TV reality is harsh, Grade must tune in fast

By Alex Brummer, March 26, 2009

Michael Grade almost certainly missed his vocation. Listening to him at fundraising ORT events, he appears a natural for America’s “Borscht Belt” comedians who, before the days of cheap flights to Florida, toured the summer resorts in the Catskills. The ITV executive chairman is in need of every bit of quick wit he has at present.

Having risen to the peak of the establishment as chairman of the BBC in the wake of the clear-out after the Hutton report, he wrongfooted the media world in November 2006 when he abandoned his post to move to ITV.

Created out of the merger of the two remaining ITV franchises, Carlton and Granada, the commercial terrestrial network had suffered under its previous boss Charles Allen — a fervent cost cutter with minimal interest in the creative side of TV. Mr Grade, with a contract potentially worth £10m, vowed to bring back the pizazz to ITV, reintroducing the strong creative values which he felt had been neglected.

His move also reflected his frustration with the changes at the BBC. Under the new post-Hutton arrangements, the governors were to be largely cut off from the corporation, becoming trustees with the role of regulating output and standards.

This did not match Mr Grade’s management talents. In his previous posts at London Weekend Television, as controller of BBC1 and latterly at Channel 4, he developed a reputation for knowing what Britain’s audiences wanted, from the upmarket South Bank Show to the import of Friends at Channel 4. Although he may best be remembered at the station for Daily Mail columnist Paul Johnson’s infamous jibe that he was the nation’s “pornographer in chief”.

The return to ITV began ebulliently enough, with Mr Grade bringing football — the FA Cup and Champions League — back to the network, and focusing on live entertainment such as the X-Factor and Dancing on Ice.

But a rapid series of staff changes suggested that all was not well. Having first backed Simon Shaps as director of television, he replaced him with Peter Fincham, a former controller at the BBC. Channel 5’s Dawn Airey joined as head of global content and left in a flash.

Mr Grade found he had inherited a series of channels working under serious commercial disadvantages. An agreement on advertising sales, reached by his predecessor Mr Allen, capped ITV’s income from commercials. Only now is it slowly being undone by the Competition Commission amid a recession induced slump in advertising. That decision will have to await a Competition Commission report.

Efforts to integrate the social networking site Friends Reunited into TV failed, and it is being sold at a loss. Advertising revenues have been cannibalised by multichannel digital broadcasting, Google and other media outlets.

So it was a sombre, not wisecracking, Mr Grade who delivered the bad news when the company (in which I hold a few shares) reported its 2008 financial results. Profits were down from £281m to £167m and after a balance sheet write-down of assets, the loss was an astonishing £2.7bn. Another 600 staff to add to previous redundancies were to be lost, and creative/production jobs axed along with Yorkshire-made shows Heartbeat and The Royal. The production budget, which Mr Grade had pledged to protect, was to be cut to £135m over the next year.

As Britain’s only mass-market terrestrial broadcaster, ITV clearly has access to an advertising and commercial audience of which cable and digital channels can only dream. So if Mr Grade is successful in getting the advertising revenue caps lifted and there is eventually a recovery in the market, it is hard to believe that the franchise will not claw its way back or be bought.

But there will be additional hard decisions for ITV with a fundraising rights issue of at least £500m on the cards, according to brokers UBS. The station will almost certainly have to wait its turn behind the queue of companies including HSBC, Land Securities and builder Wolseley, which are ahead in the queue.

Mr Grade also faces the wrath of creative staff over the ousting of the broadcaster’s director of factual and entertainment programmes Jim Allen.

The future structure of the company will also partly depend on the fate of the BSkyB stake of nearly 20 per cent, which the satellite broadcaster has been ordered to sell.

As for Mr Grade himself, his ability to remain executive chairman has been severely weakened and his confidence punctured. The executive chairman role is no longer a structure liked by long-term investors and they may well extract a promise to split the job as the price of a rights issue.

Mr Grade may have believed that his return to ITV would see commercial broadcasting restored to the high standards achieved when the franchises were seen as a licence to print money, and his uncle Sir Lew Grade was the doyen of the industry.

But fast changing technology, the advertising price cap and the slump in the global economy mean that he is now operating in a very different space. Survival as an independent broadcaster and rebuilding shareholder value have become the key tests for his leadership.

Last updated: 12:04pm, March 26 2009