Granada decided to pull out of the agreement with the European Broadcasting Union (EBU) to make the two-hour arena event, featuring 18 countries, claiming it could not make it for the price that the EBU wanted. The show would have cost around £1.6m to make but the EBU was only offering £600,000.
Granada controller of entertainment Mark Wells told Broadcast : 'We had an amicable discussion with the EBU saying we are struggling to make this show with the funds allocated and would you explore finding a new host broadcaster.'
EBU executive project manager Jeroen Depraetere admitted: 'The budget proposed was too high for the money we can raise from the membership.' The event on 20 November has now been switched to Lillehammer in Norway and will be produced by broadcaster NRK.
ITV has now decided to relegate the show to its digital channel ITV2. Last year's show, from Denmark, aired on ITV1. ITV2 will also show the UK final in September, which will be made by Granada.
ITV sources said the autumn schedule was already packed out so there was no room for the programme. However, the decision may be based on concerns over its potential ratings.
Last year's show on ITV1 got just over 5 million viewers and a 22% share in a 7pm slot.