A good Grade

Michael Grade's defection is bad for the BBC, but could be good for British television
January 14, 2007

On Tuesday 28th November, Chitra Bharucha, a former haematologist at Belfast City hospital, suddenly became the head of one of the most important media conglomerates in the world. It was not the quirks of inheritance law or the complexities of some business dynasty that brought this about, but the vagaries of the way Britain regulates its media. Bharucha is the vice-chairman of the BBC Trust, which takes over ultimate responsibility for the BBC on 1st January 2007. Her knowledge of broadcasting has been gained from serving on the BBC's Broadcasting Council for Northern Ireland and being the Northern Ireland representative on the Independent Television Commission.

Valuable though this experience is, none of it begins to measure up to that of the departing chairman, Michael Grade—who has a lifetime in television working for all the big broadcasters. But Bharucha will have to hold the fort for an estimated four months while the BBC grinds through the burdensome Nolan appointment procedure to find a replacement for Grade.

No such problems of succession arise at ITV, where Grade starts work in January. On any measure this is extraordinary—in normal business, the executive's contract would prevent such a quick switch to a competitor. Indeed, if Grade had been employed under a BBC contract, he would not be able to do this. But he is engaged by the secretary of state for culture, and—possibly harking back to an age when being chairman of the BBC was the culmination of a lifetime of public service—no one seems to have envisaged the present situation.

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The cost of this official oversight to the BBC could be very high indeed. Grade goes to ITV with a wealth of knowledge about the state of play on negotiating sports rights, the deals struck with high-profile talent and the BBC's plans for things such as on-demand programming and high-definition television. Try as he might, he cannot just forget all this valuable commercial information. But the BBC is doubly handicapped. Under media regulations, it has to conduct a "public value test" for many of its activities. In practice, this means putting its business plan in the public domain. All this is already taking much longer than expected—and with the departure of Grade, the man who has been overseeing the transformation of the governance of the BBC, it will probably be further delayed.

No wonder, then, that Grade received an ovation on his arrival at ITV. Grade is a great impresario; if anyone can attract the television talent which attracts audiences, he can. He is also a great supporter of programme-makers. In 1985, when the BBC governors caved in to pressure from the Thatcher government not to show a film that included an interview with Martin McGuinness, Grade—then controller of BBC1—was vocal in his criticism. When he was at Channel 4, he was consistently supportive of the investigative programmes with which I was involved. On one occasion, cornered at the races by a leading businessman complaining about one of our programmes, he just laughed it off, saying there was nothing he could do: "I'm just the chief executive."

Furthermore, Grade is a real supporter of public service broadcasting (PSB) and has demonstrated an understanding of the complex architecture of British broadcasting in which the plurality of ownership and financing models, combined with regulation, delivers some high-quality and innovative programming. He summed this up when at Channel 4 in the now famous phrase: "The BBC keeps us honest and we keep the BBC on its toes." This is not a man who is likely to see the salvation of ITV in dumbing-down.

Perhaps unsurprisingly, given his enthusiasm for PSB and his support for free speech, Grade is not a great fan of Rupert Murdoch. And the compliment is returned: when, during Grade's tenure, Channel 4 transmitted a programme critical of Murdoch, the media magnate complained: "Only a government-protected cartel can get away with it." But now Grade will have to deal with Murdoch—via British Sky Broadcasting—as the largest shareholder in ITV.

All this makes Grade an inspired choice to make money for ITV's shareholders. Grade has what the Financial Times calls a "mixed reputation" in the City—meaning he lost money for shareholders last time around. And he is taking over as executive chairman—something discouraged by the Financial Reporting Council's code on corporate governance: "The roles of the chairman and chief executive should not be exercised by the same individual." But all this was forgotten when the institutional shareholders—for whom ITV is, after all, just another company in a mess—saw Grade as the potential saviour.

ITV has three big challenges: to restore itself creatively so that its audiences (and thus advertising income) grow, to negotiate a better deal from the regulators, and to devise an effective strategy to cope with the arrival of multi-channel viewing. These all overlap, and Grade has plenty of experience in the first two areas. Since ITV wants a relaxation in its PSB obligations as it faces increased competition from the digital channels, who better to lead these negotiations than the supporter of PSB? And who better to see off Murdoch? In terms of political and regulatory lobbying, Grade has all the necessary qualifications: enormous charm and brilliant connections.

Not that this means he can guarantee ITV's independence. Under current rules, Murdoch cannot take over ITV, but he desperately needs a terrestrial broadcaster to make sense of his British television strategy. As it happens, one may be for sale. RTL, Channel Five's major shareholder, has a corporate objective of being either number one or number two in each market in which it operates. Five is neither; ITV is. One senior television executive recently suggested to me that Murdoch could swap his ITV shareholding for RTL's Five holding—giving both Murdoch and RTL the chance of getting what they want.