‘If people want accurate news, ITV needs prominence’
The boss of the media company says it is time to reform public service broadcasting, writes Christopher Williams in Cannes
For many people, London Luton Airport is to London as Piers Morgan is to good television, which is to say not even close and best avoided entirely if at all possible. Carolyn Mccall sees things differently. At the turn of the year she swapped easyjet for the top job at ITV, where Morgan remains gainfully employed. Mccall also still prefers to fly from the budget airline’s Bedfordshire base to Cannes and the somewhat more glamorous setting of the Mipcom media market. Here, broadcasters and producers from all over the world gather to buy and sell programmes and ideas, gossip and swill champagne with the Côte d’azur as a backdrop.
“It’s like a party out there,” Mccall observes in a side room at the ITV stand, a towering assemblage of adapted shipping containers overlooking the harbour.
These are boom times for this part of the television industry. Netflix and Amazon are pumping billions into big-budget dramas, and traditional broadcasters are responding with higher ambition and investment for their own programming. Every surface at Mipcom is adorned with promotions for a different show vying to become the next bingeworthy box set.
On one hand this is good news for Mccall and ITV. Its production business, ITV Studios, which takes commissions from anyone, is here selling international rights to an adaptation of War of the Worlds and World on Fire, an epic Second World War drama. Both will be shown by the BBC at home, but strong demand for British programmes overseas means ITV should be able to cash in on a new scale.
Four fifths of ITV Studios’ business is currently in less en vogue unscripted reality and entertainment programming, but Mccall is pushing it towards more drama.
“We’re sizeable in scripted but there’s room to grow,” she says. ITV recently declined to bid for the production giant Endemol Shine, partly because its finances rely too heavily on and two ageing unscripted formats. Despite ITV Studios’ progress, Mccall is worried and the bubbly atmosphere of Mipcom signals the cause. She believes ITV’S identity as a public service broadcaster is under threat from the rise of streaming.
Those who control the presentation of streaming apps on screen, including Sky, Virgin Media, Amazon, Apple and Google, are not obliged to give the BBC and ITV the top billing they are guaranteed on traditional channel listings. Instead apps are presented according to commercial interests, which might mean promoting their own programming or selling the best slot to Netflix.
“They just do what they want to do, which is all about making money,” says Mccall.
For ITV it is a violation of the regulatory pact on which its publicservice licence is based. It spends £120m a year on news programming that is unprofitable because it attracts relatively small audiences. In the old world of channel listings it gets guaranteed prominence in return, which boosts audiences and advertising income from less worthy parts of the schedule such as I’m a Celebrity … Get Me Out of Here!
The deal is being undermined, says Mccall.
“If people in Britain want news that is accurate and delivered impartially so people can make their own judgments about what’s going on in Syria, what’s going on in America, what’s going on in Saudi Arabia today, etc, if that is what you want then we need prominence,” she warns.
“Clearly, without prominence, we have to really think hard about what we do.”
Mccall’s warning is aimed at the Government. Ofcom, the media regulator, is reviewing prominence rules and is due to make recommendations to ministers sceptical that they should intervene against the force of change.
“This is not about stopping technology, this is not about not having all of these tech giants improving lots of people’s lives,” Mccall protests. “It’s about saying fine, but if that is the way that technology is going, then you have to reform public service broadcasting from how it was originally set up 40 years ago.”
There is an urgency. Apple is due to begin a big push into television next year and is in talks with BT to get its own set-top box into more homes. Amazon is preparing to launch its own ultra-high-definition television sets to crack more homes.
“This is about pace and speed,” says Mccall. “I think the great concern is people move very slowly, and it’s only much later they look back and go, ‘My god, if only we’d done that’.”
Mccall knows from experience that media shifts can happen quicker than you expect. Prior to easyjet she ran the publisher of The Guardian and in 2005 invested £80m in new printworks. This year they were written off and scrapped as the accelerating decline of print meant the operating costs were unsustainable.
She does not deal in menaces, but the implicit threat from ITV is that without new guarantees of prominence, it really could hand back its public service licence when it is next due for renewal in the early part of the next decade. It might lose the third slot on traditional channel listings, but what will that be worth by 2024 when most viewing will be via streaming? Perhaps not £120m.
“I haven’t gone down that route yet, but I think what we would have to say is, everywhere you look, the prominence is being diluted and it’s not just us,” says Mccall. “It’s the BBC as well, and I think that’s very dangerous for British society.”
Previous ITV regimes have threatened to ditch its public service licence, but mostly as part of campaigning to keep the BBC in check. This time ITV and the BBC are united in their concern, although Mccall has to think about the bottom line as well as the impact on politics and the public interest.
“I think we are in a different position to a state-funded broadcaster, which starts the year with a lot of money in the bank,” she says. “We have shareholders and so we have to make the return on what we do.”
Mccall has already cut their returns. For five years under her predecessor, Adam Crozier, investors enjoyed annual “special” dividends worth hundreds of millions.
The policy was ditched as soon as Mccall arrived, sending a clear signal that ITV would need to spend more to re-engineer its business for the streaming world.
Crozier and chairman Archie Norman repaired the balance sheet after the recession that followed the financial crisis and built up ITV Studios to reduce the company’s reliance on the volatile advertising market. Mccall now faces an accelerating shift in viewing habits and believes that securing a future for ITV demands investment.
The catch-up and live-streaming service ITV Hub is getting a £40m overhaul to make it feel more like a streaming service from one of the tech giants and allow advertisers to target viewers based on their consumer profile.
Mccall’s bigger bet is an as-yetunnamed subscription streaming service due for launch next year. She has held months of talks with the BBC in hope of combining its programming
library with ITV’S to create a more compelling offer to viewers. However, Mccall is now clear she will not wait for the BBC to get behind the project.
“I would say we’ve made it really clear that we would want to collaborate and have other partners who could obviously augment what we do,” she says.
“But it was also fairly important to just take the lead on it, and say there is a window otherwise we’re not going to be in it. I think for a commercial public service broadcaster, it would be very odd not to be in subscription video on demand.”
Traditional US broadcasters have been successful with something similar called Hulu. As well as acting as a library of broadcast programmes it commissions exclusive new material such as The Handmaid’s Tale to entice subscribers. Mccall says her service will also need exclusive new programming that has not been seen on ITV “but it won’t be in year one”. With 40,000 hours of programming already at her disposal, compared to Netflix’s 25,000, Mccall believes there is plenty to start with.
“As long as you offer good value, you will get the subscription,” she says.
New technology, exclusive programming and expertise in subscription businesses will be costly, and the scale of the investment is yet to be disclosed. ITV will at least benefit from free advertising via its own channels, however. Mccall is in the market for a new chief financial officer to help set the balance between spending and saving for the inevitable advertising downturn. An announcement is due soon.
“That’s a fine balance, because that’s the calculated risk when you know there are going to be economic headwinds,” she says. “We’re still very sensitive to the economy.”
Many in the television industry believe that the uncertainties faced by ITV over its public service broadcaster status and the advertising market, which still accounts for 60pc of profit, mean persistent City speculation that it will become a takeover target is misplaced, even as Comcast pays £30bn for Sky.
“Comcast bought Sky for a completely different reason,” offers Mccall. “Who knows? I don’t know. All I know is we have shedloads to do.”
‘The great concern is people move very slowly, and it’s only much later they look back and go, “My god, if only we’d done that”’
Carolyn Mccall, the chief executive of ITV, is overhauling the broadcaster’s live-streaming service ITV Hub