UTV chief points to geographic and media mix as key to success

John McCann is harbouring a dark secret beneath his inconspicuous 50-year-old chief executive surface. He has sufficient spare time (spare time - gasp!) to become a dedicated fan of not one but two television series.Unlike many other chief executives however, there is little loss of hardened-career-man face attached to the admission.

He is, after all, the top man in Ulster Television, the media firm that last week posted profits of £15.1 million (€22.7 million), up 4 per cent at a time when many peers struggle for growth.

The fact that his chosen programmes - The West Wing and ER - are not shown on his station is another matter and not one, presumably, that will particularly worry UTV's shareholders as they consider the all-time-high recently reached by their stock.

Media analysts consistently hold up UTV as an operation that manages to outperform its peers, particularly in tough times.

Mr McCann acknowledges that the firm has maintained its profits during a "dire three or four years", while ITV has, over the same period, seen its turnover fall back to £1.6 billion from £2 billion. He puts the outperformance down to balance, across the various forms of media (TV, radio and internet) and geographically.

"There's the fact that we're able to draw from three marketplaces: Belfast, London and Dublin. We've also been developing more revenues on the island of Ireland at a time when advertisers have started to look at Ireland as an island."

At the moment, for example, Belfast is the "star performer" on advertising, while last year it might have been Dublin and next it might be London. "The markets are all moving at different times."

Revenue is also becoming more widely spread as time goes on, with UTV internet in particular growing at a speed that would be envied by most racing drivers. This business, making a fierce play for the Republic's broadband market, posted an operating profit of £875,000 last year, up 80 per cent. And Mr McCann is expecting similar expansion in 2004 as the firm squeezes margins to bring prices down.

A small new media business supplying news content to plasma screens in locations such as Dublin Airport's baggage hall is, despite being mildly profitable, posting more modest growth. With the kind of educated caution known only to an accountant, Mr McCann says further roll-out will not come until the advertising proposition on the business can be truly proven.

Belfast born and bred, Mr McCann took his accountancy training in the same city. He then moved on to the inward investment body the Industrial Development Board (now Invest NI), where he took a job in the intriguingly named "rescue division". Here he worked with large numbers of troubled firms to bring them back to stability.

He recalls the work with the enthusiasm that only a natural problem-solver could have for such a position and all the grimness that it must have carried.

Even though the problems "were always the same", the answers were not and this is where the young Mr McCann gleaned his satisfaction.

It was this clear relish for the rescue job that made it difficult for Mr McCann to reach a decision when UTV came looking for his services in 1983.

The group, then a TV station and nothing more, needed a new finance man and a former colleague in Ernst & Young had nominated him as the candidate for the job.

"I had to be persuaded to leave," he says now, recalling that he moved to the TV company only on the premise that he would stay for a few years before moving on to the next learning experience.

Within six months, he had become much more involved with the inner workings of his new employer than he might have expected when making the initial jump. His arrival at UTV had coincided with the emergence of a nasty industrial relations problem in the station, whereby management's plans to eliminate what it saw as inefficient work practices (such as a seven-day working fortnight) was meeting with massive staff resistance.

"It was pretty fraught," he admits, claiming the only reason he was chosen to manage the issue was that he had the necessary naivety.

When he says he spent the next number of years trying to "modernise" UTV, it is to minimise the problems that reigned at the time. What Mr McCann saw as a simple matter of hauling an old-style, monopolistic firm into the modern, competitive world was seen by workers as a challenge to their livelihoods and the long-standing culture of their firm.

Threats to push the station off air had circulated for a while but Mr McCann had always pushed the argument that television is "more perishable than fruit" or, in other words, that an off-air station would soon be forgotten by its public.

The union chose not to listen and in 1987 a two-week strike ensued. After a period of "management service", the two sides reached an accommodation and UTV emerged as a different station with what Mr McCann calls a "sensible working relationship".

With this "baptism" in industrial relations under his belt, Mr McCann was rewarded in 1989 with the position of general manager. Ten years later he became chief executive and so led the next stage of UTV's development as a modern media company.

Mr McCann ostensibly balks at taking full credit for UTV's successful strategy of expanding into radio and taking more of an all-Ireland stance ("Once you think you've arrived, you're on the slippery slope" is a characteristic statement) but credit must nonetheless lie at his door. No sooner had he arrived in the top job than UTV began a bit of an acquisition spree in the Republic's local radio sector.

