The problems and dilemmas facing ITV

Why even Primeval had to die

ITV1 logo

ITV is having problems. We all know that. It’s share price is down the tubes, it’s having to cut jobs, its ad revenues are in decline, it can’t afford to do local news any more, its ratings are falling, it’s even having to cancel Primeval.

It’s having problems.

Over the last few days, I’ve been swanning around various people blogs (including Dan’s and Joe’s) and mailing lists, explaining to everyone who hates ITV – which is pretty much everyone – what its problems are and why they’re not all its fault. I should have been doing proper work, I know, but all these years of trade journalism haven’t been for nothing you know, and I do like the sound of my own typing.

Anyway, I thought I’d cobble together all the various postings, try to assemble them into some kind of coherent but occasionally self-contradictory mass, and let you muse on them – and argue the toss if necessary. Note, a lot of it’s been off the top off my head, so don’t quote me for truth or even accuracy on all the details: imagine them as broad sketch outlines of poor ITV’s problems – and why it had to cancel Primeval.

On the Primeval cancellation
ITV has to find £65-70m worth of drama cuts from a £1 billion slate; its share price is 20p-50p at the moment; ad revenue is down 20%; it’s just had to pay back a £250m bond. It’s not in a happy place and it gets 40% of its ad revenue from The X-Factor, Coronation Street, I’m A Celebrity, Benidorm and Britain’s Got Talent. It’s basically looking where to cut and Primeval, which is made by an indie production company rather than inhouse, is an expensive show to make in ITV terms: we’ve got to be looking at £8m per series – nothing for US TV, but a lot for British TV and I suspect a good amount of the money Primeval does make won’t be going to ITV, but to the production company that makes it since there’s been a big fuss about producer rights of late and I suspect they’ll have held on to most of them.

It’s odd, I know, but basically Primeval isn’t a soar-away enough success that its high production costs (which will be paid for by one branch of ITV) will be made up for by decent ad revenue, and other revenues will probably be going to another branch of ITV anyway.

More on the Primeval cancellation, whether X-Factor should get £6m extra in its budget and exactly what will £6m get you these days?
If memory serves me correctly, current BBC indie producer guidelines stipulate that a primetime drama with decent production values will range for £500k to £1m per episode, with budgets dropping during the day, etc. Chop that a little because it’s ITV and £6m will get you a reasonable amount of drama but not a huge amount.

Ultimately though, ITV gets about 40% of its ad revenue off the back off just a few shows (X-Factor, Corrie, I’m A Celebrity, Britain’s Got Talent and Benidorm being the main ones IIRC), so it makes sense to focus on them as much as possible, particularly when something like Lost in Austen, which was a quality show for ITV came in at about 4m viewers in a slot that normally might have earned 6m, thus depreciating the amount ITV can ask for future shows in that slot.

The simple fact is: rubbish sells on ITV and quality doesn’t because it’s so easy to overlook it, because it’s been on a downward spiral since 1992 at least. The Fixer is about the only halfway house between decent drama and high-ratings that ITV1 has, which is why it got commissioned for a second series (although that recent Lynda La Plante Prime Suspect rehash with Kelly Reilly did well, so also got a second outing).

Having said all that: most popular digital channel? ITV2. Go figure.

On ITV’s failure to understand its own problems – and how it hasn’t been able to save itself despite Primeval and other shows that “didn’t suck that much”
ITV’s current collapse is more indicative of making some really stupid business choices for the last decade. You can’t really sell dramas internationally if you don’t make dramas other countries want to see. You can’t sell merchandising off the back of programmes that have no merchandising potential. You can’t build support for programmes if you don’t know how to market or advertise your own products. You can’t get ABC1s to watch shows if you only target Ds, Es and Fs. You can’t get money out of Friends Reunited with Facebook already here. And so on.

ITV is basically a bad company that’s been badly run – although certain rules such as a ban on product placement, proper sponsorship, etc, haven’t helped – and even though Grade and some other ITV execs have known what they need to do for ages, they can’t do it because they can’t afford to do it anymore. Hell, they can’t even show the programmes they want to show because of their accounting practices: programmes only show up on its balance sheets once the programme’s aired, so expensive shows that ITV has already made can’t be shown because they can’t afford to have them turn up on their books.

On ITV’s accounting issues
ITV have long had a problem (think going back to at least 2002 and before, although it wasn’t much of a problem until then – the last recession). The problem is this: there’s a whole backlog of shows that it has sitting on its books that it simply can’t afford to air, bizarrely enough.

Because of ITV’s odd accounting structures, it doesn’t account for programmes until after they are screened, rather than when they are made/commissioned off an indie. So due to the advertising slump, the network has to show programmes that were cheaper to make so they can pay for them with the current advertising revenues. If it airs expensive shows on current revenues, it gets a massive loss in the current quarter, its share price plummets and it’s basically screwed.

So there’s a healthy wodge of shows that it would like to air but can’t because that would kill its balance sheet. Even though the programmes have already been made.

On whether the BBC should subsidise ITV’s local news and kids output via the licence fee
ITV was originally intended as a competitor to BBC, purely to buck up the BBC, and it’s done a reasonable job of that. I don’t think the Beeb serves everyone that well. I think ITV serves some groups of people a whole lot better than the Beeb does: admittedly, they’re the kind of people who watch ITV2 but they pay their licence fee, too, and the Beeb’s best effort to get them is BBC3. Oh dear. So competition is definitely good, and without ITV and C4, there wouldn’t be any competition in the PSB market for sure.

The argument goes – or used to – that purely by giving ITV access to the broadcast spectrum, it’s in a privileged position to attract mass-market audiences and the money from that can cover both its commercial work and the PSB offerings it needs to make to justify having that privileged position.

I just don’t think, particularly as we head towards the digital switchover, that that argument is justifiable any more. I think any commercial company being obliged to provide PSB content needs funding for it as long as there’s a great big BBC skewing the market and getting billions of pounds from the government to do it.

On whether ITV should be subsidised, given its inevitably going to produce bad programmes because it’s ITV
Ironically, the subsidy would only be there to improve the BBC, no matter how bad the ITV service. Everyone knows ITN is rubbish, but if ITV ever pulled its contract in favour of Sky News, the whole organisation would collapse because of its massive pension debts. But as long as there’s an ITN/ITV, the BBC does at least have someone that people might turn to and that ensures they don’t turn into Newsround (have you ever listened to Radio 1 news? That could be our future). Hell, people still tune into the News At 10 or whatever it is.

Look at the Beeb’s kids programmes: some good, some bad. I imagine that they’re going to get slowly worse without ITV to compete against. There’s nothing on Freeview (IIRC), only Sky/Virgin, for kids to watch except CBeebies, CBBC and the Beeb’s output. As a result, lots of kids TV programme makers are going out of business because they’ve only got one network they can really sell to that has any kind of budget and the Beeb will be like Tesco and drive all the suppliers’ prices into the ground. Fewer kids TV programme makers means fewer programmes being sold to the Beeb as well. And look at the effects of the ‘super-indie’ on the independent production market as well: to survive they’re having to merge, which is creating fewer sources of new programming and so on.

So more competition will increase diversity. ITV is bad now, but things will be even worse on every channel without any PSB from it.

On whether Channel 4 alone could keep ITN going through Channel 4 News
If ITV ever pulled its contract, the C4 contract wouldn’t be enough to keep it going. Channel 4’s already talking about dropping More4 news, which could put a stake through ITN’s heart anyway.

There you go. I’m really quite boring, aren’t I, and probably quite wrong.

Advertisements