Granada's winter of discontent?; The wobbly ITV giant's proposed

0 Comments | Sunday Herald, The, Sep 1, 2002 | by Darran Gardner

CONFLICT, tragedy, revolution and long cold winters. This list could refer to the central themes of Granada's new winter drama Zhivago or to what lies ahead for the ITV network giant in the coming months.

How the story ends will also be determined by how the media company reacts to what has been, so far, one of the most difficult years in its long history.

Last week's resignation of Granada's 54-year-old chief executive Steve Morrison, while not unexpected, could be seen as a sign that it was finally ready to get its house in order and begin selling a new vision for the future that shareholders, analysts and viewers could buy into.

Regardless of whether Morrison's departure was voluntary, part of an effort to thin out the boards at both Granada and its future partner Carlton Communications or even delayed retribution for the (pounds) 1 billion-plus failure of ITV Digital, the move has been seen in the industry as a necessary one to provide stability.

Appointing broadcasting veteran and former chairman of the independent broadcasting authority, Sir George Russell, as non- executive deputy chairman on the same day also served as a statement of intent. Granada was ready to tackle the future - not explain the past.

The management changes will certainly not put an end to speculation that executive chairman Charles Allen is simply strengthening his power base and diverting attention from his own corporate failings but there is no doubt that Granada desperately needs to re-assert itself. As the production heart of the ITV network (it reaches 15% of the UK's TV audience through its seven national network franchises), a weak Granada means a weak ITV.

The merger of Granada and Carlton to create a single ITV network company should take place within the next 18 months. The on-off nature of merger discussions might have introduced an element of doubt into the proceedings but Allen himself has described the merger as "a logical step" and "inescapable".

And despite legitimate concerns about reining in a merged entity's power in the advertising sales arena, consolidation is now the only way to generate strong commercial competition capable of tackling a resurgent BBC. Talk of US media firms using proposed changes in ownership rules to take control of the commercial network is also meaningless until a more stable entity emerges.

The BBC has already cut overheads and increased its programming budget. A similar move by Granada and Carlton could potentially deliver (pounds) 30m in savings by stripping out overheads and avoiding the duplication of resources. A single advertising point- of- sale would also bring with it around (pounds) 20m in cost benefits.

In May Granada disappointed the market by reporting a (pounds) 169m interim pre-tax loss. Add to that a 12% decline in ITV advertising, a network audience drop from 25.7% in 2001 to 22.5% in 2002 and the lack of ratings hits and you have a strong argument for reshaping commercial TV.

Allen might have promised an additional (pounds) 25m spend on programming but this sum will make only a marginal difference in terms of drama, entertainment or comedy production. It also does little to address the core confidence issues affecting both Granada and Carlton.

ITV has had a tough summer, fighting off surprisingly strong competition from Channel 4's Big Brother and the Commonwealth Games. However, the lack of big-hitting programme strands and confused scheduling suggests a deeper malaise. Moving beyond the 2001/2002 success of Pop Idol, ITV's new drama schedule has been "rearranged" several times, with the network openly acknowledging the weakness of its autumn line-up.

While there are high-profile movies (from Star Wars to There's Something about Mary) and strong drama such as Zhivago (snappier without the Dr), there are indications that schedulers have yet to recover from the flops such as Bob & Rose and Saturday night Premiership football.

Its ability to find successful replacements for stalwarts such as Inspector Morse, Peak Practice and Heartbeat is being hampered by a decision not to broadcast certain programmes unless it can be almost 100% certain of achieving good ratings. Drama series which have yet to appear include Hereafter, Thursday the 12th, Sirens, Jack Rosenthal's adaptation of the Kingsley Amis classic Lucky Jim, and the multi-million-pound Mayor of Casterbridge.

Despite spreading a small stable of stars (Sarah Lancashire and David Jason) too thinly, ITV's reluctance to tackle the BBC head-on is now obvious. Coronation Street's ability to shed 6m viewers (and just about scrape together 8m on a good night), might well be a contributing factor to this but the audience cycle of soaps cannot be applied to drama or entertainment. Great programmes are the only effective weapons Granada and Carlton really possess but they are now wielding them with all the ability and confidence of a novice majorette on a bad day.

Such issues might suggest that Granada is something of a befuddled giant but that is not entirely the case. The Manchester-based company remains a leading producer of programming for UK and international broadcasters operating in a network TV market - still undoubtedly the most powerful advertising medium in the country. Granada will also be the dominant partner in a merger with Carlton (a deal which is likely to see the departure of Michael Green from the smaller company) and revenues from its production arm remain strong at (pounds) 537m.