Most of ITV’s numbers are on the up – but what about ITV Studios?

Raymond Snoddy says Adam Crozier, the ITV chief executive, has a perfectly rational “transformational” five-year plan for the company but he will have difficulty building up ITV Studios, whichever brilliant executive is in charge. The one deal that would be truly transformational in production terms for ITV would be the acquisition of All3Media…

There would be something marvellously symmetrical if ITV were to buy All3Media, the UK’s largest independent production company, as many people are suggesting.

All3Media has been turned into an independent television production powerhouse by three former Granada executives – Steve Morrison, David Liddiment and Jules Burns.

Wouldn’t it be totally splendid if Morrison, who was unceremoniously tipped out of Granada in the role fall-guy and Liddiment, who resigned as ITV director-of-programmes, were to ride to the rescue of ITV’s under-achieving production business?

By any standards ITV’s results today were a huge improvement on previous performances, just as last week small cousin STV managed to produce signs of excellent progress north of the border with its results.

Most of ITV’s numbers are heading in the right direction – pre-tax profits almost tripled to £321 million, total revenues up 10% to just over £2 billion, net debt cut from £613 million to £188 million. The dividend is being restored and even the pension deficit is heading in the right direction.

Terrific!

Actually apart from the cyclical nature of television advertising at the best of times, the real winner at both ITV and STV – underlying profits up 42% at £17 million – is television itself.

The fashion among some lesser analysts that network television was somehow doomed and that television display advertising is dead or dying and with it the 30-second spot, has at last started to fade in the face of strong contradictory evidence.

The new conventional wisdom is that all the social media malarkey benefits strongly from brand development and exposure on national television.

Of course to pull in the advertising you need strong programmes and it also helps if it they are your own strong programmes.

But ITV cannot live by The X Factor and Downton Abbey alone. In fact the hits business is so uncertain that all the signs at the time were that ITV was more than a little doubtful about the likely fate of Downton Abbey in the ratings and was somewhat surprised by its success.

Alas revenues at ITV Studios fell 12.5% to £293 million at the same time as earnings slid by 11% to £81 million.

Adam Crozier, the ITV chief executive, has a perfectly rational “transformational” five-year plan for the company. But he will have difficulty building up ITV Studios, whichever brilliant executive is in charge.

The unfortunate truth is that many of the most talented production people in ITV have already wandered off to set up their own Indies.

Now it would be entirely possible to run around trying to hoover up individual indies but the problem is that many of the best have already been swept up into companies like Elisabeth Murdoch’s Shine and All3Media.

With Elisabeth returning to the arms of the family after ploughing an independent furrow, the options narrow.

The one deal that would be truly transformational in production terms for ITV would be the acquisition of All3Media and sometime around now it is due to become available for the right price.

When venture capital group Permira bought a majority stake in All3Media in 2006 the likely aim was that Permira would be looking for the exit – as VCs always do – within four or five years and a price tag was suggested at the time of around £500 million.

For ITV such a acquisition would mean owning an international chain of TV, film and new media companies in the UK, Germany, Holland, New Zealand, Australia and the US.

One of the most obvious failures of ITV in recent years has been its near total inability to break out of its traditional UK boundaries. There is also a nice little programme distribution company in there as well.

How such an acquisition would be managed would have to be decided with great clarity before such a deal was ever even contemplated.

You could let it be as a stand-alone entity reporting into the main ITV board – probably the more sensible route.

The alternative – integration – could be fraught with difficulty and lead to destruction of value and squabbles over who was in control. You upset the creatives who like the relatively hands-off relationship with the All3Media “holding” company at your peril.

The alternative would be to see it almost as a reverse takeover, with the All3Media team – in effect – taking over ITV Studios.

What is clear is that something more dramatic than organic growth – or rather organic decline – is needed to transform the prospects of ITV Studios and with it the long-term prospects of ITV overall.

The other area that really needs transformation is ITV’s new media business – an area which historically ITV has talked the talk and remained firmly behind the pace-setters. Even the BBC has been faster off the mark.

Online revenues were only £28 million in 2010 down from £37 million last time because of the disposal of Friends Reunited.

Here the big gesture acquisition is not to be advised as the Friends fiasco demonstrates only too clearly.

ITV could learn something from what Rob Woodward has achieved at STV. The company has come back from the brink after unfortunate acquisitions at what turned out to be close to the top of the market.

Woodward, the STV chief executive has repositioned the commercial broadcaster as Scotland’s digital media company – available anywhere anytime – even in the Glasgow underground.

Just as ITV has been pulling back from its local coverage STV is launching hyper-local online services all over Scotland and is planning a new Edinburgh-based edition of the main early evening news to add to those that already come from Glasgow and Aberdeen.

STV has recently thrown its hat in the ring for what has become known as Jeremy Hunt’s Channel 6. The Scottish company is also taking minority stakes and developing partnerships with small high-tech communications companies to get access to best-in-breed ideas.

You never know in time it could be transformational.