The part-purchase of County Media in Cork came in 2000 (the balance was picked up a year later) and was followed by the addition of Treaty Radio in Limerick two years later. At the end of 2002, UTV bought Lite FM in Dublin for €14 million after failing to win control of FM 104 earlier in the year. Radio interests contributed some £2.5 million to Ulster's operating profits last year, although Lite FM (now rebranded as Q102) registered a loss of about £300,000.

Mr McCann says he looked at the radio strategy as a reasonably natural departure. He considered UTV's position as a local broadcaster within a "national" UK network and reflected on the station's ability to draw advertising from and provide a service for local and national (Irish and UK) markets.

He then decided that this same approach could be adopted in radio, provided UTV could create an offering for advertisers that was something more than just one station. And given that the firm was already more than familiar with the market in the Republic through its TV operations, this seemed the obvious place to start.

There was also the small matter of media rules in the North, where UTV's television ownership would have precluded it from buying a radio station.

Mr McCann will "neither confirm nor deny" a long-standing belief in the market that UTV is preparing a bid for Galway Bay FM, but he says it does not take a rocket scientist to work out that the company's strategy is to concentrate on urban centres for its radio acquisitions.

"We may or we may not be talking to people," he says acknowledging simply that "in the broader multinational media landscape, local ownership will have difficulty competing."

Under Broadcasting Commission of Ireland (BCI) rules, no one company can own any more than 15 per cent of the total number of radio stations in the Republic, although this threshold can rise to 25 per cent as long as the BCI is convinced that it does not create any serious competition issues.

This would mean, in theory, that UTV's current stable of four stations could rise to roughly eight (presuming a few more licences are approved by the BCI) without causing the regulator undue concern.

Aside from a probable interest in Galway FM, UTV is known to be keen on one of the Dublinlicences due to be approved by the BCI later this year. Mr McCann declines to play a naming game on other urban centres that might blip on his radar screen in the Republic but is more than happy to discuss what is already in the bag - in particular Q102.

He says the key to future success at the station is getting people to "sample" again after the Lite FM tag has been truly buried. He claims to have been dubious about the Lite name from day one and was vindicated in this when UTV research concluded that consumers did not want to admit they listened to a station with such a dodgy name. Q102, on the other hand, had "no baggage". The true test of the new name will come shortly as the first listenership figures emerge but Mr McCann says advertisers have already been convinced.

Of more concern to Mr McCann and many thousands of UTV fans in the Republic at the moment is the situation whereby UTV's television offerings are unavailable on the Sky Digital service. This means that as many as 300,000 households could be outside the station's reach, thus amounting to a headache for both UTV and Sky.

The root of the problem lies in UTV's wide use of programmes made by Granada, such as Coronation Street. In the Republic, the rights to broadcast these Granada programmes are held exclusively by TV3. While this creates no issue for UTV on cable (where the service is piped in from Belfast), it amounts to a substantial problem on satellite services such as Sky Digital, where programmes are beamed in directly. In effect, it prevents any station apart from TV3 from transmitting Granada programmes over the medium.

Mr McCann says the issue is constantly live at the firm, which has explored every avenue to resolve the matter. He can see no solution apart from a change in Granada's and/or TV3's position but admits (on the basis of discussions with both parties) that this is far from likely. "It's a shame," is the extent of his expression but it does not take X-ray vision to see the blood boiling beneath the surface, particularly when he talks about the angry Sky Digital customers whose natural reaction is to blame UTV for its absence from their screens.

It is issues such as this that might lead one to wonder how UTV's position would change if it could simply become bigger. Might it not be better able to face Granada off in a corner if it was a larger player, for example?

Mr McCann downplays a failed attempt at a takeover bid worth £400 million for Scottish Media Group (SMG) last year, saying that the effort was abandoned after SMG's shares become too expensive.

"It's not something we have to do," he stresses, going on to concede that UTV's size and strong franchise will probably make it, in turn, a takeover target as time goes on.

The prospect of being taken over is "always there" he says, quickly adding that he spends no time looking over his shoulder for potential acquirers.

"There is absolutely no reason why UTV can't survive and prosper," he says, adding the small sting that since UTV's shares have risen so much (70 per cent in the past year: "we're expensive"), the prospect of being bought may have been consigned to the background - at least for now.