The Channel 3 News consortium, made up of Chrysalis, BSkyB, Bloomberg, CBS and Ulster Television, has said it is prepared to provide a rival news service for a substantially lower price than ITN.
The current five-year news contract with ITV is worth £45m a year to ITN. Losing the deal would significantly reduce its value. ITN reported a turnover of £105m last year and £8.5m profit.
ITN could hang on to the contract on the grounds that ITV satisfies its public service remit, imposed by the government, largely on the strength of the high-quality news it broadcasts, which is provided by ITN.
ITN insiders have said that it can not provide the service for less than £37m if it is to make a profit.
If ITV selects a cheaper news provider it could lose its public service status. Public service status gives ITV access to cheaper broadcasting spectrum.
However, two of ITN's shareholders -- ITV companies Carlton and Granada -- are understood to be keen to buy out the news service's other shareholders, the Daily Mail & General Trust, United Business Media and Reuters, and take majority control if media ownership rules are relaxed as expected.
Under current media legislations, no single company can own more than 20% of a news provider. An announcement about a new communications bill is expected to take place on Wednesday as part of the Queen's speech. The details of this announcement are expected to become law in January.
Channel 3 News shareholder BSkyB -- 37% owned by Rupert Murdoch's News Corporation -- has made several past attempts to undercut ITN's deal to produce news for Channel 4 and Channel 5.
These attempts to undercut ITN have led to accusations that BSkyB is acting anti-competitively. This time, the threat appears more real because it is part of a consortium with strong links in news provision.
Meanwhile, ITV suffered a severe blow today as reports emerged that its financial performance was worse than had been forecast.
A report compiled by the advertising industry reveals that ITV's advertising revenue for June will be 25% down on last time. July is expected to be 20% lower than last year, compared with analyst forecasts of between 15% and 19%.
The report shows that ITV has lost 15.7% of advertising revenue in the first seven months of 2001, compared with the 10% the industry has lost as a whole.
Channel 4 revenues have gained 1%, while Channel 5 will be down 3.5%.
Last year, ITV made record revenues, largely from the dotcom boom. This year its cheaper rivals -- Channel 4, Channel 5 and a host of cable and satellite channels -- are luring former ITV advertisers with cheaper prices.
ITV's more expensive advertising slots are suffering because companies are refusing to pay such high prices as they tighten their belts in response to the economic downturn.