ITV hunts for hit shows as advert revenue plunges

NEW ITV boss carolyn Mccall is to beef up the broadcaster’s studio arm after it was hit by the sharpest decline in TV advertising in eight years.

The former Easyjet chief executive blamed tough advertising market conditions for a £5m fall in revenue, the biggest drop since 2009.

But she said the rapid growth of internet video services and comcast’s £22bn swoop on Sky showed how valuable businesses that produced their own content were.

Announcing a ‘refresh’ of ITV’s strategy, Mccall said original programming was one of its greatest strengths and could be sold to newer players such as netflix and Amazon, which are spending billions of pounds on shows.

She said: ‘One thing that has become increasingly clear to me is creating and owning quality content is a huge advantage.’

ITV has been expanding its studio arm since former boss Adam crozier launched a major overhaul to reduce reliance on advertising.

It makes hits such as Poldark, Victoria and Saturday night Takeaway (presented by Ant McPartlin and Declan Donnelly, pictured). Its shows are often broadcast in the UK and then sold abroad, with revenues surging 13pc to £1.6bn last year.

Mccall said: ‘ITV Studios is doing very well and has done exactly what it was set up to do, which was about diversifying away from advertising revenues, and we will need to continue doing that.

‘And of course in the strategy refresh, content is one of the key areas that we are looking at. The internet giants are definite opportunities for the studio business.’

But the 56-year-old has her work cut out. Though successful, ITV’s studio arm is less profitable than other parts of the business and it was not enough to stop a profits slide of 6pc to £800m in 2017.

Viewing figures remained strong, with Broadchurch, starring David Tennant and Olivia colman, the most-watched drama of the year – 11.7m people tuned in for its finale.

ITV’s audience share across all channels rose 2pc, to 21.7pc. It is also investing in its online services, including ITV Hub, which has seen a 22pc increase in viewing. Advertising revenues are expected to pick up in 2018, boosted by the football World cup.

ITV issued no special dividend, as it had done in previous quarters, but increased its ordinary total payment to 7.8p. Investors dumped the stock, with shares falling 7.6pc, or 13.2p, to 160p.

Russ Mould, AJ Bell’s investment director, said: ‘Investors seem to be reacting with disappointment to ITV’s decision not to pay a special dividend. It makes sense for Dame carolyn to continue [crozier’s] strategy, especially as it is Sky’s control of such prime content as movies, sport and its own programming that has created a large and loyal customer base, which has in turn drawn bids from 21st century Fox, Disney and comcast.’

George Salmon, an analyst at Hargreaves Lansdown, said: ‘There’s no getting away from the uncertainty around ITV, but in the short-term investors have the boost from a World cup summer to look forward to.’

Mccall spent most of her first eight weeks travelling in the UK to visit staff in London, Leeds and Manchester. She is also understood to have become personally involved in negotiations with cable TV provider Virgin Media over the issue of payments for carrying ITV1, the broadcaster’s flagship channel.

By law, Virgin had been allowed to carry the channel for free but this rule was scrapped by the Government last year. That led ITV to reportedly hand it an £80m bill.

Mccall declined to comment on the negotiations.