Get me out of here... ITV wrestles with toughest trial
TV advertising is off a cliff due to Covid and now on its 65th anniversary, the group is set to drop out of the FTSE 100, finds Hannah Boland
At the start of the year, hopes were high for ITV. The Euro 2020 football tournament was on the horizon, and Winter Love Island was about to kick off – both drawing in advertisers. The company had also finally started to take concrete steps to ward off growing competition from US giants Netflix and Amazon with the launch of its joint subscription streaming service Britbox.
What’s more, analysts were optimistic that ITV could emerge as a post-Brexit recovery play, mirroring the rebound it enjoyed after the 2008-09 financial crash.
“If you’d have asked me in January, before Covid-19, it would have been one of my stocks for the year,” says Alex DeGroote, a media consultant and former City analyst.
Months later, and reality has hit hard. As Covid-19 wreaked havoc across the UK, ITV suffered the sharpest advertising decline in its broadcasting history.
High-profile shows such as Love Island were cancelled due to production restrictions.
Others such as I’m A Celebrity ... Get Me Out
of Here and The
Masked Singer are still set to shoot later this year, although in different formats. It has been, boss Carolyn McCall admitted, a “testing” few months – a period which this week looks set to be capped off with ITV falling out of the FTSE 100.
“It’s probably been the most difficult time that ITV has ever faced,” says Claire Enders, chief executive of Enders Analysis. “In financial terms, the company’s in much better shape than it was in 2008/09”. But, she says, “it is an equivalent nightmare”.
ITV has been here before. In 2008, the company was relegated from London’s FTSE 100 index in the wake of an advertising downturn. In the years after, Adam Crozier and Archie Norman, at the time boss and chairman of ITV respectively, worked to repair the balance sheet and build up production assets, under the ITV Studios umbrella, as a hedge against any downturn in the volatile ad market.
Ultimately, ITV rejoined the FTSE 100 again in 2011 and, by the time Crozier left ITV in 2017, the company was reporting an annual profit of more than £500m. Its share price stood at around £2.
Yet, whilst the turnaround was dramatic, few would argue that Crozier left ITV as an organisation which was protected against any future advertising downturns. Huge headwinds were on the horizon – not least the boom in online TV and film. “Crozier timed his exit perfectly,” DeGroote says. “It’s just been downhill ever since McCall came in and is it her fault? Not really.”
Since the former easyJet executive took over at ITV, she has had a hard task on her hands. Her focus has been on digitalising the company’s operations, investing heavily in ITV streaming services in a bid to compete with Silicon Valley giants. Yet, such services struggle to compete against the likes of Amazon and Netflix when it comes to content budgets.
What’s more ITV’s streaming services rely heavily on archive material. Reruns of Emmerdale won’t dominate the conversations on social media like The Mandalorian and
Stranger Things do.
“It’s very niche,” Enders says. “It would have been very naive if the company believed that launching Britbox would somehow revive its fortunes the way that Disney Plus is reviving Disney’s fortunes.” Further restrictions in the advertising market, curbing gambling and, from next year, fast food ads from appearing on TV, are also weighing heavily on ITV’s share price.
Investors appear unconvinced by the stability provided by the production assets bought under Crozier’s tenure, ITV’s share price remaining low despite the supposed hedge against the ad volatility.
“The fact that investors continually mark the stock down tells me that they don’t really believe in their recovery potential this time around,” DeGroote says.
All this has combined to ramp up speculation over a potential takeover. Talk of such a move by a US media giant has been circulating for a while, but given the recent share price crash, many see the possibility as more immediate.
“Ultimately, it seems very likely to me that ITV will eventually form part of someone else’s global scale play,” says Enders. “It looks inevitable and the Covid crisis will have advanced those arguments.”
Later this month, ITV turns 65. It may have been expecting to celebrate with ballooning advertising revenue from slated sports events and growing subscriber numbers from its Netflix rival. Now, though, the headwinds are piling up. For executives, a takeover may provide a way out. And for ITV, retirement could be on the cards.
Carolyn McCall, inset, is under pressure after ITV’s roster of hit shows were disrupted