Michael Grade Goes to ITV – Score One For the Commercials

“We think it is excellent news for the whole commercial sector,” raptured GCap Chairman Ralph Barnard even as he imparted little short-term good news about GCap for the investor set. “The key point here is that we believe Michael has not been bought in to cut costs but to give confidence to the sector and improve content.”

Monday morning ITV, the UKs faltering commercial TV company, announced the appointment of Michael Grade as executive chairman. He was swiped from the BBC, apparently under the cloak of extreme secrecy, enticed by a pay-slip ten times bigger than the Beeb’s and the promise of getting back into programming. On Tuesday he entered the ITV building.

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ITV became the poster-child for a moribund UK commercial broadcasting sector. Its last chairman, Charles Allen, followed rules set by stock traders and concentrated on cutting costs. Cut to the bone, ITV was rewarded by those same stock traders with ever falling share prices. It’s an understanding not lost on GCap’s Ralph Barnard.

As BBC Chairman, Grade was its chief political officer, not allowed, as he said, to “chit-chat with producers.” He came to that job at the BBC’s low point, filling the position vacated by Gavyn Davis following the Hutton Report. Mark Thompson, filling the shoes of the fired Greg Dyke, has concentrated on cutting costs, deals with unions and pleas – and threats – over a license fee increase. Grade’s job was spiriting through the political minefield the soon to be decided Royal Charter. Regardless of who’s done what at the BBC the fact remains that Ol’ Auntie has risen from the depths since Hutton tried to drive a stake in its heart to outperform the programming from the commercial sector. It’s all in the ratings.

Understanding the ITV board decision to reject the NTL/Branson offer and accept Rupert Murdoch’s is further clarified. The NTL deal would have strapped ITV with huge junk debt, unacceptable to a company close to announcing the biggest UK media hiring coup in years. Murdoch’s investment in ITV also makes perfect sense, from the ITV perspective. If investment in programming is the new plan, now there’s some cash. And the board cancelled a share buy-back deal; hence, more cash available.

For the BBC it’s back to harrowing uncertainty, self-doubt and hand-wringing. Grade’s temporary replacement is Dr. Chitra Bharucha, BBC Trust vice-chairman. A more permanent replacement will follow in due course. In government-speak, that could be months. Culture Secretary and chief head-hunter Tessa Jowell might benefit from the very long list of broadcasters rumored to be in line and passed over for the ITV job. With an above inflation license fee increase off the table UK politicians will start sounding like stock traders, calling for deeper cuts.

Companies in all sectors, viewing reality, are coming to the same conclusion :”You can't cut your way to success.*” Stock traders might be frustrated by the idea but with their extraordinary attention span, who cares.

Michael Grade might relish the notion of rearing success in the UKs commercial broadcasting sector. The thought is flamboyant and so is he. There’s a sense, not yet appreciated by the BBC, that he sees that success not as a zero-sum game. But if he needs to cut something, get rid of that HR department.