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ITV PLC (ITV)

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Thursday 18 October, 2007

ITV PLC

ITV Review of PRS

ITV PLC
18 October 2007

18 October 2007



      Grade outlines tough package of new measures to tackle PRS failures

      £7.8m reimbursement offered - any unclaimed funds donated to charity



ITV Executive Chairman Michael Grade today published the Findings of the
Deloitte Review and ITV Investigation into premium rate services (PRS) within
ITV programmes and announced a tough package of new measures to address the
issues raised.



On March 5th 2007 ITV announced the immediate suspension of all PRS activity,
following concerns raised over the use of PRS, and appointed Deloitte to carry
out an independent review of PRS in ITV programming.



The review was conducted in three phases: first, a review of PRS procedures in
all current programming, ensuring that all relevant programmes currently on air
have benefited from the Deloitte process; second, identifying processes and
controls that could be put in place to reduce the risk of failures arising in
the future; and third, an investigation to establish the nature and scale of any
incidents relating to the provision of PRS which have occurred in ITV programmes
from 1 April 2005 to 31 March 2007.



During this thorough and independent process Deloitte has considered information
relating to PRS in ITV series and all relevant internal and external suppliers
have been contacted.



Out of more than 60 ITV series reviewed, serious editorial issues have been
identified in three ITV programmes: Soapstar Superstar 2007; Ant and Dec's
Saturday Night Takeaway 2005 and 2006; and Ant and Dec's Gameshow Marathon 2005.
As we announced on 21st September, The British Comedy Awards 2005 is the subject
of a separate investigation by media law firm Olswang.



The Deloitte review also highlighted serious technical issues around the use of
red button for voting and the late arrival of SMS text votes on five occasions
affecting two ITV shows, including the X Factor final 2005.  On none of these
occasions did the problems alter the actual outcome of those votes.



The review identified key areas of failure in the way in which ITV integrated
PRS into its programming:



  • Programme producers, staff and supporting companies did not always
    recognise or respect the impact of editorial actions on the integrity of
    interactive elements;

  • Lack of agreed and consistently applied procedures, controls and ways of
    working between the many parties involved in the process; and

  • Supporting technology, in the most part supplied by third party suppliers,
    lacking the reliability and resilience consistently to deliver the required
    level of service.



Commenting on the review's findings, Michael Grade said:



'Today marks a major milestone in our efforts to restore public trust and put
our house in order after a series of events that have affected not just us, but
the entire broadcasting industry.



'When allegations around premium rate services in ITV programmes first emerged
in March, we took immediate action.  We suspended all premium rate services and
appointed Deloitte to come in and review our procedures and then to undertake a
thorough review of the previous two years' activity in this area.  Since March
any programme that uses PRS has had to implement and adhere to the new
procedures put in place as a result. This is working very well.



'I knew when I commissioned this work that it might make for deeply
uncomfortable reading.  But it has been a necessary and vital process. It is
only by understanding how things went wrong in the past, and being open about
them, that we can be sure that we get them right now and in the future.  The
purpose of the review wasn't limited to flushing out the problems and learning
the lessons.  We have used it to assess viewers' losses, so that we can
reimburse them.



'We have today announced a comprehensive scheme to reimburse affected consumers.
  Any unclaimed amounts will be donated to charity. My overall conclusion from
the review is that there was a serious cultural failure within ITV.  The
fundamental failure was in not recognising the impact of PRS on existing
editorial processes.  The Ayre report on PRS put this very succinctly, and I
quote: 'broadcasters often ignored the fact that viewers had entered in to an
additional transaction entitling them to an extra service they paid extra for'.



'The Deloitte review shows that, like other broadcasters, ITV fell into that
trap.  While the company saw interactivity as attractive to viewers, and PRS
revenues as valuable additional revenue, it missed the fact that with it came
obligations as well as opportunities.  It was not understood that when the
audience is invited to make choices within programmes, the producer is
effectively ceding part of his/her sovereignty over editorial decisions.



'These failings were not venal.  In all cases individuals were motivated by
their professional instinct to produce the best show, but they failed to
understand that this could come at the expense of keeping faith with
participating viewers. This cultural conflict was compounded by several other
factors including: the speed of development of PRS activities; the complexity of
the technological factors; the sheer volume of calls; and an extended chain of
operational command that existing compliance procedures failed to keep up with.



'As I have made clear on numerous occasions, the relationship of trust between
the broadcaster and the audience is paramount.  That is why we immediately
stopped all interactive services when allegations about an ITV show first
emerged. That is why with the help of Deloitte we now have the processes in
place to identify and rectify this.



