Online video a key factor as new ITV chief ponders pay TV

By Julia Glotz

Not long after ITV announced that former Royal Mail chief executive Adam Crozier would be its new chief executive – and with variations on the “now he’s got the post, can he deliver?” joke beginning to run thin – ideas about what Crozier needs to do to turn around the UK’s largest commercial broadcaster are starting to be fine-tuned.

There is no shortage of wish lists from industry executives, which vary considerably depending on which sector they come from. But one theme keeps popping up – the perennial question of what (if anything) should ITV be doing in pay television. It is a question that has taken on more importance thanks to the economic downturn (which has affected pay television far less than free-to-air commercial channels) and reports this week suggested that pay-TV options for the ITV digital channels were on the list of priorities for Crozier and new chairman Archie Norman. Frankly, it would be a surprise if they were not.

But turning a desire for steady pay-TV income into a paid-content strategy that plays to ITV’s strengths could prove to be more difficult. Crozier and Norman will rightly be expected to figure out what ITV wants to do with pay TV, even if the answer to this is ultimately “nothing”. If they decide that pay-TV is a must, it would probably take extensive toe-dipping into online pay options before they would consider launching pay-television channels, let alone taking an entire digital-channel portfolio to pay. The expensive failure of ITV Digital, the pay-DTT service, will remain as a cautionary tale as they make their deliberations.

Online video is likely to feature in any ITV pay-TV foray, so a strong online distribution partner could play an important role in moulding ITV’s pay-TV identity. One possible candidate to take on the role of mentor is Hulu, the US online-video service, which is understood to have offered ITV equity in return for exclusive content deals. Hulu is itself figuring out pay options and in News Corporation, NBC Universal and Disney it has some very experienced pay-TV players as shareholders.

After much buzz in early 2009, it all went rather quiet about a Hulu/ITV deal in the second half of the year. In part, this was because ITV was unlikely to commit to significant equity deals before a new chief executive and chairman were in place. ITV arguably has some catching up to do in terms of online innovation and its next Web moves – with or without Hulu – will be watched with great interest and seen as an indication of what Crozier’s promise of a business “transformation” might mean.

A final note on “grocers” and “postmen”. Despite much noise about ITV’s having been entrusted to two broadcasting ingénues, industry executives expressed little palpable concern about the lack of broadcasting experience of Crozier and Norman (the former chief executive of supermarket chain Asda). Leaving aside the occasional silly, snobbish remark (mostly tongue-in-cheek), there were many that saw the appeal of getting in some “fresh DNA” into ITV.

Michael Grade, the previous chairman, certainly had independent television running through his veins – as nephew of Lew Grade whose ATV was one of the original ITV franchise owners. Adam and Archie come from different stock but they could be just right for pay-TV. After all, there is little a grocer doesn’t know about selling packages and who better than a postman to handle a form of television that is addressable?