The Big Question: Will appointing a new chairman be enough to end ITV’s problems?

Author: By Ian Burrell. Media Editor

Why are we asking this now?

Britain’s biggest commercial broadcaster yesterday unveiled its new chairman,
Archie Norman, the former Conservative MP and chairman of the Asda
supermarket chain. He described the job as an “irresistible challenge”
and will replace Michael Grade, who steps down as executive chairman in

What was the reaction in the television industry and in the City?

Largely enthusiastic, thanks to Norman’s reputation for turning around
struggling businesses. The future of ITV remains in doubt but investors were
encouraged and the share price for ITV plc climbed to its highest level
since September on the back of the news. Sky News business presenter Jeff
Randall described the appointment as “a bit of a coup”.

Television production companies seemed heartened by the arrival of someone
with a business track record in giving the consumer masses what they want.
And with the Conservatives ahead in the polls, and threatening to impose
cuts on the BBC, some observers ? including David Elstein, the former chief
executive of Channel Five – thought ITV had been smart in appointing a
renowned Tory. Norman, briefly a shadow cabinet member, was a major force in
the early days of the party’s modernisation project.

Was Norman the obvious choice?

Not at all. The process of filling this apparently prestigious post has
bordered on the farcical. The former BSkyB chief executive Tony Ball had
been expected to take the role but, after endless negotiations, ITV decided
they were unable to meet his pay demands. Sir Michael Bishop, the founder of
the BMI airline, was another who turned down the job, as did Sir Crispin
Davis, the former head of the global publishing company Reed Elsevier. Bob
Wigley, a former Merrill Lynch banker, was reportedly heading a new
shortlist, and so Norman’s appointment came as something of a surprise.
Channel 4 have endured similar difficulties in finding a chairman, finally
taking on Lord Burns earlier this month.

What will a new chairman mean for programming at ITV?

Well, Archie Norman has no experience of working in broadcasting, but that
doesn’t necessarily matter. For that, he has Peter Fincham, the ITV director
of television. The broadcaster’s flagship channel, ITV1, is already enjoying
a remarkable resurgence, especially at weekends, and is the only terrestrial
channel to have increased its share of peaktime viewing this autumn.

It benefits hugely from its relationship with Simon Cowell and Fremantle Media
in producing The X Factor, which, despite being in its sixth series, is
dominating the weekend schedule. On Saturdays, helped by the ongoing drama
around the twin contestants John and Edward Grimes, it has beaten the BBC’s
Strictly Come Dancing in the ratings battle, with over 14m viewers. Even
bigger audiences ? peaking at 16.6m ? are tuning in on Sundays for the
follow-up results show, with around 10m staying with the channel for the
reality show I’m a Celebrity… Get Me Out of Here, which dates back to 2002
but is benefiting this year from the return to the jungle of the model Katie

Although these are long-running formats, Fincham has been able to put their
popularity at the core of a wider marketing strategy that bills ITV1 as “the
home of entertainment”. Those shows have also been crucial in driving
audiences to the digital channel ITV2 and to

Isn’t that mostly about Simon Cowell?

Obviously Cowell is very important. That’s why he’s on a £20m “golden
handcuffs” deal that runs to the end of this year and makes him the
highest paid British television star of all time. In the spring another
Cowell show, Britain’s Got Talent, will give ITV a further lift. But the
broadcaster argues that it also has the five most-watched new dramas of this

What does the public make of all this?

Michael Grade’s claims that the relentlessly downbeat press commentary that
haunts ITV does not reflect the business he has been running didn’t convince
the media industry. But ITV is still generally well thought of by the mass
television audience. A recent poll by the Fresh Minds consultancy and
Marketing magazine made it Britain’s most loved media brand, with 73 per
cent of respondents saying they either “love” or “like
somewhat” ITV.

So does that mean ITV’s fortunes are finally and definitely improving?

To some degree. The broadcaster announced recently that it expects advertising
revenues to grow next month, for the first time in 18 months. The chief
operating officer, John Cresswell, predicted a 4 per cent year-on-year
growth and said that “ITV is continuing to outperform the market”,
though he was not sufficiently confident to say the company was definitely
on an upward curve.

The BBC welcomes a stronger ITV ? which helps to counteract the idea that the
corporation has grown too big ? and believes it is playing an active role in
the commercial broadcaster’s improved fortunes, such as by not scheduling
competitively against The X Factor’s Sunday results show. But in many areas,
such as news and current affairs, ITV clearly struggles to compete with its
old rival. It even failed to provide live coverage of the inauguration of
Barack Obama.

What’s the bigger picture?

Still not good. Despite the green shoots, ITV made a pre-tax loss of £105m in
the first half of this year. Though the share price was 53.75p at close of
trading yesterday ? from 23p in February ? it once stood at 148p, when
Carlton first merged with Granada more than five years ago. At the start of
this year it was forced to slash 1,000 jobs, including 430 in the news
division, in a bid to save £75m by next year. With advertising revenues in
freefall, Rupert Howell, the experienced adman who is ITV’s managing
director of brand and commercial, admitted it was “scrapping for its

ITV is laden with debt. Its £2.1bn pension scheme had a funding deficit of
£646m when it was last valued in December and ITV has agreed to pay £150m
into the fund over five years. Although the company recently announced it
would raise £120m by issuing bonds to lift debt, and has decided against
selling off SDN, its digital channel operator, the outlook remains bleak. It
has a ?500m bond due for payment in 2011.

Media analyst Patrick Yau told this newspaper last month that ITV had “little
strategic option but to continue cutting costs and hope for a recovery”.
Such a policy would clearly further threaten ITV’s production arm, ITV
Studios in Manchester, which has already made a series of cutbacks. And the
weakness of the amalgamation of broadcasters that constitutes ITV has been
further demonstrated by STV suing it for £35m.

What will Norman do next?

His first task will be to fill the vacant post of chief executive. That’s not
as easy as it sounds – ITV began the search last April.

Are there grounds for thinking ITV still has a bright future?


* With Archie Norman at the helm it has a leader well qualified to turn the
business around

* The television advertising market is finally picking up, offering ITV some
respite from the financial gloom

* Audiences of over 16m for X Factor show that ITV1 is once again the
home of television entertainment


* The company is in severe financial difficulty, with crippling debts and
impending funding deficits

* Inevitable future cuts mean that the long-term outlook for programme makers
remains grim

* The ITV model no longer works, and the stations that constitute it will
inevitably split apart

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