ITV Unveils Five Year Growth Plan
ITV has unveiled a new five year “self-help” plan to grow its business, focusing on content and online.
It will invest approximately £1 billion across its channels this year and has set itself a target of delivering a 38.5% share of commercial impacts across its channels in 2012.
It hopes to achieve this by maintaining and accelerating ITV1’s current ratings improvement and building on the success of ITV2 and turning it into the UK’s third commercial network for 16-34s.
ITV1’s programming budget will be frozen, whilst ITV2 will receive a £20 million increase to its programming budget.
In a strategy update webcast this morning, ITV chief executive Michael Grade said that there would be no great risk of capital in order to get ITV growing again.
With regard to whether in a digital world there is still a future for a business built on television advertising, he said: “Television advertising is still a very, very potent force, which is why advertisers are so exercised over the price of ITV’s airtime and so on. And that will remain so for the foreseeable future.”
“ITV is the only commercial network in the whole of the UK which can command, on a regular basis, audiences of five, six, seven, eight, nine, 10, 11, 12, 15 million. We’re the only people that can do that. That is a potent marketing vehicle for advertisers, and will remain so.
“It’s not the be-all and end-all of our business going forward, because there are new opportunities for advertisers on the web. We have the content. We have the ability to create the content. We can drive traffic to the web. We’ve demonstrated that. And if that’s where the advertiser wants to be, we’re going to be there for them.”
The objective for ITV’s consumer business is to deliver £150 million in online revenues by 2010, with at least 75% to come from online display, video and local classified advertising.
Grade said: “By 2012, I want ITV to be widely acknowledged as the UK’s favourite source of free, original entertainment across all popular platforms and devices, not just on television. Reshaped, revitalised and redeployed, ITV’s unrivalled assets will ensure that it is once again a top and bottom line growth business. The old ITV competed in a £6 billion market – the UK television advertising and programme market. The new ITV will be operating in a market worth double that – including new types of advertising, new and diverse revenue streams, all driven by our premium, mass appeal content, free to the consumer and valued by our advertisers.
“To achieve this we are implementing a content-led growth plan, built on ITV’s creation and ownership of the UK’s most valuable programmes. Our plan enables us to sustain investment in original programmes and content through self-funding. We will pay for new investment in content through greater efficiencies throughout the business and for major new business investments and acquisitions out of disposals of remaining non-core assets. ITV will continue to target dividend cover of 2 to 2.5 times. The current intention to hold the dividend reflects the Board’s confidence in the growth plan to rebuild cover to that level over the medium term.
“This is a plan rooted in self-help. Our priority is to put our own house in order, making our assets work better, harder and more in tune with each other.”
Last week, the Office of Fair Trading announced that it will conduct a review of the imposed contract rights renewal (CRR) on ITV.
The review will begin early next year and be carried out in partnership with Ofcom (see OFT To Conduct Review Of CRR).
Grade said of the review: “If at the end of the OFT review of the CRR remedy a replacement is agreed upon, then obviously that will have benefits to advertisers, because it will mean we’re able better to invest in the programmes. And, obviously, hopefully it will benefit our shareholders at the same time.
“It will enable us to get a fair price for our airtime. Not an exorbitant price, a fair price, which we are denied under this remedy presently. What we need the OFT to do is to complete their review in time to meet the ’08 upfront negotiations for the contracts for airtime by the end of ’08, and we’re hoping to persuade them to speed things up.”
In August, ITV announced that its underlying earnings in the six months to June 30 fell to £151 million from £202 million a year ago, less than analysts had previously predicted (see ITV Earnings Decline).