Fallout From Phone-In Fraud Hits ITV's Bottom Line

21 May 2007

LONDON: In a trading statement issued last week, Britain's largest commercial broadcaster ITV admitted the furore over crooked phone-in quizzes and competitions [WARC News: 07-Mar-07] continues to deplete revenues from its premium rate telephone lines - down twenty per cent over the past two months.

This, confessed recently appointed executive chairman Michael Grade - addressing his first annual shareholders meeting and still basking in his honeymoon with investors - will have "a material impact" on revenues in the current fiscal.

But phoney phone-ins are the lesser of ITV's worries. Of greater concern is the ongoing slide in ad revenues, down 9.6% in the year to date at flagship channel ITV1 and 5.7% across the group as a whole.

Although the fall can partially be attributed to weakness in the TV sector as whole, Grade is well aware that advertising money follows viewers - an endangered species at ITV1 and currently deserting in droves. Viewing levels are down 6.2% this year, compared with 3.8% averaged across all the broadcaster's four channels.

Grade, an acknowledged master-scheduler, said he has already taken action to halt the exodus of viewers and promises new schedules for all channels. He acknowledged that viewers are "bored and tired" with old formats and declared his commitment to "innovative and bold" programming that would bring back the lost hordes.

Grade then turned to the Contract Rights Renewal mechanism - a regimen that prevents the television giant from raising airtime prices to compensate for falling viewer numbers - and as popular with ITV executives as are George W Bush and Tony Blair with their respective electorates.

Grade sang from the same hymnsheet as his deposed predecessor Charles Allen: "CRR is damaging UK commercial television as a whole," he complained. "Selling airtime as a commodity can only lead to commodity programming and that is not in anyone's best interests, including the advertisers."

Seen by ITV as a negotiating millstone around its neck, CRR was imposed by the UK's Office of Fair Trading to protect advertisers and rival broadcasters at the time of ITV's creation by merger in 2004, when it dominated the TV sector with an advertising market share of 52%.

In business - unlike the Bible - the sins of the fathers are not visited upon the third and fourth generation. And thus it came to pass that shareholders, happily blaming the broadcaster's disappointing current results on past management, voted overwhelmingly to ratify Grade's appointment.

As they did his remuneration package (£825,000 in annual salary plus 150% conditional bonus), despite opposition from shareholder watchdog PIRC on grounds that that the deal is "excessive" and the targets insufficiently challenging.

Data sourced from The Times (UK); additional content by WARC staff