'I am also on the record as saying that I take a zero tolerance stance, and that
means not tolerating a culture that condones audiences being deliberately
misled, or not getting the service they have been offered. In some instances
there has been disciplinary action, but I don't intend to take a couple of token
scalps in expiation. That would not solve the problem.  As I've said, those
involved thought they were working to make the best programmes.  The effective
solution is to change the culture, to change the systems, to understand the
importance of trust.  I am absolutely sure that there isn't a person working in
or for the company who doesn't understand now where and why it went wrong.  And
everyone also knows that a line has been drawn, and that there will be no
excuses for ignoring it - the consequences will be severe. As I said to the
Select Committee earlier this year, now we have the processes in place it will
be a case of one strike and you're out.  That's how we will rebuild trust.



'Let me say finally, on behalf of ITV, that we deeply regret what has happened
and how sorry we are for breaking trust with our viewers.'



In response to the review, ITV today announced a comprehensive reimbursement
scheme.  Affected consumers will be offered reimbursement, with the right to
claim at any time before 29 February 2008 by contacting ITV on Freephone number
0800 028 0180 or via www.ITV.com/competitions. The reimbursement process will be
easy to follow and will be well publicised on air by ITV.



ITV recognises that some of this amount may not be reimbursed as it may not be
possible to identify or verify all affected individuals in every case; and some
potential claimants may not make a claim.



To address this, the difference between the total potential reimbursement and
the actual amount claimed by consumers will be donated to charity. The total
potential reimbursement is around £7.8 million, which represents the amount
spent by affected consumers and is almost double the amount ITV actually
received from these calls.



In addition to reimbursements, ITV today announced a number of significant
changes to the operation of PRS within its programming and training processes.



  • The immediate suspension of all SMS and Red Button voting in live
    programmes.  Only when the network and platform operators can reassure ITV
    that appropriate systems are in place to ensure delivery of votes in a
    timely fashion, will ITV reconsider this position.  In the meantime, ITV
    will continue to offer SMS and Red Button for non-time critical competitions
    and other interactivity.



  • Bringing telephony service provision in-house on programmes made by ITV
    Productions, with an intention to extend that across all programmes
    broadcast on ITV. ITV is working with BT to develop a solution to manage
    interactive service provision in house. ITV's dependency on third party
    providers will be reduced and the level of control that ITV can exercise
    over services will significantly increase.



  • Introduction of relevant and targeted training across the company ensuring
    that employees are aware of their responsibilities in respect of the
    operation of interactive services and its integration into programme making.
    In addition all productions employees will receive broad compliance
    training on joining the company and will be required to attend refresher
    training on a regular basis.


  • ITV's compliance resources are being strengthened with the addition of a
    dedicated Interactive Governance team to ensure maintenance of industry
    leading standards and the probity of all interactive services across ITV.



In addition to ITV's commitment to reimburse £7.8 million associated with PRS
activity, and to donate any balance of that sum to charity, ITV will also have
incurred costs in the process of approximately £2 million. In the results of ITV
for the half year to 30 June 2007, ITV had included, in pre-exceptional
operating profit, a charge for items associated with PRS activity across ITV and
GMTV then estimated at £5 million. Subsequently on 26 September 2007 Ofcom
announced a fine on GMTV of £2 million. Based on current estimates and before
any potential Ofcom fine on ITV, an exceptional operating charge of £18 million
associated with PRS activity will be taken by ITV in the full year 2007 and will
include the £5 million pre-exceptional operating charge taken at the half year.



Ends.



For more information please contact:



ITV Communications:

Brigitte Trafford -        0844 881 8180
Jim Godfrey -              0844 881 8434
Ruth Settle -              0844 881 8225



Tulchan Communications:

Tel: 0207 353 4200
Andrew Grant
Susannah Voyle
David Allchurch



ITV Investor Relations:

James Tibbitts -         0844 881 5656
Georgina Blackburn -     0844 881 5665



Notes:



  • Viewers wishing to claim a refund for any of the issues raised can obtain
    a claim form,  from 1 November 2007, by contacting ITV on Freephone 0800 028
    0180 or via the web site www.ITV.com/competitions



  • In March 2007, ITV appointed Deloitte & Touche LLP to carry out a
    comprehensive review of the use of premium rate interactive services ('PRS')
    in programming on all ITV channels.  This work has been conducted in  three
    phases:

o        In Phase 1, Deloitte reviewed procedures in relation to PRS in specific
programmes which were being broadcast or about to be broadcast at the date of
the announcement in order to strengthen procedures as necessary;

o        In Phase 2, Deloitte helped to identify processes and controls that
could be put in place to reduce the risk of failures arising in the future; and

o        In Phase 3, Deloitte undertook an investigation to establish the nature
and scale of any incidents relating to the provision of PRS which have occurred
in ITV programmes over the last two years from 1 April 2005 to 31 March 2007



  • The Findings of the Deloitte Review and ITV Investigation into use of PRS
    services in ITV Programming have been made available to OFCOM and ICSTIS and
    are available at www.itvplc.com



                      This information is provided by RNS
            The company news service from the London Stock Exchange