A legal dispute between STV and ITV will intensify this week, with the Glasgow-based broadcaster expected to seek £40m in compensation from the national group.
The move is in retaliation to ITV’s decision last week to sue STV for up to £38m in unpaid bills because the parent of Scottish and Grampian television opted out of screening networked dramas such as The Bill, Wuthering Heights and Marple. The action threatens the future of STV, which has debts of £44m and a pension liability of £30m.
STV is believed to be preparing to countersue over ITV’s alleged failure to pass on network advertising revenues. It will claim that ITV, led by chairman Michael Grade, was obstructive, making it impossible for the Deloitte, STV’s auditors, to audit network advertising sales over the past 18 months.
STV will claim that Deloitte has only been able to audit 5% of revenue-related contracts covering two-and-a-half years of a six-year period during which, it will allege to have uncovered a shortfall of £2m. STV will allege that, over a six year period, it is owed around £40m.
STV is being advised by Herbert Smith, a London law firm, while ITV is using Olswang. The legal dispute is understood to be part of a wider attempt by Rob Woodward, chief executive of STV, to assert the company’s independence and renegotiate how independent television programmes are commissioned and paid for.
STV insiders describe the existing system, devised when the ITV network comprised 15 separate listed companies, as “dysfunctional and unworkable”.
“ITV has shown absolutely no interest in embracing any debate about modernising the system,” said one. “I think Woodward is hoping there will be a seismic shift in ITV’s attitude. Longer-term, he wants to see a new settlement, a network that is structured for mutual benefit.”
Observers believe such a strategy is high-risk and has little chance of success. One media analyst said: “I think Rob Woodward is trying to fight on too many fronts. Combined with the problem of the pension deficit and the company’s debt position, he has bitten off more than he can chew with this.”
ITV said it would contest any counter-claim from STV, adding that there was no evidence of a £2 million shortfall.
An ITV spokesman said: “It is simply untrue and disingenuous to suggest that ITV has prevented STV’s independent auditor, Deloitte, from carrying out a review of contracts. We have been co-operative and supplied all documents relevant to the review which, in any case, we believe to be flawed.”
- The board of ITV has this weekend begun urgent talks with Sir Crispin Davies, former boss of Reed Elsevier, and Sir Michael Bishop, the entrepreneur who chaired Channel 4, in an attempt to accelerate the appointment of a new chairman at the crisis-ridden broadcaster after Michael Grade resigned on Friday. Davis and Bishop are the frontrunners, although Sir Christopher Bland, the former chairman of the BBC and BT, and Martin Broughton, chairman of British Airways have also been approached. ITV has yet to appoint a new chief executive after talks with former Sky boss Tony Ball broke down.
- Meanwhile STV is seeking a closer relationship with the BBC whose director general, Mark Thompson, recently visited the Scottish company’s Glasgow HQ to sign a memorandum of understanding that will lead to greater co-operation between the two broadcasters. Areas where co-operation is being sought include news, technical, accommodation, training and infrastructure. The BBC and STV are already trialling the pooling of news pictures.
This article was the ‘hamper’ on the front page of the Sunday Times business section on 27 September 2009
Article as it appeared on the front page of the Sunday Times business section
