Founded in the mid-fifties, ITV PLC (LON:ITV) is somehow still around in this age of Netflix, YouTube and video-on-demand. How is that possible?
Educational Archie
Lew Grade, one of the pioneers of independent television in the UK, once reportedly described the commercial television business in Britain as “a licence to print money”.
By 2010, that was no longer the case. ITV was struggling under the weight of its debts and fighting a rearguard against online competition for advertising revenues.
Enter former Asda luminary Archie Norman as chairman.
“ITV's challenge is to reduce its dependence on a free-to-air model threatened by digital media and besieged by legacy regulation,” Norman said, shortly after taking the helm.
Controversially, one of Norman’s first moves was to appoint then Royal Mail boss, Adam Crozier, as chief executive.
Together, they tightened operational management.
Controversial or not, under their stewardship, ITV shares have quadrupled in value as the broadcaster invested heavily in content acquisition.
Norman has moved on but Crozier is still there.
No longer just a broadcaster
“Each country has its own ruling class. In capitalist countries, the rulers own the means of production and employ workers,” - Karl Marx
As a former Tory MP, Archie Norman is probably not naturally inclined to agree with Karl Marx, but he seemed to recognise early on that ITV needed to produce, and therefore own, more of the stuff it transmitted.
This morning, ITV revealed in its full-year results that revenue from its ITV Studios division had risen 13% in to £1.40bn in 2016 from £1.24bn the year before.
In 2009, revenue was less than half that level at £597mln.
The company is even making programmes (e.g. Poldark) for the BBC, which would probably have Lord Reith, the first director general of the Beeb, spinning in his Presbyterian grave.
A licence to churn out cash
Full-year earnings may have only risen 2% in 2016 but the company whacked up the full-year dividend by 20% to 7.2p. The board is proposing to pay a special dividend of 5p on top of that.
The cash generation should give the group the flexibility to consider earnings enhancing acquisitions; it's already had a look at Peppa Pig owner Entertainment One but was given the brush-off.
Of course, there is also the possibility of earnings destroying acquisitions, such as Rupert Murdoch's purchase of MySpace and ITV's own embarrassing acquisition of another company that could have been as big as Facebook, Friends Reunited.
For now, management seems to be sticking to things it understands, namely content production.
The I in ITV
The company's name is derived from Independent Television; how long it will remain independent is unclear.
If nothing else, moneybags Apple would love to get its hands on the rights to the brand i-TV; at £8.4bn ITV is a snip and is probably barely more than Apple pays its tax advisers …
In the USA, telecoms company AT&T is looking to bolster its media presence with the acquisition of Time Warner, while Twenty-First Century Fox has decided the political conditions are right for it to finally take full control of Sky PLC.
ITV must surely be on the radar of someone as a possible acquisition. Given it is already a shareholder, Liberty Global is the favourite choice of many as a likely bidder.
Mass marketing – the only game in town
ITV maintains its leading position in the UK television advertising market, delivering 99% of all UK commercial audiences over five million, the company's CEO Adam Crozier boasted in this morning's results statement.
People's viewing habits are changing but millions still tune in live to watch “I'm a non-entity, have you heard of me?” and endless talent shows – heaven knows why, but there you are.
That sort of bang for the buck is still sought after by the big spenders of the advertising world, and is likely to remain so for some years yet.