ITV Enters “Early Stages of Strategic Restructuring” as Profits Tumble

Dan Meier 07 March, 2024 

ITV has entered a “strategic restructuring” phase as linear advertising declines continue to weigh on the commercial broadcaster’s balance sheets. The group made no mention of redundancies in its full-year earnings, but a recruitment freeze implemented last month is expected to remain in place for the first half of 2024.

Linear revenues fell 15 percent YoY during 2023, buoyed by a 19 percent rise in digital revenues, driven by the growth of ITV’s streaming service. The UK broadcaster has recently shifted its focus to its ITVX, a priority emphasised by last week’s announcement that the group would relinquish its share of BritBox, the streaming joint venture co-owned by the BBC.

But the digital gains were not enough to offset “the challenging linear TV advertising market”, and total revenues fell 2 percent YoY. EBITDA also dropped 32 percent to hit £489 million, with a £464 million investment in ITVX putting a sizeable dent in the broadcaster’s profit margin.

Catching up

The broadcaster emphasised its plan to become a “leader in UK advertiser-funded streaming”, aiming to deliver at least £750 million in digital revenues by 2026. Last year the company generated £490 million in digital revenues.

ITV noted that its streaming business is not seperate from, but integrated with its traditional ad-funded TV business. This enables the broadcaster to essentially re-monetise its content, according to ITV, with digital targeting capabilities allowing the company to charge higher CPMs. And the business claimed that 90 percent of users who come to ITVX for premiere titles go on to watch other content on the service.

“The way we think about it is it’s not primarily a subscription service, unlike the big US streamers,” said ITV CFO Chris Kennedy. “It’s ad-funded, it’s free to watch, it’s a continuation of our existing business of ad-funded free-to-air TV.”

“It also means that all of the viewing is now monetisable,” added Kennedy. “In the old linear world, someone watched more than seven days after we broadcast the programme, we wouldn’t get paid. Now, every time someone watches on ITVX, whether it’s live, or it’s catch-up with the service after that, we get paid and the CPMs on those ads are higher.”

Selling to the streamers

ITV Studios also remained a bright spot in the results, with sales up 4 percent YoY, reaching £2.2 billion. The company pointed to the success of its studio’s recent work, such as Mr Bates vs The Post Office, as well as Love Island, a format it has now sold to 27 countries.

ITV aims to grow the production business by 5 percent each year for the next five years, while boosting the number of shows it produces for streaming services. The group said 32 percent of ITV Studios’ revenues now come from streaming services, up 10 percent YoY and ahead of its five-year target.

This strategy of selling content to streaming services is driven in part by weaker demand from free-to-air European broadcasters, who ITV said were “holding back spend until they see more certainty in the advertising market.” But the broadcaster also warned that US companies would continue to be impacted by the Hollywood strikes this year, delaying around £80 million of spending until 2025.

Ahead of schedule

Meanwhile the company’s own content spend will be “marginally reduced” in 2024 to around £1.3 billion. ITV said the business is in the “early stages of a strategic restructuring and efficiency programme across the group to reshape the cost base, enhance profitability, and support the growth drivers of studios and streaming.”

But the broadcaster said it is ahead of schedule in its 2026 cost-savings target, having delivered £130 million of its £150 million goal, a figure it expects to hit one year early.

“In 2023 we saw the benefit of the actions we have taken to reposition ITV towards higher sustainable growth,” said ITV CEO Carolyn McCall. “Our Studios business recorded the highest ever revenues and profits and in its first year ITVX delivered strong growth in viewing and digital revenue with investment on plan.”

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