MEDIA FORUM: Will ITV's latest plans redefine digital broadcasting? If it isn't consolidating, then it's restructuring. Just how significant is the new strategy for the future of the ITV network, Alasdair Reid asks

Last week, Charles Allen, the chairman of Granada, called it 'the

most fundamental change in British broadcasting since the launch of

multi-channel television'. Michael Green, his opposite number (and

ever-closer strategic partner) at Carlton Communications, talked of

'leapfrogging the BBC and Sky'.



Big talk, gentlemen. Very big talk indeed. Is it really that big a

deal?



On the face of it, last week's announcements on the future of various

ITV properties add up to a significant landmark in commercial

broadcasting - noteworthy even given the fact that ITV's diminishing

family of controlling interests seems to contrive yet another landmark

deal every couple of months.



Structurally, its most important provision is the rebranding of

ONdigital as ITV Digital; and on the personnel side the biggest news is

the appointment of Stuart Prebble, previously the chief executive of

ONdigital, to the long-vacant role of ITV chief executive. Look on it as

a reverse takeover.



ITV's main players will continue to pool resources as far as they are

allowed within the letter of the law. Continued streamlining of

management structures will enable the family of ITV channels to be

strengthened and expanded. There will be more cross-promotion and

support of ITV2, for instance, and more importantly, a whole new

channel, ITV Sport, which will showcase live UEFA Champions League

action as well as coverage of the English leagues. Last, and in this

case very definitely least, the network's various online properties will

be merged into ITV.com



So, as advertised by the dynamic duo, does this redefine British

broadcasting?



We'll wait and see but there are some obvious downsides that have been

glossed over in the press handouts. No mention of all the time, effort

and cash spent in trying to build up the ONdigital brand. Sources at Sky

insisted, rather unconvincingly, that they are not ones to gloat - but

they claimed to be downright astounded that a rival could even

contemplate rebranding in the middle of a bitter marketing war.



Many observers agree - and add that this could be interpreted as

ONdigital's last throw of the dice. Is it? For instance, the City's

reaction was largely negative, with the share prices in both Carlton and

Granada dipping. Paul Richards, an analyst with WestLB Panmure, says

that the City reaction was a product of two factors: 'The principle

issue was the immediate outlook for ITV's advertising revenues - and

what has been announced doesn't alter that. May and June are expected to

be down and though people are hoping for an element of recovery later

this year, that isn't something that can be taken for granted. So the

overriding concern is short term.'



The second concern, though, is ONdigital. Richards adds: 'A year ago,

people were happy to stand losses incurred in acquiring subscribers

because a year ago it was presented to us as a low capital cost business

- that is, it wouldn't require the sorts of huge infrastructure

investment that cable did. They were going to buy in their programming

from Sky and with advertising growing we could see them making a return

on this. Now it's clear that the peak funding requirement will be more

than pounds 1 billion and it won't break even for another two to three

years. We've got to be interested in cash flow, dividends and profits.

We have to ask if it's a prudent investment.'



But what of the advertising market? Bob Wootton, the director of media

and advertising affairs at the ISBA, says his reaction is generally

positive. These initiatives strengthen ITV as a whole, which is in the

interests of advertisers. And he looks forward to forging a relationship

with Stuart Prebble. 'It's true that he's not well-known in the

advertising community but he knows the ITV labyrinth,' Wooton says.



But there are some nagging worries for the advertising community, he

insists: 'Our only concern is that every time that developments like

this take place, it gives the ITV spin doctors another opportunity to

talk about the inevitability of there being one (company owning the

whole of) ITV. It's not the case in our minds that there is any

inevitability of there being one ITV.'



Should advertisers continue to be worried about this? Mick Desmond, the

chief executive of Granada Enterprises, doesn't fudge this issue. He

states: 'This isn't in our gift, of course, and we'll wait to see what

the government resolution will be. But the reality is that ITV is moving

to one entity and last week's announcements are one aspect of that. In

terms of the sales environment, there is an inevitability that we will

move to one sales point. It makes sense for us to lobby for that -

that's no secret.



We would argue that it's actually better for advertisers in that we will

be better focused, be able to move quicker and talk with one voice.'



All of which will not exactly be music to advertisers' ears. But will

they take comfort in the fact that there is, at last, an ITV chief

executive in place? Is Prebble advertiser friendly? And is it important

to ITV's sales efforts that he is? 'Certainly,' Desmond continues. 'He

will not only have a clear business model but he will be keen to

maintain relationships with advertisers. It's something we've managed to

maintain in various ways since Richard Eyre (ITV's previous chief

executive) left. I think we have a good track record there and we would

certainly be cutting our own throats if we didn't listen to our

customers. Our relationship with the ISBA and the IPA has been good and

we will want to continue that.'



Jim Marshall, the chief executive of MediaVest, won't quibble with much

of that. He comments: 'My first thoughts were - 'not before time'. From

ITV's point of view, all of this makes eminently good sense. I think

everybody had become confused as to whether ONdigital was principally an

alternative platform to SkyDigital - in which case you can forget about

it - or ITV's vehicle for evolving its own multichannel offering. I

think we're now seeing more of the latter, especially with the new

sports channel, which could be very strong indeed. In the past the

multi-channel offerings from Carlton and Granada have been very

ineffectual and trivial indeed.'



But as with Wootton, there are some caveats. Marshall adds: 'This is

good news from the point of view of ITV having a coherent overall

strategy. But there are some issues that have to be watched - like

cross-channel promotion and the consolidation of ITV's power in the

advertising market. We shouldn't forget in all of this that ITV still

has a huge dominance in commercial television.'



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Digital marketing executives oversee the online marketing strategy for their organisation. They plan and execute digital (including email) marketing campaigns and design, maintain and supply content for the organisation's website(s).