Snow’s Face­book broad­side points to grow­ing fears over dig­i­tal tide

The broad­caster’s Ed­in­burgh speech hides deeper con­cerns about the chang­ing me­dia land­scape, writes Christo­pher Wil­liams

The Sunday Telegraph - Money & Business - - Business - Ini­tia­tives est to the tele­vi­sion wood ex­ec­u­tives for raises the ex­ec­u­tives its own

We got him,” pro­claims a well-re­freshed se­nior tele­vi­sion ex­ec­u­tive in the early hours in an Ed­in­burgh night­club. “We got Mark Zucker­berg to take no­tice.” It is a few hours and a few drinks since Jon Snow, the vet­eran Channel 4 news­reader, fired a broad­side at Face­book on be­half of the Bri­tish tele­vi­sion in­dus­try. The so­cial net­work, along with Google, was blamed for the de­struc­tion of lo­cal jour­nal­ism and a dis­con­nect in so­ci­ety that meant long-stand­ing con­cerns over safety at Gren­fell Tower were un­heard by the “elite”. Giv­ing the main lec­ture at the Ed­in­burgh In­ter­na­tional Tele­vi­sion Fes­ti­val, Snow at­tacked Face­book as the un­car­ing at­ten­tion seeker play­ing “fast and loose” with the work of oth­ers. Govern­ment should force the Sil­i­con Val­ley gi­ant to pay for the ma­te­rial it dis­trib­utes and more taxes, he said.

Snow was not first choice to de­liver the key­note speech, but his choice of at­tack tar­get may have been. Or­gan­is­ers orig­i­nally sought a fe­male speaker to ad­dress con­cerns about a lack of di­ver­sity at se­nior lev­els. They then held talks with the ac­tor Stephen Fry, who de­spite his technophilia has also called for Face­book and other tech­nol­ogy com­pa­nies that are “evad­ing re­spon­si­bil­ity” for ma­te­rial they dis­trib­ute to face reg­u­la­tion as pub­lish­ers.

Face­book’s re­sponse, a blog post from Zucker­berg high­light­ing var­i­ous

to sup­port at­tempts to make money from jour­nal­ism on­line, came within hours of Snow’s per­for­mance.

The sub­stance of the so­cial net­work’s pro­pos­als was of lim­ited in­ter­gath­ered in Ed­in­burgh, how­ever. Snow him­self of­fered no an­swers. Bri­tish tele­vi­sion was just pleased to know it was still ca­pa­ble of stir­ring a beast of Face­book’s vast scale. “They’re our en­emy now,” said the par­ty­ing ex­ec­u­tive.

Such at­ti­tudes have be­come in­creas­ingly com­mon in tele­vi­sion, as the dig­i­tal gi­ants make in­cur­sions on to ter­ri­tory that was for­merly the pre­serve of broad­cast­ers. Face­book it­self has be­gun build­ing a home for pro­fes­sion­ally pro­duced tele­vi­sion on its so­cial net­work, and is of­fer­ing pro­gramme mak­ers a cut of the ad­ver­tis­ing spoils.

These are not new trends, how­ever. Tele­vi­sion has known for years that it was on the tech­nol­ogy in­dus­try’s list of sec­tors to colonise.

Play­ers such as Youtube, Net­flix and Ama­zon have been gain­ing ground for years. The ar­rival of Face­book, and soon Ap­ple, which has be­gun hir­ing Hol­ly­push into pro­gramme mak­ing, merely stakes.

Snapchat, now strug­gling on the pub­lic mar­kets fol­low­ing its splashy de­but in March, is the lat­est to make its pitch to Bri­tish pro­duc­ers, ask­ing them to make pro­grammes de­signed for smart­phones.

“It is in­evitable that the way peo­ple con­sume con­tent will con­tinue to change, peo­ple use Snapchat on av­er­age 15 times a day, it is be­com­ing a sig­nif­i­cant part of their lives, it lets them re­ally eas­ily ac­cess con­tent,” says con­tent chief Nick Bell. “That re­ally be­comes very pow­er­ful.” Yet ner­vous­ness and hos­til­ity to­wards Sil­i­con Val­ley is mount­ing in the tra­di­tional tele­vi­sion in­dus­try, and Snow caught the mood to win a stand­ing ova­tion.

