IN black braces and shirtsleeves, Sir Paul McCartney was taking his audience at the Brit Awards on a journey. “We’re going over to ITV2 . . . where no-one ever goes,” he shouted with a note of incredulity, before launching into Lady Madonna for the Earls Court crowd.

The digital channel may have been a new experience for the former Beatle, performing after picking up a lifetime achievement award last Wednesday night. But it is increasingly familiar territory for viewers, and not just those who follow shows spilling over from ITV1, like the Brits.

The channel’s success is a bright shaft of light for Michael Grade. Against the backdrop of a tumbling share price and mixed critical reviews, the performance of ITV’s executive chairman will face heavy scrutiny when he unveils his first set of annual results on March 5.

Underlying profits are forecast to have slipped 36% to £259m because of higher interest costs, the closure of the ITV Play quiz channel and investment made in online activities.

ITV2 has a weekly audience share of 1.9%. Original commissions such as Billie Piper writhing in stockings in The Secret Diary of a Call Girl have made it Britain’s biggest nonterrestrial channel, even beating Five in the ratings on occasion.

It was left to Grade as a legacy from Charles Allen, the former chief executive. The so-called “family” of digital channels ITV now runs – born out of a realisa-tion that it needed to bulk up in a multi-channel world – is more than offsetting the audience trickling away from flagship ITV1.

Like McCartney, Grade has rattled through some of his greatest hits in the 13 months he has presided over ITV. Reviving News At Ten and swiping the rights to air FA Cup ties and England’s home internationals from rivals are the sort of grand gestures that have followed Grade on a celebrated, cigar-strewn media career through LWT, the BBC, Channel 4 and lottery operator Camelot.

Whether his tenure at ITV will cap the lot remains to be seen. Some of the fans who welcomed him as a saviour are growing disillusioned. “We just hoped for more,” said one. “He hasn’t brought in as many new people as he might have. He hasn’t gone far enough.”

Others worry that Grade’s fabled magic touch has deserted him and he has fallen behind the digital, on-demand times.

“It was Uncle Lew this and Uncle Lew that,” said one former employee, who listened to Grade regularly harking back to the glory days when his uncle helped found the commercial tel-evision monopoly in 1955.

Indeed, friends say Grade is finding the going tougher than he thought it would be. One former director calls the job “a poisoned chalice”. And on top of ITV, Grade is busy chairing Ocado, the grocery deliverer, and Pine-wood, the film group that is negotiating to buy the BBC’s studios.

His main task is to fix ITV1, which still accounts for 60% of the broadcaster’s income. He has to deliver big shows and big audiences. He has made some progress, although early results have not overwhelmed.

ITV1 has lost 2.7% of its audience so far this year, despite a slate of new programmes, but done better than Channel 4 and Five, whose audiences tumbled 13.8% and 6% respectively. Insiders admit they need a new hit to brag about – and not just returning successes such as Dancing on Ice and the Stephen Fry drama Kingdom.

However, advertisers, assiduously courted by Grade, appear more comfortable with the channel’s performance than a year ago.

“It is more positive than not,” said one. “We are seeing a flattening-out in terms of audience loss and a number of formats performing pretty consistently.” But he cited one worry caused by research that suggests ITV1’s audience has become slightly older and more downmarket since the News at Ten relaunch.

At least Grade has secured a review of the contract-rights renewal mechanism, put in place at the time of the Carlton-Granada merger, that prevents the broadcaster from raising the price of advertising slots to compensate for falling audiences. Regulator Ofcom is already interviewing advertisers to hear their views, although changes will not take effect until 2010.

And then there is the share price. On Grade’s watch, ITV’s shares have fallen 35% as investors fret over the weak outlook for advertising. Although there is little evidence yet that spending is being cut, industry watchers are bearish about the second half of the year.

The overhang of shares is also taking its toll. BSkyB, 39% owned by News Corporation, ultimate owner of The Sunday Times, still has 17.9% of ITV, though it has been ordered by business secretary John Hutton to reduce this to no more than 7.5%. The uncertainty will persist after Sky challenged the Competition Commission’s findings.

Despite the slump, investors appear to have fallen in behind Grade for the long haul. “I think it was felt it would take him a year or two to take effect,” said one shareholder. “It was never going to be a quick fix.”

Another added: “It’s a very difficult environment. How do you measure how well he’s doing? I think it’s fairer to give him the benefit of the doubt.”

Analysts are divided. Even with the share price at a lowly 70Äp, Patrick Wellington at Morgan Stanley said that ITV was trading at a significant premium to broadcasters elsewhere in Europe. But even with the share price standing at 14 times earnings, Omar Sheikh at Dres-dner Kleinwort said that at this level ITV’s nonbroadcasting assets, including its huge programme-making arm and archive of shows, were in effect being thrown in for free.

Several private-equity firms have looked at the possibility of making a bid for the company but they are struggling to make the numbers work. Raising funding is also a sticking point as the credit crunch persists.

“Everyone is looking at it,” said one wheeler-dealer. All agree that ITV should be worth more than its £2.8 billion market value, not least because few of its peers in Europe have such a dominant position in their home market.

So how long has Grade got to grind out a better performance? He signed on for up to three years, after which he will become part-time chairman. This means he could map out a successor in little over a year, after one more key autumn and winter seasons of shows.

He clearly believes that creative tension is good. He has cleverly assembled several internal candidates to fight it out to succeed him.

The frontrunner is the ambitious Dawn Airey, who is spending £200m to rebuild ITV’s production arm, with a view to nurturing long-running drama hits that will sell well overseas.

Her main rival is Rupert Howell, the former advertising man turned commercial director. His remit includes improving Friends Reunited, the social-networking website eclipsed by Facebook. The number of unique visitors to the site has halved in the past year, according to the audience-measurement firm Com-score, compared with an eightfold increase at Facebook and a doubling of users at Bebo.

To get scale, Friends is preparing to turn its back on its subscription model. But that means it must draw in advertisers to replace last year’s £10m of profit on sales of £25m.

Grade has told friends he does not want to name a successor too soon, for fear of becoming a lame duck like Michael Checkland, who anointed John Birt early to replace him as BBC director-general.

As McCartney knows, it is best to leave the stage with the audience calling for more. Ever the showman, Grade probably aspires to doing the same thing. But first he must wring out some solid results from ITV.

Now that would be a lifetime’s achievement.

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