Opinion: Perspective - ITV needs clearer digital vision to exploit change

By the time you read this, Charles Allen will probably have unveiled ITV's maiden first-half results and set ITV executives plotting where the next hank of fat is to be trimmed from the broadcaster's financial bones. Alongside a strong set of pre-tax profits - up more than 10 per cent, if the forecasters punted well - further cost-cutting will be high on the ITV agenda.

There's no doubt that there is still some flab in the ITV system but shareholders are looking for more fundamental reductions in, for example, the money ITV pays the Government for its licences and the remaining public service burdens that the channel carries; religious programming is likely to be top of the kill-list.

It's easy to see why such savings matter more than ever. Over the summer, ITV experienced some of its most dismal results in recent years. Its audiences have plummeted, so it is facing a potential £100 million slide in ad revenue next year thanks to the complicated Contract Rights Renewal trading mechanism that was a requisite of the Carlton/Granada merger, and the ITV share price has fallen by nearly a third in the past six months.

Even so, Allen is also peddling an optimistic outlook for advertising sales, with September showing a 7 per cent increase in ad revenue and a surge in money from most major product categories except retail. Such optimism seems premature for a company that admits it is managing terminal decline and whose crucial autumn schedule - on which the economic health of next year depends - is unproven.

After the analysts have had their day with Allen, advertisers will be wanting to know exactly what plan he has to shore up mass commercial audiences and develop the ITV brand into new commercial properties.

What ITV desperately needs is a strategy for growth. Its second channel, ITV2, has just about moved into profit (though not without some possible strong-arming of media buyers by packaging ITV1 and 2 together, something Ofcom could make more difficult once it turns its attention to the airtime trading market next year). And there are plans for a golden-oldies style ITV3 on digital platforms later this year. Sustaining its existing two channels and building a third will require a stronger advertising revenue base, built upon stronger programming and higher audiences - you see the virtuous/vicious circle in which ITV finds itself.

The good news for ITV is that the economics of TV are changing. Anyone attending the "How to get cash from advertisers" session at last month's Edinburgh Festival can be in no doubt that advertisers are a prime target for supplying a new stream of money for programme development. At the same time, programme sponsorship is expanding TV's commercial coffers: a quarter of the new campaigns written about in Campaign last week were for sponsorship idents.

Also last week, ZenithOptimedia and Nielsen joined forces in the US to launch a system tracking product placement exposure in TV programmes; as product placement rules are relaxed over here - as they surely will be - and this sort of brand exposure within the programming can be quantified, it will offer a new commercial vehicle for all parties.

All of which means that ITV has new opportunities to protect and expand its revenues even as viewing fragments across the digital TV spectrum.

The challenge for Allen is to underpin this with a clearer digital vision and the strongest possible line-up of programmes. This autumn, every viewer really counts.

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