MEDIA FORUM: Can ITV restore faith in its reputation as a player? - Can Carlton and Granada just pretend that the ITV Digital saga was all a bad dream or is ITV's credibility beyond repair? Alasdair Reid asks

The sense of relief was almost palpable at Carlton and Granada last week. One or two probably experienced at least a twinge of sadness, and for a handful of others, whose careers have been tarnished by the whole sorry saga, the response was more taciturn but for those whose business is primarily the mainstream ITV1 brand the last chapter in the ITV Digital saga couldn't have come soon enough.

Well you would be relieved, wouldn't you? If only for the reason that it feels rather nice when you stop beating your head against a brick wall.

By and large, the City seems to agree - and although the Carlton and Granada sales prices have been settling down again, they leapt at the initial news that the end was nigh for ITV Digital.

That doesn't always mean very much - we all know how short-term the City can be. But there are many, especially on the commercial side of the two ITV companies, who believe that there is a longer-term dividend here. They have realised that some agencies and advertisers have never taken ITV Digital seriously, seeing it as a flawed concept that was badly managed from day one. So once more, ITV's sales people can go into the negotiation bear pit with their heads held high.

On the other hand, there might be a bit of nip and tuck still left in this one. One airtime trader joked that in the future he will sign off deals in much the same spirit as ITV Digital entered into its Nationwide football contracts.

Simon Wallis, a director of WestLB Panmure, says that the immediate benefits to Carlton and Granada are obvious, but agrees that this isn't the whole issue here. "It's a good move for Carlton and Granada to cut their losses,

he says, "but the downside is independent of what happened to ITV Digital. Just because that failed it doesn't mean that the challenges faced by the players in free-TV have gone away."

Quite. In other words, going backwards isn't really an option. In the 21st century, old-fashioned commercial broadcasters, such as ITV, need some evolutionary direction.

Does it need a new grand plan? Where can the big two look for expansion now? Will this accelerate their merger, subject to regulatory approval, naturally? Or does the lack of strategic manoeuvring space mean it's now more likely they will become takeover targets? And actually, aren't there also major problems now looming in the shorter to medium term? Potentially, there could be all sorts of accidents waiting to happen. If a raft of football clubs go out of business as a result of the refusal or inability of ITV Digital to meet its commitments, then ITV1 might find itself frozen out of living rooms the length and breadth of the country - similar to the treatment meted out to The Sun in Liverpool following the Hillsborough disaster. Some people take their football allegiances very seriously and there has already been a campaign to persuade football fans to boycott advertising around ITV's coverage of the recent Champions League semi-final.

And, come to think of it, the network may now have to work very hard indeed to retain the Champions League rights. ITV sources declined to comment on that - or indeed take part in any way in this Forum - but Mark Jarvis, the broadcast director of Carat, agrees that programming rights could become a problem area for the network.

Jarvis states: "The share price situation is a reflection of what the City thinks will happen to the balance sheets at Carlton and Granada.

And it's also true that recent events have meant a significant amount of senior management time has been taken out of the main ITV business.

Getting more management time behind the main brand has to be a good thing.

But I think there are other sides to this too. For instance, ITV's credibility in programme acquisitions has to be rocked by this. It will have reverberations in sport obviously - for instance, it will impact on future Champions League negotiations - but in other programming areas. It won't necessarily mean that ITV will be excluded, but it will probably mean that they will be charged a premium."

Rights holders, in other words, will want an insurance policy built into any future dealings they have with ITV. Which will have a tangible effect on overheads. Less tangible will be the effect on the main ITV brand and the knock-on effect that could have on audiences.

"The whole business will have an effect too in the minds of consumers. They tried to reposition ITV Digital away from ITV, but it will impact on the ITV brand and that inevitably makes their job a little harder. The brand hasn't been in fine fettle in any case,

Jarvis adds.

However, it's not just about the knock-on effect in the terrestrial market.

Michael Winkler, the European media director of Gillette, is now worried about competition in the pay-TV market: "In the long run it's obviously not in the best interests of advertisers if pay-TV ends up entirely dominated by BSkyB. We have an excellent relationship with Sky, but the majority of their income is from subscription. If they had the whole pay-TV market I imagine that might eventually make them less willing to be flexible."

There's another angle too: "Everybody who subscribes to Sky watches less ITV, so if Sky inherits ITV Digital homes, ITV1 will lose share. It has stopped communicating its targets, but I presume it still has internal targets, and I suspect it may have been struggling to meet them, so the pressure internally will be huge."

Winkler subscribes to the view that stemming the drain in resources will take the pressure off ITV1 programming budgets. Though even this isn't cut and dried. "ITV1 already has the biggest programming budget in the commercial TV sector. It's not just an issue of money,

he says.

Some observers, however, believe that ITV deserves a little bit of breathing space. For instance, Chris Hayward, the TV director of Zenith Media, has more than a little sympathy for Carlton and Granada. Much of the sniping is ill-informed, he suggests, and few really appreciate the political dimension to the whole episode.

"ITV is always an easy target for criticism. For example, there is great sympathy for the Football League in all of this, but they knew right from the start that they'd originally sold it over the odds and then they still got a good offer in recent weeks. Obviously there will be a knock-on effect in terms of people taking a far more calculated view on future projects that ITV might propose. But I think, in general, there's been a whole sense of reality brought to the whole broadcast market. I think everyone's taking on board how vast the entry levels are when we're talking about this sort of project. I don't think ITV are alone in misjudging that."