Grade attacks CRR mechanism

ITV's executive chairman calls for 'urgent review' as broadcaster reports 19 per cent decline in profits.

ITV's executive chairman, Michael Grade, has blamed Contract Rights Renewal and a "tough" advertising market for a dramatic slump in both profits and advertising revenues in 2006.

The broadcaster's annual results revealed a drop in underlying pre-tax profits of 19 per cent to £364 million from £452 million the year before.

ITV said the lacklustre TV market and the constraints of CRR had contributed to a 12 per cent drop in ad revenue for ITV1. Total advertising revenues were down by 8 per cent to £1.49 million, and ITV expects a 4.5 per cent drop in the first quarter of 2007.

Grade said: "While we expect this decline to slow and stabilise as multichannel digital television fully replaces analogue, it is probable ITV1 revenues will decline in 2007."

Grade criticised "a lack of innovation" in ITV programming, which he said resulted from a "fear of ratings failure and the punitive consequences that follow under the CRR remedy". He said his immediate priorities were to develop stronger programming and new-media businesses and reduce "overly onerous regulatory constraints", adding that he would lobby hard for an "urgent review" of CRR.

But Jim Marshall, the chairman of the IPA Media Futures Group, said: "The CRR mechanism has to exist to protect advertisers against the dominant position of ITV. I neither understand nor agree with the argument that it has had a detrimental effect on programme quality and innovation."

ITV reported a dip in total revenues to £2.18 billion in 2006 compared with £2.19 billion the previous year. Its operating profit was down from £329 million in 2005 to £264 million. However, its digital channels showed some growth, with revenues up by 41 per cent to £157 million.