Why Sky's the limit

Dawn Airey has good reason to choose BSkyB over ITV. She and Sky plan a major entertainment channel, report Saeed Shah and David Lister

Dawn Airey's choice of BSkyB over ITV marks a turning point in television history. How could any right-thinking television executive want to run a satellite service, best known for its football and its films, and available to only 40 per cent of the population, in preference to a terrestrial commercial network with more than 40 years' history?

Airey won't even have anything to do with Sky's main selling point, Premiership football. But perhaps that is the point. It is Sky's ambition to set the agenda in something other than sport; in general entertainment, in fact. That means comedy, drama, sitcoms – the stuff of prime-time TV. That is what Elisabeth Murdoch tried to do when she was managing director, but she never made any great waves under the Sky One entertainment channel. Dawn Airey aims to do better: to offer a challenge to ITV, as does her new boss, Rupert Murdoch.

Sky has offered Airey the post of managing director of Sky Networks, which puts her in charge of all non-sports content, reporting to Sky's chief executive, Tony Ball. They reportedly even offered her less money than ITV's £1million-a-year bid.

Sky has already been a huge success, establishing itself as the home of blockbuster movies, top sports and entertainment series. But its ambitions go way beyond that. Mr Ball has said he wants Sky content in every home in the country. That's not idle bragging. Sky is already available through satellite and cable and it will be broadcast to digital terrestrial viewers, as Sky has secured three valuable slots on the former ITV Digital platform, to be relaunched by the BBC. When the Government switches off the analogue TV signal by 2010, Sky will be in every British home.

So, the writing is on the wall. Sky is the 100-pound gorilla which is invading all our lives. Airey is jumping on board for that reason. Sky's content, outside sport, is known mostly for high-profile American films and series. Airey's arrival, to oversee a budget of some £750 million a year, is a strong signal that Sky is looking to commission much more original content. That is how it can clearly differentiate its content from other broadcasters. Currently, Sky One, the main general entertainment channel, has 50 per cent original content; expect that to rise under Airey.

Next year, Sky will launch up to three music channels, each devoted to a different genre. Overseeing this will be probably be Airey's first major task. Sky One is aimed squarely at the 16-34 age group. Another general entertainment channel is being planned, perhaps one that will have a broader appeal.

The big mission for Airey will be to produce a mass-appeal channel that Sky would offer to digital terrestrial viewers – which may become the way that most households watch TV in the future. Sky has three channel slots on this platform, which will initially be occupied by Sky News, Sky Sports News and Sky Travel. This is, however, merely a holding position. Certainly, Sky Travel will be replaced in the next few years by a more compelling content offering, probably by the general entertainment channel that Airey will create.

Airey's decision to join Sky not only demonstrates how far it has come, but it is a very graphic and painful illustration of ITV's rapidly shrinking appeal and status. ITV has had a catastrophic year, which has been it having to walk away from its failed £1m ITV Digital investment and a massive drop in the ratings.

During the first half of this year, ITV saw its share of the key 16-34 age group loved by advertisers, shrink by 22 per cent. That's catastrophic and a sign that its troubles run deep – this is a structural decline, which appears to have done permanent damage to the ITV brand in the eyes both of advertisers and viewers.

The ITV network has been without a chief executive since May and its director of programmes is about to leave. Not so long ago, running ITV would have been only second to being director general of the BBC in the television world. Now ITV looks increasingly like a lame duck. Sky snatching Ms. Airey from under it is just the latest humiliation for the fallen giant. ITV has a programming budget of £825m; yet it is said that, had Sky not come along, Ms. Airey would even have preferred staying at Channel 5, which has a programming budget of just £150m, to taking the helm at ITV.