When Alan Bates took his campaign for justice to Westminster again last week, it would not just have been the hundreds of post office operators he represents who would have been pleased by his persistence. Carolyn McCall, chief executive of ITV, will doubtless be delighted at the wide-ranging political impact of the broadcaster’s hit drama Mr Bates vs the Post Office, which ignited public anger over the slow-burning Horizon scandal.
As she prepares to present annual results this week, the jury is still out on McCall’s strategy as she attempts to counter the inevitable long-term decline in traditional TV viewership with growth in digital audiences. The Bates drama pulled in 4 million viewers an episode when it was shown, and a further 10 million through the channel’s on-demand service, ITVX.
For McCall, a former boss of easyJet and Guardian Media Group, the show’s success provides a welcome fillip six years into her tenure. After navigating the strains of the pandemic, she now faces a torrid advertising market and a fall in the share price. Helpfully, the Post Office dramatisation has emphasised one of ITV’s strong suits.
“Mr Bates demonstrates there is still a very large audience for typical high-quality drama. That’s what broadcasters can deliver,” says Shore Capital analyst Roddy Davidson. “ITV is still a strong proposal for advertisers: it’s mass-market, proven and trusted. There are none of the issues with misrepresentation found elsewhere.”
The broadcaster has a decent track record in “social purpose drama” – see last year’s take on the 1989 Hillsborough disaster – and will hope to repeat the Mr Bates feat with Peter Moffat’s forthcoming drama on the contaminated blood scandal.
ITV’s update on Thursday will act as a barometer for the state of the advertising market, as will Tuesday’s annual results from Reach, the owner of the Mirror, Express and Star newspaper s. Its recent indicators have been gloomy – 450 jobs have gone and there was an angry staff backlash against its chief executive before Christmas. Elsewhere in TV, the ad slump has been reflected in the biggest round of job cuts at Channel 4 in more than 15 years.
Shore Capital expects ITV’s annual TV advertising revenues to be down about 10%, reflecting a bleak year when the cost of living crisis and weak consumer confidence hurt big brands’ spending.
McCall also spent the year fighting fires. First there were calls to drop presenter Jeremy Clarkson over an article he wrote in the Sun, then came Phillip Schofield’s summer resignation from This Morning, which catapulted McCall in front of MPs to explain her handling of the situation. And a reported £1.5m shelled out to get Nigel Farage on I’m a Celebrity appeared to return little on its investment.
Meanwhile, concerns over the future of traditional TV are weighing on the shares. Analysis by research firm Enders found that broadcast TV viewing fell 3%, to two hours 28 minutes per person a day, in 2023 compared with the previous year. Younger audiences were down 80% on pre-pandemic levels.
ITV’s share price has halved since its 2022 announcement that it would spend big to revamp its streaming service. ITVX launched at the end of 2022 and the company spent £160m on digital-first content in 2023.
In January, Mr Bates and the crime thriller Trigger Point helped it land a record 315m streams. The early signs are that the company should hit a target to draw in £750m in digital revenue, largely via ITVX, by 2026.
Despite this, “the market is in wait-and-see mode with ITVX,” says Davidson. “It’s a step forward on the previous offer but we need to see some hard figures on streaming and subscriber numbers. There need to be signs it is being taken seriously by advertisers and viewers.”
With a chill wind blowing through the industry, streamers including Netflix have cut back on budgets. McCall does not appear tempted to acquire production companies to secure future hits, although she did consider snapping up All3Media, the maker of Fleabag, which was eventually bought last month for £1.15bn by the Abu Dhabi-backed RedBird IMI, which is also trying to complete a takeover of the Telegraph.
The picture could soon be brighter: Britain is expected to come out of recession and the Euro 2024 football tournament looks likely to pull in greater advertising and viewers to ITV’s terrestrial output.
Some good news came last week in an unexpected form. ITV announced the sale of its 50% stake in its patriotic streaming service, BritBox, to its joint venture partner, BBC Studios. Viewed as a niche consideration by analysts, the deal for the channel, home to classic shows from Fawlty Towers to Line of Duty, raked in £255m in cash, a figure which surprised industry watchers and sent the shares soaring, as the proceeds will be handed to investors.
McCall will hope those shareholders will show similar patience to Bates, and stick with ITV for the long haul against an uncertain backdrop.
