As Carolyn McCall enters her eighth year as boss of ITV she might be forgiven for wondering if maybe she shouldn’t have turned down a chance to run Marks & Spencer instead.
McCall revealed the approach back in 2016 while quashing speculation she was poised to leave easyJet, where her reputation soared having turned around the fortunes of the budget airline.
McCall didn’t pursue the M&S job but the following year accepted the role at ITV, officially taking over from Adam Crozier in January 2018. However, the Midas touch she enjoyed in the aviation sector has proven elusive in the embattled TV industry.
When she joined ITV the broadcaster’s market capitalisation stood at £7.25bn, a far cry from the sub-£2.5bn levels investors have stubbornly valued the company at despite McCall’s best efforts.
The streaming era has ingrained in investors – and potential buyers – the belief that traditional TV viewing will remain in a downward spiral and that broadcasters such as ITV will not be able to sufficiently transform their businesses to exploit the digital age.
“McCall came in post-Brexit and ahead of Covid, against the backdrop of streamers getting bigger and bigger,” says Alex DeGroote, a media and tech analyst. “There have been a number of headwinds; anyone would have struggled. Has this been a successful period for shareholders and other stakeholders? The jury is still out. I don’t see a quick fix to the problem.”
However, ITV’s low share price, coupled with renewed interest in the growing success of its TV production arm, has once again raised in City circles the potential solution of the UK’s biggest commercial public service broadcaster being broken up.
Last month, ITV’s share price surged after a report of potential bid interest brewing from private equity giant CVC Capital Partners, French broadcaster TF1, RedBird IMI, which recently acquired Traitors-maker All3Media for £1.2bn, and production group Mediawan, which bought a controlling stake in Brad Pitt’s Plan B Entertainment two years ago.
Liberty Global, ITV’s biggest shareholder with a 9.9% stake, has also long been touted as ultimately looking to take ITV private.
The company, which four years ago merged Virgin Media with Telefonica’s O2 to create a pay-TV and mobile giant, has held a stake in ITV since 2014.
While traditional TV audiences remain in overall decline, the insatiable demand for high-end content has focused attention on ITV Studios, which McCall has for years argued is unjustifiably undervalued by investors.
In 2021, McCall embarked on a five-year plan to exploit the surge in demand for expensive, prestige TV shows from streaming platforms, on top of commissions such as Line of Duty for the BBC and its funnel of in-house shows such as I’m a Celebrity …, Coronation Street and Love Island.
The fruits of this plan – which will help ITV Studios to record profits this year despite dented revenue from the Hollywood actors’ and writers’ strikes – include the adaptation of Jilly Cooper’s bestseller Rivals for Disney+ and the global Netflix hit Fool Me Once.
ITV has also continued to expand operations, including the recent deal to take a majority stake in Hartswood Films, the maker of shows such as Sherlock and Douglas is Cancelled.
ITV has been the focus of takeover and breakup talk for decades. Long-term investors still rue the missed opportunity of the £4.7bn takeover bid in 2006 that would have seen it ultimately become part of Virgin Media, a deal thwarted by the then Sky chief James Murdoch who took a blocking stake.
The content arm of ITV has been cited as the jewel in the crown, possibly worth as much as £1.5bn based on the broadcaster’s market value, and the sale price achieved by All3Media.
But separation of the asset would be difficult – studios supply about half of ITV’s own on-screen content, while questions would be asked about how to apportion debt and pensions.
A break-up could also make ITV’s broadcast arm find a new home, with France’s TF1 seen as a potential suitor.
While ITV is maintaining its share of the TV market, accounting for about a third of all viewing on commercial channels, the traditional advertising model remains under pressure as linear TV audiences continue to shrink.
However, commercial and critical hits such as the drama Mr Bates vs the Post Office, which brought to national attention the plight of the wrongfully prosecuted post office operators and their decades-long fight for justice, are testament to the power of traditional TV.
Under McCall, who was the chief executive of Guardian Media Group from 2006 to 2010 ITV has shifted where it brings in revenue, with more than half the money now coming from non-advertising sources.
However, market negativity over future prospects was highlighted in the reaction to the start of ITVX, the £800m-plus bet on a new national streaming champion designed to compete in the Netflix era. When it was announced in 2022, ITV’s shares slumped by 15%.
Nevertheless, the service has gone from strength-to-strength notching up 1.2bn streaming hours in the nine months to the end of September, a 14% year-on-year increase.
Total digital revenues grew by 11% year-on-year to £376m over the same period, with ITVX underpinning McCall’s pledge to make £750m a year in digital revenues by the end of 2026.
“I would argue both ITV and Channel 4 have delivered quite significantly in terms of levels of growth in building streaming businesses,” said one TV industry executive.
“That growth may not be at a pace to get ITV back into overall growth mode yet, but they have done a pretty good job compared to a lot of broadcasters around the world. If McCall was to leave tomorrow you would have to say she left the business with a much stronger digital footprint than when she arrived”
The debate about the success of the transition to a streaming-based future aside, ITV has also just renewed its licence with media regulator Ofcom for another 10 years.
This includes guarantees around public service broadcasting such as providing regional programming across the network, an expensive and potentially off-putting burden for any new owner.
“ITV is broadcasting’s mergers and acquisitions problem child,” says DeGroote. “Over the years, everyone has run the slide rule over ITV. The truth is it is almost too difficult to solve.”
