Has ITV got past first Grade
There are various ways to assess Grade's first 12 months.
Some will look at the share price down to 78.1p from 112.5p on the day before his appointment was announced. Others will point to the campaign to have BSkyB ousted from ITV's share register. There is also his handling of the premium rate phone in ruckus.
Perhaps it is best to measure Grade's progress against his own wish list. As far as his desire for a strong BBC is concerned, that's no longer in his gift. But the former chairman of the BBC governors is probably satisfied with Auntie's output. More pressing has been his desire to address the regulators. Here, Grade's considerable lobbying skills seem to have pandora bracelets for women scored his biggest successes so far.
John Hutton, the Business Secretary, is likely to announce later this month that BSkyB must reduce its 17.9 per cent stake in ITV; tomorrow is the deadline for submissions to Hutton on this matter from interested parties.
Grade has also won a review of the Contract Rights Renewal mechanism, which shackles ITV's ability to compete for advertising income. The Office of Fair Trading will begin its investigation this month, and a change in ITV's favour looks likely.
Finally, there is the campaign to get rid of the few remaining quotas for producing regional programming, news and current affairs. Grade is pushing at an open door on this one. When Britain goes entirely multi channel in 2012, ITV will no longer have the privilege of being one of a select handful of terrestrial broadcasters. In this environment, keeping commercial operators to public service quotas will become untenable.
Lorna Tilbian, the head media analyst at Numis Securities, says that the only thing holding ITV back this year will be fears of a recession. "Were it not for the current macro economic backdrop, Michael would be in serious danger of recapturing ITV's old golden virtuous circle better programming, bigger audiences, higher advertising revenues, all ploughed back for even more of the same," she says.
But ITV1 trailed BBC1 in the Christmas ratings, and Grade has yet to show that he can find five blockbuster dramas. He will be hoping for a hit next month with Rock Rivals, a fictional tale of two TV talent show judges whose marriage falls apart.
What jewelry armoire about his succession? Securing the services of advertising guru Rupert Howell as commercial director and Dawn Airey, the former Sky executive, to run the production business was a coup for Grade. In Airey, he has an obvious candidate to succeed him when he retreats to the role of non executive chairman. The handover is likely to happen in a couple of years' time.
But will there be a healthy business to pass on when the time comes? The City thinks ITV must become less dependent on advertising revenues from ITV1. Of the group's turnover of 2. 2bn for 2006, the main channel brought in 1. 3bn from advertisers, 181m less than the year before. To counter that trend, Grade wants to double the income from making shows pandora shopping online and selling formats at home and abroad to 1.2bn by 2012.
Investors also expect development of a digital strategy.
Income from the digital channels is growing. ITV2 is already bigger than Sky One, and for the past couple of years has been trying to overtake Five to become the third most popular network among viewers aged 16 to 34. Grade reiterated that goal in September.
Phil Georgiadis, the chairman and chief executive of Walker Media, which buys advertising on behalf of Marks Spencer among others, says digital matters are a distraction and ITV's best hope is in doing what it has always done best.
"We still spend a lot of time watching television. There is more gold in the old hills," he says. "What Grade should be doing is getting the share that television enjoys of all advertising up."
Roger Parry, the serial media executive who put himself forward for the ITV job in 2006, contends that Grade has not been radical enough in moving away from the old business model.
He thinks that ITV should be split into two companies channels and production and that picking a fight with Sky over its stake was the wrong thing to do. With Murdoch forbidden by British law to seize full control of ITV, Sky's holding provided a bulwark against other unsolicited approaches for the company, Parry believes.
Parry sums up year one with a disaster metaphor: "The lights on the Titanic are now burning brighter, the new captain has everybody cheap pandora charms and bracelets in great spirits, the food has improved but the iceberg is still exactly where it was and the ship has not yet changed course."
Grade has made many of the
right noises, but ITV's share price remains a long way off the 135p at which his own options begin to pay out. That target must also be on his personal wish list, but it looks unlikely to be fulfilled this year.
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