strategy any more – it’s bonkers. Today is a different, on-demand world.”

Howell, however, insisted at last week’s Incorporated Society of British Advertisers (ISBA) conference that scheduling changes had gone “very well”, yet declined to comment further. He appeared alone at the event, which Grade was supposed to have headlined a year on from the rabble-rousing speech he gave just weeks after taking up his post.

The commercial broadcaster also faces growing pressure over its share price, which this week hit a record low of 64.5p. The recent saga with BSkyB’s controversial 17.9% stake in ITV has done little to help, with the Government’s decision to force Sky to scale back its holding, dampening the stock further. Meanwhile, rumours have resurfaced about takeover interest from private equity companies such as Apax, Kohlberg Kravis Roberts and Provident, and much hangs on today’s results.

But it is not all doom and gloom for the broadcaster. Rivals and media agencies point to the success of its digital channels. In fact, they predict that for the first time since the Contract Rights Renewal (CRR) trading mechanism was introduced, ITV will not lose a pound of advertising revenue. Expectations are that every pound that ITV1 loses will be respent across ITV World.

Ironically, such a prediction comes at a time when the broadcaster has finally convinced regulators to review CRR, which was put in place to stop ITV abusing its dominant trading position as a condition of the merger of Carlton and Granada. ITV can also point to growth online, although its much-vaunted online TV player has been considerably outgunned by the success of the BBC’s iPlayer rival.

Nevertheless, Grade is unlikely to enjoy a repeat of the standing ovation he received when he first walked through ITV headquarters. He must, however, prove he has not squandered all of that goodwill.

As one agency head says: “At the beginning of the year everything ITV was doing was brave and good, and rightfully got plaudits. That those brave decisions haven’t [come] off and that management is seen to be doing something about it is also encouraging. But ITV seems reluctant to publicly take any blame, and that is a shame because it means there is a danger of all that good work being flawed.”

The former BBC chairman may have bought himself extra time, but he must ensure his supporters do not run out of patience.

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