Has ITV turned a strategic corner?

Opinion

After five years in charge and having just launched ITVX, the broadcaster and its CEO appear to be at a key moment in ITV’s colourful history.

One of the most hilarious moments at a media annual meeting happened at the Mirror Group years ago when the newspaper group was a separate quoted company.

A small shareholder admitted to being perplexed that sometimes the shares went up, and at other times they came down. The chairman was asked whether it would be possible to give some advance warning, on when the shares were about to go up.

If only such a thing were either possible — or legal.

As with annual meetings, the declaration of annual results of companies are set-piece occasions when chairpersons and chief executives are rehearsed and coached about what to say, and (more importantly) what not to say.

Tomorrow we will learn a lot about the state of ITV and how the launch of ITVX, its freemium streaming service, is going when the company announces its results for 2022.

The trick with these set-piece occasions is to avoid, where possible, unpleasant surprises that will cause the share price to plummet.

Power play

To avoid such surprises along the way, trading updates are given in advance, analysts are briefed within the rules, and a friendly Sunday newspaper journalist is encouraged to write a piece that, at the very least, hints at how the results are likely to pan out.

The old days when the business editors of the posh Sundays would get a brown envelope from some of the slicker financial PR outfits with a cracking exclusive about an imminent multi-billion takeover are largely over. But you can still read obviously well-informed pieces over your Sunday breakfast which may or may not carry the occasional trace of the dark arts.

Anyone interested in the future of ITV, or how well the ITVX service is going, would have been attracted to a lead article in the Mail on Sunday’s business supplement which came complete with a power picture of ITV chief executive Carolyn McCall.

Under a neat headline: “ITV boss’s results are a stream come true,” a picture caption in the Financial Mail on Sunday told of a “winning strategy.”

This is important because McCall, the former successful chief executive of easyJet who has just completed five years at the helm of ITV, has staked her executive reputation on reducing ITV’s dependence on volatile advertising revenue. She has firmly pointed the company towards streaming and subscription, including Britbox.

The Media Leader Podcast: ITV CEO Carolyn McCall’s vision for TV and streaming

According to “a city source” ITVX is doing well with advertisers “flocking” to the service with “its huge viewing figures.”

Millions were tuning in to shows like Love Island every evening for several weeks at a time and ITV Studios, which produced programmes such as Line of Duty and Cold Feet for the BBC, has gone “from strength to strength.”

Group ITV revenues were expected to have risen slightly from £3.5bn in 2021 to £3.6bn last year and are forecast to rise “in the coming years.”

Two decades of twists and turns

More important than any of this, the Financial Mail on Sunday said boldly that tomorrow’s results will show that ITV has turned a strategic corner.

The company will confirm that revenues from its streaming and studio businesses — “both expected to report double-digit growth — now account for more than half of the total.”

The largely positive piece might have contributed to a modest uplift in the ITV share price on Monday of about 1.7 per cent.

Alas, in the way of such things, by yesterday the gain has evaporated and ITV stood back again at 88p. This does represent a recent rise of nearly 20%, although much reduced compared to the 169p price when McCall took over — albeit in very different times for the media industry.

In fact, since ITV first came together through a merger in February 2004 and floated at 148p, there has been a lot of ups and downs, mainly downs, in the share price.

There have been remarkable twists and turns, with former ITV executive Greg Dyke failing with a cash and new shares bid worth 130p a share in 2006 before the shares fell to an all-time low of 23p three years later.

An abiding mystery across two decades of ITV’s most recent “mature” iteration is why a relatively small media group in the scale of things has never been taken out.

Not all American media players fancy regulated, public-service broadcasting, and free-to-air television is seen by some as the past; old fashioned compared with the social media giants and the multi-billion streamers. There could also be large pension fund obligations.

Three more years for McCall?

Right now the big question — and one where we will find out more tomorrow — is whether McCall has managed to chisel out a coherent strategy for the future linking original production, traditional advertising funded television and a growing streaming and subscription offering.

There are lumpy bits. Is it wise to put your finest attractions first on what is for now the less central part of the business? And there is more than a little irony involved in ITV trying to break into the subscription business while Netflix has been pushing ahead with its own advertising funded service — something it said it would never do.

According to the Financial Mail on Sunday, McCall wants to hold on to the ITV Studios division. This is absolutely right. A divestiture might raise a fancy price in the short term but would amount to corporate vandalism and cut ITV, in whatever guise, from its lifeblood — original programmes.

There is another intriguing piece of information about McCall’s future in the Mail on Sunday piece. The article claims that as McCall’s plans gain momentum, “sources expect her to stay in the chief executive role until at least 2026 to oversee the revamp’s completion.”

That is a telling sentence because, after five years in charge, it would be entirely plausible if McCall were to decide that having successfully launched both ITVX and the new strategy she might now want new and larger challenges elsewhere. Industry whispers have already started suggesting such a thing.

Luckily the whisperers will not have long to wait to find out the truth of the matter. Tomorrow we can hear it from the horse’s mouth whether McCall does indeed intend to stay until at least 2026.

Such a commitment, which would represent stability, would almost certainly push up the ITV share price. But then again, as we have already heard, shares can go down as well as up.

Raymond Snoddy is a media consultant, national newspaper columnist and former presenter of NewsWatch on BBC News. He writes for The Media Leader on Wednesdays — read his column here.