WHEN in 2005 Channel 4 chairman Luke Johnson told an astounded media pack that a little-known marketing executive was to become the broadcaster's latest chief executive, his language could not have been any more enthusiastic.
Describing Andy Duncan as "the brightest media executive of the Channel 4 generation" Johnson gave short shrift to concerns about whether a marketing man who had come over from the BBC was suitable to take charge of such a prestigious programme maker
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But when Johnson faced the cameras again last Wednesday – this time to announce Duncan's departure – the contrast could not have been starker.
With the media grapevine buzzing with talk of a boardroom rift, a steely-faced Johnson did his best to convince shareholders and pundits that the decision to part company was "mutual". But the holes in his defence quickly opened up when he added: "There is always a healthy tension on a board of ambitious people."
For weeks, industry blogs had been full of chatter about how Duncan was likely to be served up as a sacrificial lamb. Channel 4 (C4) is facing a £150 million funding gap in 2012 when the government switches off analogue television, and advertising for the traditional channels is expected to fall off a cliff.
It had been hoped that a joint venture with BBC Worldwide, the corporation's commercial arm, could secure C4's future but with a potential tie-up now off the table, board members are understood to have preyed on Duncan.
"He was made a fall guy for mission impossible," said Claire Enders of Enders Analysis.
A host of other TV big shots were associated with the role last week, including Peter Fincham, director of television at ITV and Kevin Lygo, head of content at C4.
But with no obvious solution to C4's funding problems in sight, it wasn't long before the City was asking if anyone would be fool-hardy enough to take the top job. "It sounds like a poisoned chalice to me," says Sam Hart, media analyst at Charles Stanley.
Johnson is leading the search for Duncan's predecessor before he himself steps down as chairman before the end of the year. He's facing stiff opposition for candidates from ITV, which is also on the hunt to replace executive chairman Michael Grade. It is understood that ITV will confirm within days that former Sky boss Tony Ball has agreed to take the chief executive's role. Grade said earlier this year that he will stay on as non-executive chairman but City sources say he's likely to disappear out of the door fairly swiftly after the new chief executive's arrival.
Back in the heady days of the Nineties, few City jobs were as coveted as the chief executive positions at the television broadcasters. Free-flowing champagne, parties at Soho's Groucho Club and a direct line to glamorous celebrities were part and parcel of the job. But with the internet and the new age of digital programming threatening to pull the rug from under the industry's feet, analysts argue it will be a brave man or woman to take on ITV and C4 in this day and age.
When Ball dots the i's and crosses the t's on his contract at ITV, he'll be acutely aware of the fate of those who have gone before him.
Although Grade was greeted like a returning war hero when he walked through the doors of ITV's headquarters in 2007, it wasn't long before the City was cracking jokes about how he wasn't "making the grade". Earlier this year ITV posted the biggest full-year loss in media history, forcing it to axe 600 jobs and make swingeing cuts to its prized programming budget. Before Grade, Charles Allen left amid shareholder uproar over poor viewing figures and falling advertising revenues.
According to Hart of Charles Stanley, the challenges facing the new chief executives of both ITV and C4 are even more problematic than those that caused their predecessors' failure.
"Both ITV and Channel 4 face similar problems and unfortunately a lot of those problems are structural," he argues. "For example, the continued loss of audience share to the digital channels, the rise of personal video recorders where it is easier for users to skip advertising and the rise of on-demand viewing through things such as the iPlayer (BBC's online stream]."
In the first half of this year, television advertising fell by 17 per cent across the market. Although it is expected to recover as the economy emerges from recession, Hart suggests that ad revenue is unlikely to ever recover fully given the technological changes to the industry. ITV advertising income dropped 15 per cent to £909m in the first six months of the year while STV saw its revenues fall away by 21 per cent during the same period.
"ITV and C4 will not be able to recover a significant proportion of the advertising revenue they have lost in the current downturn," Hart says.
With ITV labouring under £730m of debt, plus a pension deficit of £538m, the onus will be on Ball to ease the pressure on its balance sheet – and fast.
There is mounting speculation that one of his first moves will be to launch a rights issue, which Royal Bank of Scotland analyst Paul Gooden anticipates would go down "quite well" with shareholders.
It is also anticipated that ITV will seek to divest further assets after it sold the Friends Reunited website last month to DC Thomson's online technology subsidiary Brightsolid for £25m. Analysts say that the most obvious target would be ITV's global content business which sells popular programmes such as Hell's Kitchen, starring chef Gordon Ramsay, to production companies abroad.
"It's an extremely good business" says Hart. "Recently it has been speculated that it could be worth between £500m and £750m. If ITV were to sell that it would to a certain extent solve some of its balance sheet problems."
