Exit Allen. Now the real drama begins

It has been a long, cold summer for ITV. The World Cup was a calamity during which five viewers tuned into BBC coverage for every one who watched matches on ITV1. Philip Schofield's much anticipated Saturday entertainment show It's Now or Never was ditched after one week. Love Island failed abjectly to do for ITV what Big Brother has done for Channel 4.

Figures confirm the crisis. ITV1's audience share is down 17 per cent year-on-year to a record low of 16.8 per cent. Last week, Credit Suisse said the channel's annual advertising revenues could fall by £205m.

Pressure on ITV's chief executive, Charles Allen, has been mounting all year. It went spectacularly public when a private equity consortium led by the former BBC director-general Greg Dyke offered to acquire 48 per cent of the business. That was rejected but Roger Parry, chairman of the local newspaper giant Johnston Press, is reported to be preparing an offer that would split the broadcaster into two companies, one running production and the other broadcasting.

It is not just the financial world that has lost confidence. The writer Jimmy McGovern, whose Cracker returns to ITV next month, recently called ITV prime-time drama "crap". His view was reinforced in May when ITV's director of television, Simon Shaps, confessed that his channel has "largely missed the revolution in lifestyle programming", and revealed that he looks "in awe and envy" at the BBC's "adventurous, mould-breaking drama" such as Bleak House and Doctor Who.

This week the crisis will culminate in Allen's resignation. The man who led the October 2003 merger between Granada and Carlton TV - so creating a single ITV company for the first time since the old network of regional franchises took to the airwaves in 1955 - has said he will step down. His announcement is expected to be confirmed at a board meeting tomorrow ahead of Wednesday's interim results. He expects to relinquish his responsibilities in the new year, shortly after his 50th birthday.

Allen says his ideal job after ITV would be as winetaster for Tesco. Friends think it more likely that he will accept another senior job or a seat in the House of Lords. He is a Labour supporter and, two years ago, was awarded a CBE for community work. But whether he accepts ermine or moves rapidly to a new chief executive position, analysts agree that Allen has achieved more at ITV than one disastrous summer reveals.

"On balance he's been good from a shareholder perspective," says Steve Hobbs, head of media at Carat. "His strategy for ITV's digital channels has worked extremely well. The only huge question is over ITV1."

Paul Richards, an analyst at Numis Securi-ties, agrees: "ITV plc has been well run. Allen did a very good job of integrating Carlton and Granada. The launch of ITV2 and ITV3 was a success. His negotiation of ITV franchise renewals was well handled and saved the company a lot of money."

Nobody who has observed his career closely is prepared to write Allen off. Born the unplanned third child of a 40-year-old mother who already had two teenage children, at 14 he lost his hairdresser father to a heart attack. His mother worked as a waitress in the British Steel dining rooms in his native Lanarkshire. University was out of the question and Allen admits that he has always felt "inferior" about not going.

Years after he achieved success in business he still avoided direct questions about his education. He assuaged his mother's guilt at not being able to afford higher education by promising that he would become an executive by the time he was 30. He made it at 28, but the big break came when he joined the contract caterer Compass and met his lifelong friend and mentor Gerry Robinson, now Sir Gerry, the former Granada Group boss. The pair moved to Granada in 1991. There, despite being patronised as an "upstart caterer" by John Cleese, Allen began his inexorable rise through the British media establishment. The ITV network was mired in takeover struggles and executive intrigue. Allen learned tactical lessons in a series of confrontations with his fellow regional television bosses, famously winning a battle with Greg Dyke when Dyke lost his job as chief executive of London Weekend Television following a takeover by Granada.

His biggest business achievement was, undoubtedly, the £4bn merger between Granada and Carlton which Patricia Hewitt, the then Secretary of State for Trade and Industry, declared would enable the merged company to "compete more effectively with the BBC, Channels 4 and Five and BSkyB". But the agreement ITV reached with the Government created the problem that has ended Allen's reign. Crunching the businesses together saved ITV more than £140m in licence payments to the Treasury, but there was a price to pay. Concerned that the merged ITV would control more than half the television advertising market, ministers sought a promise to sell airtime at guaranteed prices.

As the advertising market has declined, this agreement, known as the Contracts Rights Renewal (CRR), has left Allen with little room for manoeuvre. "He would not have got the merger without it," says Morag Blazey, managing director of the PHD media-buying agency. "But it was designed by his own lawyers and it is the architect of his misfortune. Without it, ITV's losses would be much smaller. CRR has made shareholders suffer and cut programme budgets. Whoever replaces Allen will have to renegotiate it."

That suggests that the channel's salvation lies in better programmes. "On balance, Charles Allen has done the financial side well," says Hobbs, "Now ITV needs a creative television person."

