TV out in the Cold

There is more evidence that life is slowly coming back to the property market. Last week figures from the British Bankers’ Association – we haven’t heard much from them lately, now why should that be? – showed a second monthly increase in the number of home loan approvals.

There was a four per cent gain in January taking the total number of new mortgages being approved to more than 23,000. It’s good news but it is still more than 40 per cent down for the same period last year.

It is beginning to look as if the old adage about property still being better than most other investments remains true. The stock market has been a blood bath, sticking it in the bank now looks risky and even if the bank doesn’t go bust it pays less than peanuts on deposit accounts, and the whole range of bonds and trusts et al are all looking distinctly dodgy.

Property has taken an almighty swipe – but pity the poor devils who have seen their pensions wiped out and their stock market holdings vaporise. You can stick a pin almost anywhere in the stock market and the simple guide of highs and lows will tell a sorry tale.

Take ITV as just one example. It was launched at about £1.14 a share and Michael Grade arrived with cigar and red braces and was hailed as a Messiah. Some hope. Grade’s being paid a reported – and some would argue obscene - £2 million a year.

ITV shares are currently around 23 pence apiece. So if you’d bought £50,000 worth at its launch – your holding would be worth about a fifth or £10,000. If you’d had your money in banks or building or any other sector the damage might have been even worse.

ITV advertising is down 20 per cent for the first quarter. Most of it’s either disappeared entirely or vamooshed to the Net or one of the digital channels which relatively speaking few people watch. Like the one with the forgettable name which Richard and Judy are now on. The figures for their show slumped to 8,000. That’s less than the circulation of most weekly newspapers sell.

But back to ITV. A twenty per cent drop in advertising for the first three months? That’s just a fifth of its usual take. If it kept falling at that rate for four quarters – a year’s worth – advertising revenue would be down by 80 per cent. So ITV would have to try and get by on 20 per cent of what it’s been used to. Basically, that would be curtains.

Grade’s planning to make yet more redundancies – ITV’s now been vomiting people for months. It’s going to flog of some of its businesses such as Friends United. And it will only get a fraction of what its previous boss Charles Allen – big-time caterer turned media mogul – paid for it when he ran ITV.

And guess what? This is highly original – it’s likely to launch a rights issue to boost its finances. That will dilute still further the existing holdings. And it’s what so many other companies are planning to do now. So putative shareholders and existing ones will have quite a choice as to where they choose to invest their money. Given its appalling track record it’s unlikely most would risk their money in ITV.

There’s another stupendously original plan in mind. ITV is going to cut again its programme budget. It makes you wonder .. er, as far as the programme budget goes, isn’t that part of the reason the rot set in in the first place? It stopped making programmes anybody wanted to watch apart from downmarket gameshows and talent contests.

As anybody knows in business, or should do, it’s the easiest thing in the world to go downmarket. But it’s almost impossible to go up again.

If ITV was not wildly overpaying its bosses, if it was making proper programming such as original dramas and documentaries which would sell around the world and would give it more of an ABC1 advertising share which even in these times is better than a CDE advertising profile, and if it got rid of the massive white-elephant studios entirely which are still scattered around the country, it might fare better.

The other big problem which is like a noose around ITV’s neck is its pension fund. This is what is blighting so many different companies. In ITV’s case it’s got £800m worth of debt and in two years time it faces a red alert when a £450m bank loan has to be repaid. How’s that going to be repaid if revenue has dwindled to virtually nothing?

So bricks and mortar might have gone through a tricky time. But just think .. you could be an ITV shareholder waiting with beating heart to see what new horrors Grade is going to drop on you anytime now.

No wonder there’s a cry to see ITV merge with Channel Five ( or Five as it now ludicrously styles itself) and Channel 4. But it doesn’t sound like much of a solution to TV professionals. Three lame dogs tied together hand and foot. That would be merely tripling the problem rather than finding a solution.

And what would it lead to? More cost-cutting, redundancies, programme budgets slashed. No doubt the boss of three combined companies would earn £6 million a year, three times what Grade gets for running just one outfit. With a nice fat pension of course. But haven’t these ‘solutions’ been tried before? One could have sworn it’s what ITV’s been doing.

Why is it that all these highly paid bosses cannot come up with anything more original than endless slash and burn? Whatever happened to entrepreneurial spirit, of fighting, of growing businesses and demonstrating innovation and originality no matter how tough the climate? After all, isn’t that why they’re paid so much money? Let’s face it, you could get any old Joe off the street to come up with the blindingly obvious solutions that are being mooted at the moment. And you wouldn’t have to pay him millions of pounds either. He’d do it for a modest wage and be grateful just to have a job.

Don’t run away with the idea that ITV’s bust. It’s likely to turn in pre-tax profits of around £150 million. That would be down from £280 m in 2007. But £150m is still a lot of loot. If ITV bosses cannot get by on that they should try life in the small business sector where there is a real hardship and where thousands of thousands of people are on a knife-edge worried about a letter arriving from one of the greedy banks. Now that’s real pressure. And they’re not each on £2 million a year. You might have to sell the yacht Mr. Grade. Ah, shame.