McCall's ITV strategic refresh bets on growing direct to consumer revenues

ITV CEO McCall: expects to make £60m of investments, as well as, £40m in cost savings, by 2021
ITV CEO McCall: expects to make £60m of investments, as well as, £40m in cost savings, by 2021

ITV boss Dame Carolyn McCall is betting that consumers will pay for more services from the free-to-air broadcaster and wants to generate £100m from direct-to-consumer revenues.

McCall, unveiling an 8% rise in revenues, including a 2% lift in advertising, in the first six months of the year, announced a series of measures in a long-awaited "strategic refresh".

She said her priorities are:

  • strengthen ITV as an "integrated" producer broadcaster that makes and sells shows, as well as broadcasting on ITV’s own channels;
  • grow UK and global productions through ITV Studios for other broadcasters and platforms;
  • create a "direct to consumer" business that generates £100m because streaming platforms have shown "consumers’ willingness to pay". McCall plans to adopt a "360 monetisation" strategy for certain programme brands;
  • invest in ITV’s own brand, including "increased marketing off-screen", and in data, creativity and capabilities, including hiring a chief technology officer and chief data officer and creating an in-house centre for data excellence.

McCall expects to make £60m of investments, as well as make cost savings of up to £40m, by 2021.

"ITV will be more than TV," she told investors. "It will be a structurally sound integrated producer broadcaster where we aim to maintain total viewing and increase total advertising revenue; it will be a growing and profitable content business, which drives returns; and it will create value by developing and nurturing strong direct consumer relationships, where people want to spend money on a range of content and experiences with a really trusted brand.

"We will deliver this strategy by building greater capability in data, analytics and technology as well as developing the great creative and commercial talent ITV already has. Executing the strategy will enable us to continue to deliver sustainable returns to our shareholders."

Analysts at investment bank Numis Securities described McCall’s strategy as "sensible" and Liberum Capital said it "makes sense" and should "position" ITV "well for for future changes".

Ad revenues rose 2% in the first six months of the year, including a 48% jump in online ad sales, thanks to Love Island and the World Cup and the third quarter should be broadly flat.

"Advertising categories such as Retail, FMCG, Finance, and Airlines, Travel and Holidays continued to see declines in advertising due to the uncertain economic outlook, leading advertisers to reduce spend to maintain margins," ITV said.

"Within Retail, we have seen spending decline on both the high street and the supermarkets. Entertainment & Leisure was up, in particular around the World Cup.

"Telecommunications and Computing increased their spend around product launches and digital brands continue to spend heavily on television to build brand awareness."

McCall joined ITV in January from easyJet, where she made her name by taking the no-frills airline upmarket and investing in the customer experience, data and its brand.

She identified three "enablers" to deliver her strategy at ITV: communicate and market ITV effectively, be a lean and agile organisation "with a culture that can constantly adapt to change" and embed data, analytics and technology right across the group.

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