There is near unanimity in the worlds of finance and media that the dire condition of ITV1 represents Allen's largest single failure. But the agreement extends to recognising that this is not entirely his fault. "He has poached some great commissioning editors from Channel 4 and the BBC," says Blazey. "The problem is that their ideas may take two years to come through and it is not clear ITV has got that long."

Allen will resign with ITV's share price in the doldrums, the ratings of its most important channel at rock bottom and predators circling. It would be easy to condemn him - as one senior media executive does - as "a big figure who was so successful in achieving his vision of a single ITV that he got careless and failed to notice how digital television was fragmenting his market".

Perhaps, but if the CRR is renegotiated and ITV1's new autumn schedule includes at least one ratings grabber, the City may quickly notice that ITV remains an enormous broadcaster with a production budget of nearly £1bn. Charles Allen created it, and despite the investor pressure that has forced him out, nobody is betting that the station will collapse. He leaves a challenge, not a basket case.

The Succession: Names in the frame for one of TV's biggest jobs

Stephen Carter

Former chief executive of media regulator Ofcom, where he was seen as sympathetic to ITV's agenda. Rival commercial broadcasters think his appointment would give rise to a conflict of interest for Ofcom.

Greg Dyke

Ousted by Allen as chief executive of LWT back in 1994. Put together an unsuccessful private equity bid for ITV as part of a consortium earlier this year. Had it been been successful, he would have taken Allen's chair.

Andy Duncan

Chief executive of Channel 4, where his star is rising. In July, Channel 4 overtook ITV's audience share for the critical 16- to 34-year-old group, buoyed by Big Brother.

Kevin Lygo

Director of television and creative brains behind Channel 4, with a reputation for spotting industry trends and knowing when to jump ship. Brought hit shows like Desperate Housewives and Shameless to the screen and has developed the identities of the digital channels.

Dawn Airey

Turned down an offer to be ITV's chief executive in 2002, instead becoming managing director of the Sky stable of channels. Has recently had her role at Sky expanded to include new media but is expected to be lured back to terrestrial TV soon.

MEDIA DIARY

Off Marco's menu

The serialisation of Marco Pierre White's autobiography in The Sunday Telegraph and The Daily Telegraph last week prompted an unusually sharp reaction from the Daily Mail and The Mail on Sunday. Alison Boshoff unleashed two acid pieces on Saturday and Monday under the headline "Marco: making of a tyrant", while The Mail on Sunday gleefully reported White's burgeoning "friendship" with Martine McCutcheon leaving his marriage on the rocks. Could this all just be a case of sour grapes? The Daily Mail is thought to have made an extravagant bid for rights to the book White Slave, offering far more than the Telegraph Group. However, having been turned over a few too many times by the Mail, the temperamental restaurateur took the lower offer.

Power lunch?

Amid the turmoil at ITV, its outgoing chief executive Charles Allen still had time for a spot of lunch. Allen was seen dining with Andy Duncan, his counterpart at Channel 4, on Monday. Could Duncan be asking Allen for tips on securing the succession?

And so we say farewell

The Daily Mail's long-serving John Edwards is packing it in. The 73-year-old, who has a regular weekly column, had told colleagues that he was planning to leave at the end of the year. But the management has met him halfway and his column looks like lasting only into the autumn. "John's putting a brave face on it," says a colleague.

Taki takes 'em all on

A spot of anarchy in the back pages of Matthew d'Ancona's Spectator. "What I'd like to know is who the terrorist is: the one who has killed 750 civilians and 100 fighters, or the one who has killed 33 soldiers and 18 civilians?" asks Taki of the fighting in the Lebanon. "The Spectator's editors may disagree... but the proof is in the numbers." Editors? How many is he suggesting The Spectator has? Surely such an error would not have slipped through had chief executive Andrew Neil checked the copy.

Bowen hedges his bets

The BBC's Middle East editor Jeremy Bowen is not having a good war. A week ago he declared that the conflict in the Middle East was "entering the end game", adding cheerily: "Both sides will take something from it." Subsequent BBC headline: "Israel to widen ground offensive."

King for a day

Simon Heffer is to get his mitts on The Daily Telegraph editorship, but only for a day. The puffed-up columnist will be editing tomorrow's paper, so staff have been digging up their best "string 'em up" stories to satisfy the ginger beast.

Clash of the tartans

While News International's troops are mustering for the imminent London newspaper battle, the Daily Record is launching an assault on the other side of Hadrian's Wall. The Trinity-owned Scottish morning paper, whose rival is the Scottish Sun, is to produce a free evening edition before the end of the month. The £200,000 libel win against the Murdoch-owned News of the World by Scottish Socialist MP Tommy Sheridan will stir that pot nicely.