Kate Bulkley, Media Analyst.

All eyes are on ITV’s results

By Kate Bulkley

Broadcast News

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For Broadcast February 26, 2015

Figures will reveal more than just profit and loss, says Kate Bulkley

When the biggest fish in the pond makes a splash, the ripples are felt by everyone else. And while ITV’s full-year financial results are always a must watch affair, the 2014 performance will be particularly interesting.

All the big American fish – Viacom, 21st Century Fox, Comcast (owner of NBC Universal), Walt Disney and, most recently, Discovery – have sounded alarm bells about 2015 after reporting lower advertising revenues for some or all of their networks during the bulk of last year.

Analysts have described these declines as “alarming” and “unprecedented”, so it will be intriguing to see where ITV stands. Chief executive Adam Crozier forecast that his company (and, by definition, the bulk of the UK industry) would be bucking the US trend for once.

Last November, Crozier said advertising grew by 6% in the first nine months of 2014 to £1.16bn, and forecast that full-year growth would be as much as 5%. The question is whether or not ITV’s guidance will hold up in next week’s results.

Other elements of the report also need to be looked at closely. First, what’s going to happen in the diversification stakes? ITV has made a strong commitment to buying up both traditional TV indies and digital content companies, with many of those purchases in the US.

The likes of cash-flow rich Leftfield Productions will be consolidated into ITV’s results for the first time next week. ITV once relied on advertising for 90% of its profits; these new buys are helping to reduce that figure to around 75%.

The most recent purchase of a minority stake in Zealot Networks probably says a great deal about Crozier’s mindset going forward. Zealot has not even made a piece of content yet, but its founder Danny Zappin has a great digital pedigree as the co-founder of Maker Studios (now owned by Disney), and digital-first content is obviously where some of

ITV’s future has to lie: chasing the increasing numbers of internet-only viewers, the so-called ‘Netflix generation’.

The next question is how fast ITV needs to move into alternative delivery and payment models for its content. On-demand consumption is increasing and live viewing is falling, and not just among the kids.

ITV re-entered the pay channel arena with the launch of ITV Encore last autumn, so what’s next?

Of course, even as audiences for TV fragment, advertisers that want to reach a truly mass audience in the UK will continue to turn to ITV. But content is a risky business: there have been Saturday night travails with the likes of Planet’s Got Talent and Stars In Their Eyes (pictured), and there’s no guarantee that US projects like the re-make of Saturday Night Takeaway for NBC won’t flop – just like its host Neil Patrick Harris did at last weekend’s Oscars ceremony.

ITV’s share price has also performed well recently, but it has been held up to a degree by the stake John Malone’s Liberty Global bought from Sky last July.

That deal gave the stock a ‘bid premium’. How attractive ITV is as a potential takeover target, in the short term at least, will become clearer next week.

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