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ITV executives are thought to be planning for the worst-case scenario - for the TV ad market to fall 20% over the entire year, which would deprive ITV of some £300m.

Insiders claim ad spend across ITV's channels is expected to be down 18.5% year on year in Q1, which equates to a £70m drop, and similar levels of decline are expected in Q2, reducing ITV's total ad revenue in the first half of 2009 by £140m.

On top of such declines, ITV has to pay £250m and €500m (£452m) bond repayments in March 2009 and October 2011 respectively.

One insider said: "ITV executives aren't building an ITV for the future right now, they are just thinking of all the possible ways to cut costs - and you can't cost cut your way to profit, especially in the current market."

ITV employs 4,500 staff. It made 1,000 jobs redundant in October 2008. Tomorrow (Wednesday), ITV will publish its 2008 results and analysts predict the broadcaster has just three options to turn its fortunes around: offer a rights issue to shareholders, dispose of certain non-core assets, or carry on trading in the hope of an improved market.

Some believe ITV has banked too heavily on one solution to its problems - the amount of financial relief gained via a relaxation of contract rights renewal, which prevents ITV from raising its ad prices.

Justin Diddams, equity analyst at RBS, said: "The removal of CRR now is going to have little effect in the short to mid-term because there is little demand for advertising - therefore it's not sufficient to warrant big price increases from ITV."

The sale of ITV Productions has been mooted, butLuke Johnson, chairman of Channel 4, said: "The two parts of the business are heavily dependent on each other, so it would be difficult to separate."

ITV declined to comment.

Separately, ITV also refused to comment on speculation that it has proposed a three-way merger with Channel 4 and Five.

The ITV dilemma: what should it do next?

Problems

Debt
Analysts estimate ITV's net debt at the end of 2008 will total up to £750m. ITV said its pension deficit as of November 2008 was £121m, although analysts believe its cash position is still strong.
 
Ad downturn
TV ad spend has been significantly hit by the recession. According to insiders, ITV expects a fall of as much as £300m in ad revenue this year.

CRR
ITV has long argued that it suffers from the imposition of contract rights renewal (CRR), which pegs client ad spend in direct proportion to ITV1's impacts.
 
Programming
ITV1's share of all-adult impacts fell from 32.1% in 2007 to 30% last year, although ITV told Media Week ITV1 outperformed all rival terrestrial channels in terms of 16-34s in 2008 and all channels in terms of individuals' peak-time share, with 23.9%.
 
Poor diversification
ITV's bid to diversify beyond ITV1 into a multi-platform player has hit stormy waters. Friends Reunited, bought for £175m in 2006, is now thought to be worth about £50m.


Solutions

Disposals
Non-core assets such as Freeview channel landlord SDN and Friends Reunited are expected to be sold for about £200m and £50m respectively.
 
Regulatory relief
ITV argues that a relaxation of CRR would allow it to air more diverse programming. It is already set to save about £40m annually through reduced PSB obligations approved this year.
 
Sale
With new owners at the helm, ITV could receive the cash injection that many believe it needs to maintain its £1bn+ programming budget. But with the credit markets drying up, buyers are few and far between.
 
Cash call
ITV could cut debt and bring in more cash by offering a share sale, or rights issue, at deeply discounted rates.
 
Cutbacks
500 jobs could be cut this week - less than six months after ITV's last round of job cuts led to 1,000 departures.
 
International strategy
ITV operates largely in the UK, while its peers - the likes of RTL Group and the US networks - have developed hugely profitable overseas operations.


What the experts say

Bernard Balderston, assoc. director (media), Procter & Gamble
"ITV will probably have to cut its [£1bn+] programming budget, which isn't good for clients or consumers, as it always stood by the preservation of that being a core part of its strategy. But at the end of the day, if the numbers don't add up, ITV can't keep spending money it doesn't have. It will also have to keep on stripping non-core assets and get as much as it can for what it has left."

Luke Johnson, chairman, Channel 4
"All ITV can do is cut costs and get as much regulatory relief as possible. And that doesn't just include the relaxation of CRR; it needs to lose as much of its PSB remit as possible so it can efficiently cut costs. The pension debt won't stop it trading, but it is off-putting to any potential buyers."

Justin Diddams, equity analyst, RBS
"The problem is ITV doesn't have that much left to dispose of - it has already sold most of its valuable non-core assets. It will be able to pay off its pension debts; it's just whether there will be enough left to pay for programming and other costs."

Richard Eyre, former ITV chief executive
"ITV must wriggle out of its regulatory restraints and work on new revenue streams urgently. ITV has also inherited many problems and much debt, which start-ups don't have. It thinks about the world in an old-fashioned way and needs a layer of radicalism. Why isn't it creating online dramas to rival the likes of Bebo?"