For Broadcast September 20, 2007

Michael Grade gave us his vision for the future of ITV last week, but the company's share price edged down in the three days afterwards. Why? Well, the analysts heard not so much a brave new Grade world as a strategy that sounded like Charles Allen mark II with a little Dawn Airey sprinkled on top.

Dawn is certainly a powerhouse and it's a positive move by ITV to embrace the good bits of the ill-fated Iostar plan, ie fire up the content business. And there was a little pot of internet razzmatazz from Grade as well. But at least one analyst said the internet strategy was "impossible to model" given the lack of detail about how the fivefold increase in internet revenues to £150m by 2010 would be achieved.

For the City, the plan to close regional news bureaux and save £35m to £40m was also not new. The only change was the timescale, as it seems this will happen sooner than 2012, when most analysts had it pencilled in.

But the big concern for the City was the forecast leap in ITV's content revenues - from £600m to £1.2bn by 2012. A new game called "Find the £600m" is now being played across the Square Mile. Grade wants to up the amount of in-house programming on ITV1 from 54% to 75% by 2012. Assuming something of this order can be achieved, it could yield perhaps £150m in incremental revenue (ITV would not have to pay indies and would own all rights). Add in the plan to sell some £200m in non-core assets and use that money to buy into the right content creation businesses, and you could generate perhaps £200m in new revenue.

That leaves £250m of the £600m gap to be created organically. This is essentially saying that ITV formats like Hell's Kitchen will have to go around the world at much greater velocity, or new formats will have to be developed or bought in. According to Paul Reynolds of Deutsche Bank, "as a package, the new content strategy doesn't stack up".

In addition ITV1 - still the revenue engine of ITV - is not getting an increase in its budget (although ITV2 is getting an extra £20m), so no wonder the City was fairly underwhelmed. Maybe it could add a premium rate phone line to its "Find the £600m" game and donate the proceeds to ITV. What is TV's version of cinema's 'popcorn' revenue builder?

Where is the Popcorn in the TV business?

When outsiders look at the TV business, they see things differently. Private equity guru Guy Hands has turned around a lot of businesses and at the weekend he told the RTS Cambridge convention how PE firms look for businesses that are really broken - the more broken the better, as there is more to fix.

When Hands' company Terra Firma bought Odeon cinemas in 2004, he promptly told the workforce that their business model was broken. Terra Firma refurbished the cinemas with better toilets and seats, low margin foods like crisps were taken from the counters and ticket prices were revamped.

"We have yet to have a year when showing the film makes the money," Hands said. "The money is in the food sold at the cinema counters; the profit is in the popcorn."

So what does Hands think of TV? He feels it needs to decide - much like the cinema had to - what business it is in. Is TV in the business of making content or distributing it?

He also wondered at a business where personal ambition and a self-serving culture seem to exist despite audience fragmentation and changing viewer habits.

So, to use Hands' Odeon experience, what is the popcorn for today's TV business? Since forever, the answer was the 30-second spot; build the schedule and ads will come. But that is the old model. The industry can either wait for PE to come in and find the new popcorn, or TV can start looking a little harder itself.