Sources close to Ball suggest that he is also likely to use his background at Sky to move away from ITV's historic commitment to free-to-air, public service broadcasting, towards the pay TV market. There is considerable market chatter that he would move some of its successful digital programmes to a subscription channel.
"It's certainly an option as he knows pay per view very well," says Alex De Groote, media analyst at Panmure Gordon. "On a five-year view we need to get away from this idea of ITV being an old school broadcaster."
Sources close to C4 say that Johnson is also keen to make a much bigger splash in the digital market. After tie-up talks with BBC Worldwide stalled, Johnson and the rest of the board are working against the clock to secure alternative sources of income, including making a play for a share of the BBC's licence fee.
Speaking at the Royal Television Society conference in Cambridge last week, Johnson hinted that he has instructed headhunters at the Zygos Partnership to poach a new chief executive from the digital media world. He said: "We want someone who has considerable experience of television but also a profound understanding of the digital universe because I think that to lead any broadcaster, it isn't enough to be able to look backwards at the golden age."
Potential targets are likely to include Pascal Cagni, who heads Apple's business in Europe, Ashley Highfield, who was the brains behind the BBC's iPlayer, and former communications minister Lord Carter of Barnes. But analysts suggest the Zygos Partnership will face a difficult task convincing industry hot shots to defect to the troubled C4.
To add to its funding woes, the recession has forced the broadcaster to shelve a planned foray into radio and magazine publishing. It has also been dogged by a series of programming scandals over the past few years – mostly famously when the treatment of Bollywood star Shilpa Shetty on the 2007 edition of Celebrity Big Brother provoked hundreds of complaints to the regulator and demonstrations on the streets of India.
Last month Duncan made the surprise announcement that C4 was pulling the plug on Big Brother from next year. Although the reality TV show has seen audiences plummet since it first hit Britain's screens in 2000, it remained a vital source of advertising revenue and helped fund more earnest programming.
De Groote of Panmure Gordon argues that the new chief executive will not be left with many hands still to play. "It does feel that some sort of JV (joint venture] is the only way forward for Channel 4."
If the BBC Worldwide deal cannot be resurrected, De Groote suggests C4 and Five, the weakest of the "big five" channels, may be forced to look at a tie-up in future.
Andy Viner, head of media at BDO Stoy Hayward, says the new chief executive of C4 will have no choice but to get with the digital age – and swiftly. "The changes in technology have happened so quickly and broadcasters like C4 and ITV aren't used to making decisions that quickly," he says. He suggests that it has fallen far behind rivals when it comes to internet broadcasting and other platforms such as IPTV – where viewers use the red button on their remote to access other services. "They have not made enough use of this and Sky is way ahead of them," he says.
While C4's future remains in doubt, De Groote is more optimistic about Ball's chances of pulling off a revolution at ITV. Earlier this year, ITV indicated that it was outperforming the rest of the market on advertising and De Groote suggests that September will mark a turning point in the ad market. "I've heard that it (advertising] will be flat to only slightly down in September," he says.
He points out that there has been a remarkable revival in shareholder confidence in ITV in recent weeks, with shares in the broadcaster closing at 49p on Friday, up 165 per cent over the past six months. He said ITV is likely to re-enter the FTSE 100 at the next re-shuffle. "From a position where the sector was shafted it has made quite a comeback," he says.
Front runners for the C4 jobPeter Fincham, director of television at ITV, is the hot favourite to replace Andy Duncan at the helm of Channel 4. The 53-year-old, pictured right, was passed over for the role in 2005 when the board made the surprise decision to run with former marketing man Duncan instead. But analysts expect that the C4 board is unlikely to make the same mistake again and bookmakers Paddy Power has made Fincham, a former BBC1 controller, the odds-on favourite at 4/5.
Also in the running is Kevin Lygo, C4's current head of content. Once described as the "TV executive who could walk into any job he wanted", Lygo knows the broadcaster like the back of his hand. He has managed content at C4 since 2003 and was head of entertainment between 1998 and 2001 before putting in a brief stint at Channel Five. However, he was criticised for his notable silence during the Big Brother race row in 2007.
Ed Richards, chief executive of Ofcom, is also tipped as one of the lead contenders. Richards has an extensive history at the regulator, where he was also chief operating officer, but also worked as a senior policy adviser on media for the Blair government.
Speculation has been growing in recent days that Jana Bennett, director of BBC Vision, could also be approached for the C4 role. Bennett is in charge of content across BBC's television channels and on the web.
Rob Woodward, head of STV Group, was named as a potential candidate when news first broke of Duncan's departure but analysts are unconvinced. One City source said: "That would surprise me as he has his teeth stuck in at STV."
