NEWS from ITV this morning of 600 job cuts and closure of its studios in Leeds may open the doors to more drastic changes in UK broadcasting as the recession tears into TV revenues and with no early end in sight.
News of the job losses came as ITV reported a record 2008 loss of £2.7bn after a huge write-down in the value of its assets. The group is also planning to sell the website Friends Reunited, bought in 2005 in a cash and shares deal worth £175 million.
The studio in Leeds is best known for popular nostalgia programmes such as Heartbeat and The Royal, both of which have now stopped being made.
Chairman Michael Grade said today: "Current conditions in the advertising market are the most challenging I have experienced in over 30 years in UK broadcasting."
ITV's advertising revenue has plunged with the onset of severe recession and the growth of niche commercial channels and the internet.The company reckons net advertising revenue for the first quarter of 2009 alone will be down by about 17 per cent on the same period last year. Hopes of an Easter boost are fading.
The broadcaster admitted that its targets set in 2007 were "no longer appropriate". These had assumed growth in UK television advertising, but there had since been an "unprecedented deterioration in the global economic outlook", the broadcaster said today.
Shares in the group slumped another 2.3 per cent on the stock market this morning to 23.25p. A year ago they were changing hands at 69.1p - and even at that level they were way down on previous peaks.
The heavy loss compared to a profit of £137 million pounds in 2007. The group booked impairment charges of £2.7 billion for the year, reflecting a drop in advertising revenue and the uncertain outlook for 2009.Revenue was down 2.5 per cent to £2.03 billion, and the company suspended its final dividend.
Friends Reunited accounted for about half of the group's online revenue of £36 million last year. The company also plans to close its Local broadband operation, which provides local news, and intends to dispose of Scoot, its online business directory.
The job losses amount to 11.5 percent of its staff of 5,232 at year's end, to help meet a target of £50 million in cost savings.
Even before it announced its annual results, no-one was in any doubt how bad things were for the UK's leading advertising-funded broadcaster.
The days when an ITV franchise was deemed "a licence to print money" and a single regional company - Granada - could splash out millions on high-quality dramas such as Brideshead Revisited and The Jewel in the Crown are long gone.
The irony of the group's position is that it coincides with a rise in viewing figures for terrestrial television as households opt to stay in for a quiet night at home as a result of cutting back on discretionary spending in pubs, clubs and restaurants. Television should be a recession beneficiary.
But so deep are the problems at ITV that even a merger with BBC Worldwide or Five has been mooted - moves that would mean a re-writing of competition rules and further big job cuts. . Things must be dire for ITV to suggest a merger with the two other ad-funded terrestrial broadcasters, Channel 4 and Five.
It says this is "blue sky thinking", as requested by the government, in response to Lord Carter's interim report on Digital Britain - but such a merger really is thinking the unthinkable.
The government would need to scrap the competition rules, as it did with the Lloyds Bank takeover of HBOS - hardly an encouraging precedent.
" If the worst should happen, and ITV were dismantled or taken over by an overseas company, it would leave a huge hole "
Other broadcasters and production companies simply will not wear such a merger. Channel 4's chairman Luke Johnson says he regards ITV's pension hole as an "enormous poison pill" and sees no great value in equity in ITV. Tim Hincks, chief executive of Endemol UK, which sells shows including Big Brother to ITV, Channel 4, Five and the BBC - thinks it is a non-starter. BSkyB and Virgin - no strangers to the law courts - seem certain to object.
The fact that ITV has even raised the idea shows just how bad things are in commercial television, where huge structural changes have collided not just with an existing downturn in advertising but the global financial crash.
Broadcasting unions are blaming mismanagement rather than the economic downturn, for ITV's woes. Gerry Morrissey, general secretary of broadcasting union Bectu, claimed that the group's management had been more interested in looking after shareholders and senior management, rather than staff and viewers. He also accused ITV of giving up on its public service broadcasting remit after the broadcaster said it was going to move more towards popular entertainment programmes.
The broadcaster admitted that its targets set in 2007 were "no longer appropriate". The targets set had assumed growth in UK television advertising, but there had since been an "unprecedented deterioration in the global economic outlook", the broadcaster said.
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