The arrival of Dawn Airey as chief executive at Channel Five cannot come soon enough. Airey's start date in October was revealed yesterday by parent company RTL at the same time as it emerged that Five's profits in the first half of 2008 had been wiped out.

While revenue was a steady £164 million, profits tumbled from just under £4 million a year ago to zero, partly because of relaunch costs for its digital stations. Five's family of channels — it runs Five US and Fiver as well as its flagship, Five, Britain's fifth terrestrial channel — also saw its share of the net TV advertising market shrink by 1%.

Such signs don't augur well with advertising revenues on the slide. ITV and Channel 4 are signalling drops of between 10% and 20% in September.

The good news for Five is that Airey, who helped found the channel in 1997, is starting as soon as October. When RTL chief Gerhard Zeiler poached her from ITV in April, her then boss Michael Grade threatened to hold her to a year's gardening leave, which meant she wouldn't have started until May 2009. “The knowledge Dawn Airey is arriving in October is a welcome relief,” says Delissa Needham, executive producer of The History Channel, which works with Five. “It will be good to have somebody at the helm at last, somebody's who previously done a good job.”

Insiders at Five, and those working outside in independent TV production who make its programmes, have been desperate for the limbo period to end. It's an open secret that morale within Five has been low following the management upheaval. Airey's appointment was the most dramatic. Her predecessor at Five, Jane Lighting, and managing director Lisa Opie quit as soon as news of Airey's hiring emerged. Zeiler's decision to recruit her was an acknowledgement that things at Five were not working.

But the troubles are not only financial but also creative. Five has had three programming bosses in less than two years. Dan Chambers left abruptly in 2006. It took an age to find a replacement, Jay Hunt, from the BBC. She quit within months last December, to return as BBC1 boss — a tribute to Five's talent-spotting but a blow to morale. Lighting and Opie recruited the BBC's Ben Gale this year but, by the time he arrived, they had left. No wonder there have been other departures by commissioners among the lower executive ranks. Gale himself is liked but it is said his inexperience shows. With no permanent chief executive of Five above him, insiders complained that decisions were being funked or referred to RTL.

Five's previous bosses have gone some way towards revamping the schedules. Lighting and Opie bought that hardy perennial, Australian soap Neighbours, for £300 million in a 10-year deal in the search for a ratings mainstay. They hired Natasha Kaplinsky as a £1 million-a-year news anchor — a move that has paid dividends at 5pm (ratings up 45%) but less so at 7pm. Five has also bought the rights to the UEFA Cup from next season. And while audience share may be under pressure on the main channel, Five points out that together with its digital stations, more people are watching than at any point since 2005.

“They've done some really smart purchases of US programming such as House and Grey's Anatomy,” adds Adrian Monck, former managing editor of Five News and professor of journalism at City University. Factual series Ice Road Truckers was another shrewd buy. “But has Five had a breakthrough? It's never had a hit like Channel 4 with Big Brother. It's never had a hit that can dominate on an evening and that's why they're still around 6% [market share].”

Five could also suffer as it has so far been excluded from the Kangaroo “iPlayer-style” download website which the BBC, ITV and C4 are collaborating on. For now Five is having to stick to running its own “on-demand” site.

RTL is counting on Airey to improve things. In 1997 she memorably defined Five as “more than just football, films and f*****g” — although most people choose to remember only the three Fs.
The feeling now is that the main channel lacks brand identity. While Five has some well-regarded “strands” such as Extraordinary People and history series Revealed, it lacks iconic homegrown programming. Gale has promised more entertainment and plans to expand its children's TV brand Milkshake.

Zeiler and his ultimate parent company Bertelsmann — which owns 90% of RTL — want to be the number one or two leading player. That is the case in other territories that RTL channels operate: Germany, France and Holland. Indeed Zeiler repeated a year ago that he wanted Five to be the second-biggest commercial channel in the UK, after ITV. That ambition has not been realised.

However, as with ITV and C4, Five faces deeper structural problems. Power in the digital age has been shifting from channel owners to content creators. This is well illustrated in RTL's latest results. While Five broke even, its sister company Freemantle reported pre-tax profits of £77.2 million, up 6.6%.

Freemantle, a global business, makes The Apprentice, Pop Idol and Britain's Got Talent. Paradoxically in the UK all are broadcast on Five's rivals. Freemantle also makes Five's Neighbours, a deft piece of inter-company dealing — although Five is also obliged to take some other programmes it might not have otherwise chosen.

The great conundrum is what RTL wants to do with Five. In 2004 C4 and Five discussed a merger. One recent rumour is that RTL might be willing to sell a stake in Five in exchange for BSkyB's holding in ITV, which is likely to be sold. Another suggestion is that Airey, formerly at Sky, could lead a tie-up with ITV or Sky itself. Zeiler has dismissed such talk: “Rumours don't have to be true.” The fact RTL has so far failed to make any move for ITV, desite its low share price, suggests he is playing a straight bat. That still doesn't answer the question about what RTL wants from Five.