Last week I profiled ITV's chief operating officer, John Cresswell, for Media Week. Here's my take on what he had to say about the hamstrung ITV's future:
Six hundred job cuts, total losses of £2.7bn in 2008 and a potential £300m drop in ad revenue in 2009 are just some of the challenges John Cresswell, ITV's chief operating officer, must successfully surmount in the coming year.
For a man facing one of the greatest challenges in
Over the past 18 months, ITV's share price has been decimated and the broadcaster embarked on its first major cost-cutting wave last October, slashing 1,000 jobs across the then 5,500-strong company.
ITV restructured its sales team and made as many efficiencies as it could, safe in the knowledge the regulators were coming round to cutting most of its public service broadcasting duties.
However, by the unveiling of ITV's 2008 results last week, in the pit of an ever-worsening recession, further cuts and desperate asset sales are being doled out by executive chairman Michael Grade. Gone are the online and content targets Grade set in 2007, due to poor market conditions.
Revised strategy
So how does Cresswell answer those who say ITV no longer has a strategy and is cost-cutting its way to profit? "The strategy is the same, but we have had to calibrate it for the volatile economy and remove the targets," he explains calmly.
"Our original strategy was in three parts: stabilise and grow our channels business, grow the production business, and increase online capability - all of which we have done."
However, with a consensus that the TV ad model is broken, as ITV's group strategy director Carolyn Fairbairn admitted last week at a London Business School Forum, ITV's options for delivering a healthy return to shareholders are running out.
Grade has warned that writing ITV off in the depths of a recession is "dangerous", blaming its current state on two factors - the recession and regulation.
The recession has certainly eroded the possibility of hitting the £1.2bn revenue target in Global Content by 2012, as this was heavily predicated on an acquisition strategy, a hard business plan to follow in a troubled economy - although ITV has bought companies such as independent producer 12 Yard.
Equally, the Competition Commission's decision to block Project Kangaroo, the joint VoD venture between ITV, Channel 4 and the BBC, has jeopardised the broadcaster's ambitious revenue target of £150m by 2012.
Furthermore, ITV's online strategy lacks detail. Cresswell is confident ITV will be able to raise revenue from its archived content, but is vague on how. Syndication on open platforms such as YouTube are possibilities, but ITV must retain the sales.
Cresswell says: "Online video is still at the heart of our strategy. Plenty of people are knocking at our door wanting to use our content." He is also hoping to salvage some of the Kangaroo technology, which he describes as "stunning".
When pushed, Cresswell discloses that he expects ITV.com to break even each month by the turn of the year. But that's the greatest indication of any sort of financial target an understandably strained Cresswell is willing to give.
The need for deregulation in terms of relaxing the contract rights renewal mechanism, which prevents ITV from raising its ad prices, is less compelling in the current market, with analysts saying the lack of advertiser demand will not warrant big price increases from ITV.
Cresswell says: "We don't think CRR is an appropriate remedy while ITV is substitutable. ITV is a premium brand, so we ought to able to charge a premium price - it's not about jacking up prices."
Cuts and asset sales form another part of ITV's survival plan. The sacred £1bn programming budget has finally been cut by £65m this year, with a further cut of £75m in 2011. Six hundred job cuts will span the whole business, with a large chunk coming from ITV Leeds. The commercial team will be spared yet another restructure, but there will still be job cuts.
Assets for sale
Friends Reunited is for sale and SDN, ITV's Freeview business and one of the company's most strategically and financially valuable business assets, is being ominously "reviewed".
Cresswell insists both assets will be sold only when the "time is right" and they aren't "forced sales". However, the depreciation of Friends Reunited and the low price SDN would fetch in the current market must smart.
Meanwhile, mergers and take overs are still low on the "save ITV" wish list. Cresswell kyboshes rumours of an ITV merger with Channel 4 and Five, calling it a piece of blue-sky thinking on one slide of a presentation to Lord Carter's Digital Britain steering committee. And he is very uncomfortable about a potential Channel 4/Five merger, since it would throw up "a lot of state aid issues".
Cresswell is not a fan of speculation - and he baulks at his name being included in a list of Grade's potential successors at the end of 2010. He says: "I have a very full day job at the moment and there is no point speculating on a process that is a year away and will be undertaken by the board."
Well, at least that's one certainty about ITV's future: Michael Grade will leave and, beyond that, who knows? As Cresswell concludes: "There is no point speculating. Only when you understand what your target is, then go for it."
But just what ITV can still aim for beyond basic survival in the current economic climate is seemingly a work furiously in progress.
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