“Never, since the rise of the print­ing press, have two com­pa­nies held such a mo­nop­oly over the world’s in­for­ma­tion,” said Snow in his at­tack on Face­book and Google. “And never have such or­gan­i­sa­tions taken so lit­tle re­spon­si­bil­ity for it.” The heads prog­no­sis – but they have still ad­vanced by 50pc since cri­sis time. It is not al­ways this easy. Lon­don con­ges­tion charger Capita will soon cel­e­brate the an­niver­sary of its big prof­its warn­ing and the shares are lit­tle changed. The an­nounce­ment of chief ex­ec­u­tive Andy Parker’s suc­ces­sor – which can’t be far away – should help them along. And Car­il­lion, a more re­cent ca­su­alty? Only for the brave.

And so to In­ter­serve, an­other com­pany guilty of try­ing to do any­thing for any­one with in­suf­fi­cient fo­cus on what they might charge. It builds prisons and hos­pi­tals, cleans rail­way sta­tions and even as­sem­bles the grand­stand for the Ed­in­burgh Mil­i­tary Tat­too. If only it had never got into con­struct­ing en­ergy-from-waste plants. Af­ter cost over­runs and de­lays, In­ter­serve said it was get­ting out of the ac­tiv­ity a year ago, but the cost of exit bal­looned to £160m in Fe­bru­ary and there has been talk of le­gal ac­tion in con­nec­tion with a Glas­gow plant.

The com­pany ex­pects to “com­plete sub­stan­tially” the con­struc­tion of these projects in the first half of next year. Howard Sey­mour at Nu­mis be­lieves the Derby in­cin­er­a­tor is the con­tract with the great­est risk pro­file, so the fact it has reached the test­ing phase is sig­nif­i­cant. In­ter­serve ran into gen­der pay gap this sum­mer, the ap­petite for con­tro­versy is much di­min­ished.

Yet the glee with which ex­ec­u­tives greeted Snow’s at­tack points to a grow­ing ner­vous­ness. Since the col­lapse of the ad­ver­tis­ing mar­ket in the wake of the fi­nan­cial cri­sis, tele­vi­sion has been on the front foot fi­nan­cially. Ad­ver­tis­ing sales rose strongly, driv­ing the re­cov­er­ies at ITV and Channel 4 un­der chief ex­ec­u­tives Adam Crozier and David Abra­ham, and stok­ing con­fi­dence across the in­dus­try. Now though, Cro- trou­ble just as trad­ing dipped else­where. Prof­its are down in sup­port ser­vices, which have been hin­dered by the hia­tus in pro­cure­ment fol­low­ing the Brexit vote. The UK con­struc­tion arm is mak­ing a loss but it has be­gun to nar­row its strate­gic fo­cus. One bright spot is equip­ment hire busi­ness RMD Kwik­form which could be sold if the go­ing gets tougher at group level.

Test­ing In­ter­serve’s fi­nan­cial head­room, Joe Brent at Liberum as­sumes a base of £500m of debt, the man­age­ment’s guid­ance for peak bor­row­ings this year, and adds £50m for re­stricted cash and £50m for volatil­ity. That still leaves £40m of head­room within In­ter­serve’s £640m fa­cil­ity. He also floats the idea of a £100m rights issue that would di­lute in­vestors not tak­ing up their rights.

White’s ar­rival from Sodexo is not the only ex­ec­u­tive change. In­ter­serve’s fi­nance di­rec­tor is not far be­hind long-serv­ing boss Adrian Rin­grose in head­ing for the exit. It means that there is noth­ing to stop a thor­ough kitchen-sink­ing that would give the new team air cover for their turn­around. The threat of this bleaker out­look plus un­der­whelm­ing in­terim fig­ures this month has sent the stock trick­ling fur­ther south.

