Having previously called Google a parasite, Michael Grade, the executive chairman of British broadcaster ITV, has again called on critics of the proposed Kangaroo online video service to contribute to the cost of programme production. Meanwhile ITV has announced the merger of its loss making online operations with its traditional broadcasting business and warned that trading conditions are likely to remain challenging over the next year.

While ITV has so far been unsuccessful in making money online, its executive chairman, who was previously chairman of the BBC and formerly chief executive of Channel 4, has gone on the offensive to justify its involvement in the proposed joint venture between the three major broadcasters, codenamed Kangaroo.

“For people who don’t invest a halfpenny in British content, to complain about it seems to me a bit rich,” he said. “Maybe they’d like to put some money into the British production sector then maybe they can have a say”.

As it happens, Google and YouTube appeared to welcome the initiative in their submission to the Competition Commission, which is currently investigating whether the Kangaroo joint venture could limit competition.

“Google does not expect this JV to have any negative impact on competition or customers,” concluded Google in its submission. “We hope that the JV would be willing to partner with us.”

Google can afford to take such a position and is clearly conscious about appearing critical. It is currently worth around sixty times the market capitalisation of ITV. The advertising revenues of Google in Britain have already overtaken those of the fifty year old commercial television broadcaster.

Speaking at the Broadcasting Press Guild, Michael Grade appeared to argue that critics of Kangaroo were appealing to regulators where they could not compete commercially.

“We live in a dream world in this country, where you can win through regulation and politics what you can’t win commercially,” he said. He then turned on Virgin Media, saying: “If Virgin want to invest £250 million a year in our content, or if anyone else does, come and have a conversation”.

Ironically, Virgin Media might once have been prepared to invest more than that had it merged with ITV, a plan that was effectively thwarted by its competitor Sky, which invested no less than £940 million in ITV to acquire 17.9% of the company and become its biggest shareholder. That value of the Sky stake has since fallen by 75% and it may be obliged to sell at a considerable loss.

Virgin Media and Sky both invest significantly in programme production and their channels compete with ITV for viewers. ITV is evidently content to let them carry its channels and package them as part of their respective subscription services.

Merged operations
ITV, which has so far failed to find its fortune online, has now announced that it will merge its broadcast and online operations. Peter Fincham will become director of television, channels and online, with Ben McOwen Wilson taking responsibility for all new media business. Jeff Henry, the managing director of the ITV Consumer division will stand down following the transition.

Michael Grade said that Jeff Henry had “created valuable new revenue streams that we will continue to develop”. In the first nine months of 2008, ITV reported online revenues of just £25 million, against a total turnover over nearly £1.5 billion. ITV reported over 80 million video views over the nine month period.

“Now is the time to integrate our online video sites editorially with our broadcast business as mass-market channels in their own right and drive the advertising opportunity from that proven consumer demand,” the executive chairman told investors.

The company said that in the uncertain economic outlook, trading conditions across ITV were likely to remain challenging in 2009.