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
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
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.'