Questor has been highly bear­ish on In­ter­serve, urg­ing in­vestors to “avoid” as re­cently as Aug 15, and rightly so. In cut­ting through the un­nec­es­sary com­plex­ity of this busi­ness, there is no telling what nas­ties might emerge. But a fur­ther 11.6pc fall in the shares since then, mak­ing them trade at barely three times next year’s earn­ings, could be just enough to en­cour­age the most risk-tol­er­ant in­vestors to try some bot­tom fish­ing. zier has stepped down and Abra­ham will be gone from Channel 4 within months. The ad­ver­tis­ing mar­ket peaked be­fore the Brexit ref­er­en­dum and now shows signs of a se­ri­ous de­cline. WPP’S poor first-half re­sults, pub­lished on Wed­nes­day, caused a rip­ple of fear in Ed­in­burgh, not least be­cause Face­book and Google were iden­ti­fied as the cause.

Sir Martin Sor­rell’s ad­ver­tis­ing agency em­pire suf­fered an 11pc drop in its shares, its big­gest since 1998, as it failed to meet sales tar­gets. He warned that shifts to­wards dig­i­tal con­sumerism were fun­da­men­tal, trig­ger­ing changes by big brand own­ers, but blamed most of the dis­ap­point­ment on cost cut­ting by clients.

For the likes of ITV, which trades heav­ily on its abil­ity to de­liver big tele­vi­sion au­di­ences for con­sumer goods gi­ants, Sor­rell’s com­ments are wor­ri­some.

Yet Sor­rell dis­missed claims of a struc­tural threat to ad­ver­tis­ing agen­cies. “As usual, there were ques­tions whether the cur­rent slow­down is due to the struc­tural pres­sures com­ing from dig­i­tal play­ers, con­sul­tants, or bring­ing ser­vices in-house,” said Bar­clays an­a­lyst Julien Roch.

“Man­age­ment dis­missed the struc­tural the­sis say­ing that spend with Google and Face­book con­tin­ues to in­crease and Google is now their ninth

‘Money can’t buy you suc­cess in this busi­ness – but there needs to be a more level play­ing field’

largest client.” WPP’S weak per­for­mance glob­ally also masked a strong re­sult in the UK.

The com­pany has con­tin­ued to grow since the Brexit ref­er­en­dum, re­gard­less of de­clin­ing sales else­where in ad­ver­tis­ing.

“It may be some­thing at the mi­cro level that is to do with our busi­ness,” says Sor­rell. “We have a strong busi­ness in the UK, very strong mar­ket share, very good peo­ple, very tal­ented, and that may be one of the rea­sons.”

Re­gard­less of the wax­ing and wan­ing of ad­ver­tis­ing sales, se­nior tele­vi­sion ex­ec­u­tives know that the eco­nomics of the in­dus­try will not be the same next year, let alone fur­ther down the road.

“There was a ques­tion on one of the pan­els about what things will look like in 10 years,” says an ex­ec­u­tive in charge of one of the in­dus­try’s big­gest pro­gram­ming bud­gets.

“Christ, I don’t know what things are go­ing to look like in six months. The whole point is that no­body knows.

“That in­cludes the dig­i­tal guys. Money can’t buy you suc­cess in this busi­ness. It’s more com­pli­cated than that.

“But we all know there needs to be a more level play­ing field.”

Un­cer­tainty reigns but there are signs that tele­vi­sion ex­ec­u­tives are more alive to the threat of dig­i­tal gi­ants than pub­lish­ers or the mu­sic in­dus­try were.

Jay Hunt, the de­part­ing chief cre­ative of­fi­cer of Channel 4, sug­gests the in­dus­try must walk a line, col­lab­o­rat­ing with Face­book, Net­flix and the rest, with­out let­ting them take credit for cre­ativ­ity.

“In the end there are big play­ers com­ing in say­ing we like what you do, we want some of that in our ser­vice,” she says. “That’s fan­tas­tic. But over time you have to think about where the brand at­tri­bu­tion sits on all of this and then it’s a more com­pli­cated con­ver­sa­tion.”

Jon Snow, left, has urged Face­book to pay more to­wards the news it car­ries, while also crit­i­cis­ing the spread of false sto­ries about the Pope, above

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