Old rivals slug it out for ITV

But do either Allen or Dyke have what it takes to shape web's future?

LONDON — They’ve been depicted as two dinosaurs fighting over a kill that’s disappearing before their eyes. If only it were that simple.

In fact, the outcome of the duel between veteran U.K. webheads Charles Allen and Greg Dyke has repercussions for the future.

For whoever wins the battle to control ITV, Blighty’s dominant commercial broadcaster, will determine the contours of the country’s media landscape for years to come.

Dyke, the charismatic maverick topper who emerged as a dominant player in the late ’80s, is pitted against Allen, who has run the web since the merger of its main regional TV companies, Carlton and Granada, more than two years ago.

Dyke, who reinvented Pearson Television before helping to mastermind tyro channel Five and ankling as the BBC’s director general in 2004, has never forgiven Allen for seizing control of his beloved LWT, the company that controlled commercial weekend TV in London.

A hostile takeover by Allen’s Granada 12 years ago signaled an abrupt end to Dyke’s ITV career — and the wounds have never healed.

“For Greg Dyke, ITV is unfinished business,” says David Elstein, a former ITV colleague and Five CEO.

Now he is bidding to take control of the web in a complex private equity bid involving financiers Apax, Goldman Sachs and Blackstone that is preparing a revised offer after Allen roundly rejected the initial bid.

In the first approach, the group offered £1.3 billion ($2.2 billion) for a 48% stake in ITV plus a special dividend to existing stockholders by leveraging the balance sheet by $6 billion.

A revised offer, being mulled last week, would reportedly require Dyke’s group to underwrite a further $2.2 billion of new ITV stock.

Dyke, who once famously described Allen — who used to work in the food business — as “a cost-cutting caterer,” wants to revamp ITV flagship web ITV1 by scaling down program costs and buying up top domestic sports and more U.S. shows.

ITV slipped when it allowed Channel 4 to buy “Desperate Housewives” and “Lost.” But the woman responsible for the deal, acquisitions topper Jay Kandola, is now on the ITV pay roll.

Dyke thinks ITV, whose last adventure in pay TV, ITV Digital, collapsed in 2002 with losses of $1.5 billion, needs to get back on the pay bandwagon.

One possibility is a deal with Five, the RTL-owned terrestrial web he once chaired, which has a foothold in pay TV via a stake in digital terrestrial paybox Top Up TV.

To some U.K. industry observers, Dyke’s strategy smacks of pie in the sky, not least because it fails to factor in the growing threat from new media platforms, and broadband in particular.

Greg Dyke doesn’t understand the digital world, says an industry watcher. “ITV has belatedly recognized the competition from digital TV, but it is unclear what it is doing about broadband. Smart videorecorders are not going to kill ITV’s advertising revenue, but broadband might.”

ITV1 has lost nearly half its viewing share in the past decade, and its reputation as a creative powerhouse is tarnished.

Last week, the British Academy of Film and Television Arts nominations for its TV awards included a mere seven nods for ITV, compared with 20 for Channel 4 and 47 for the BBC.

Allen’s strategy involves diversifying revenue streams by launching new digital webs and installing a new commissioning team including the highly regarded ex-head of Granada America, Paul Jackson, and led by the dynamic Simon Shaps.

“ITV has spent many months restructuring its commissioning team, and it’s the strongest they’ve ever had,” says Andrew Zein, managing director of leading U.K. indie, Tiger Aspect.

Last week, Allen appeared to be winning the PR war, as Dyke uncharacteristically kept his head down. Industryites reckon that the bid will fail and that Allen will make a few changes and hold on.

However, London’s financial community is skeptical as ITV’s stock price remains moribund, much to the grief of institutional investors like Fidelity, which owns 14% and is reputedly well disposed toward Dyke’s bid.

Ultimately, the city will decide if Dyke’s bid succeeds or Allen, the great survivor, gets to fight another day.

But some investors are already off-loading ITV stock. Says one, “It’s such an uncertain future out there now for ITV and, brilliant though he is, Greg Dyke is no miracle worker.”