Auds tumble sans show but profits rise
LONDON — One month on from its first birthday as a merged entity, ITV, Blighty’s biggest commercial terrestrial broadcaster, has good news and bad news.
Last week it surprised the City by announcing better-than-expected results as profits surged 57% to $612 million.
Yet two days earlier media reporters had again rushed to write ITV’s obituary after figures for flagship web ITV1 showed audiences down 10% year on year, including a hemorrhage of all-important 16-34 year olds who have opted for digital channels, like BBC3, aimed at them.
Admittedly, the viewer figures were skewed by the fact that in January and February 2004, ITV1’s share was buoyed by Granada’s reality skein “I’m a Celebrity … Get Me Out of Here!” It did not have a similar breakout hit this year.
What the scribes also failed to point out was that despite the decline, ITV’s digital channel strategy is clicking into gear and that the ferocious program of cost savings is paying off for CEO Charles Allen and his team.
“I want to nail this nonsense about ITV1,” Allen fumes. “You’re comparing two weeks this year when ‘I’m a Celebrity’ screened … the highest-rating show ever. You’ve got to make sure you’re comparing like with like.”
In fact, a lot about ITV, which celebrates its 50th anniversary this year, is very different to how it used to be.
Communications regulator Ofcom has accepted Allen’s case that in such a competitive market place ITV cannot afford to be burdened by many of its former public service obligations, and it is emerging as a leaner entity.
Ofcom has approved ITV’s plans to cut the levels of children’s, religious and regional shows on ITV1, which more than ever depends for its success on soaps, drama and entertainment.
“ITV is now behaving more like a private commercial broadcaster, along European lines, rather than a U.K. public service broadcaster,” says Dermot Nolan, director of media consultancy TBS.
And more good news from Ofcom for investors is on the cards.
The regulator, concerned that U.K. broadcasting will be dominated by the BBC and satcaster BSkyB, is likely to agree to cut ITV’s license payments.
“This could save hundreds of millions of pounds,” reckons media consultant Theresa Wise, a senior partner at Accenture.
She is upbeat about ITV’s potential for growth. “I think it is easy to denigrate ITV’s dependence on older and down-market audiences.
“Frankly, that’s always been the heartland of their audience, and the new channels, (digital) ITV2 and 3, could address other demographic groups.
“ITV1 has always been about mass market. No other commercial broadcaster gets those kinds of numbers in the U.K.”
As video-on-demand start to come on stream and broadcasters discuss tie-ups with mobile operators, Wise expects ITV to exploit its big brands in these arenas.
Nevertheless, as the switch to digital continues and the take-up of personal digital recorders allowing viewers to skip ads grows, the City will keep a close eye on ITV1’s performance.
In U.K. homes that receive terrestrial, digital terrestrial, satellite and/or cable channels (described as multichannel homes here), ITV1’s aud share was down from 24% in February 2004 to 19% this year — a fall of more than 25%.
ITV2, at around 2%, has been helped by satellite channel Sky One’s poor showing, but new investment in paybox E4, the Channel 4 net aimed at the same 16-34 demo, may affect future growth levels.
In any case, Allen, once almost written off by investors after the failure of pay service ITV Digital, is eager to diversify the company’s revenues.
ITV3 was launched in November, and a fourth channel is planned; ITV is competing with Channel 4 for a slot on the digital terrestrial Freeview platform, which has powered digital take-up because it is, as the name suggests, a free service to auds.
In fact, thus far Allen’s strategy has been so successful that the idea of a U.S. conglom (allowed for the first time under the 2003 Communications Act) making a bid for ITV looks unlikely.
“Where’s the premium for any U.S. investor?” asks a former ITV executive. “I wouldn’t discount it in the very long term, but ITV is way too expensive for someone like Viacom to be considering a bid.”