Crozier thinking outside the box
ITV's chief executive Adam Crozier is in the middle of a five-year mission to transform the broadcaster. Gideon Spanier assesses progress
Thursday 01 March 2012
When Adam Crozier got the top job at ITV two years ago, he signed up for a pay and bonus package said to be worth up to £15m if he could pull off a five-year turnaround. Nearly two years in, Mr Crozier says he is making "good progress" on that transformation after yesterday reporting a 14 per cent rise in annual pre-tax profits to £327m. So he ought to be hitting at least some bonus targets.
Click HERE to view graphic
On the basis of the balance sheet, Mr Crozier and the chairman, Archie Norman, who recruited him, can claim that ITV is in far better health. ITV has swung from net debt of £612m at the start of 2010 to a surplus of £45m. A canny deal over its pension and bond buybacks mean that the Downton Abbey and Only Way Is Essex broadcaster is "cash positive", fuelling talk of possible acquisitions.
Revenues last year rose only 4 per cent to £2.14bn yet ITV was able to bank fatter profits thanks to its stronger financial position. On an adjusted basis, before exceptionals, profits surged by a quarter.
Advertising was virtually flat – up 1 per cent last year – but the programme-making arm, ITV Studios, is finally fulfilling some promise as it sells more shows to other broadcasters. It's all part of Mr Crozier's masterplan to make more money from programming content, pay TV and online – and reduce dependence on volatile advertising.
Non-advertising revenues rose 11 per cent because ITV sold more shows such as Come Dine With Me to Channel 4, White Van Man to BBC3 and the new drama Titanic, written by the Downton screenplay writer, Julian Fellowes, to 86 countries.
Mr Crozier was also able to announce a full-year dividend of 1.6p – the first payout to shareholders for three years. It sent the shares up almost 7 per cent, or 5.45p, to 85.95p.
However, ITV is still below the 95p level it hit exactly year ago on results day. That suggests Mr Crozier still has plenty to do. As the five-year share price graph shows, ITV is still below pre-recession levels seen in 2007 under its previous boss Michael Grade.
Mr Crozier set four key targets in his 2010 transformation plan. These were: create a new, lean fit-for-purpose organisation; maximise audience and revenue share from existing TV channels; expand through free and pay models across new platforms such as online, mobile and cable TV; and build a strong international programme-making business. Judged by those four criteria, Mr Crozier's record is mixed.
In terms of making the organisation fit for purpose and selling programmes, he has made some clear progress. The programme-making arm won 111 new commissions during 2011, up 28 per cent, and 45 of those were from international buyers. It makes good sense for ITV to expand its own production hub as it keeps hold of the intellectual property, rather than relying on external producers such as Fremantle, maker of X Factor and Britain's Got Talent, or Carnival, which produced Downton Abbey.
However, on two other key measures – improving audience share and increasing revenues from new media platforms – there has been less success.
Audience share for the flagship channel, ITV1, fell 2 per cent last year, which Mr Crozier admits is "disappointing". He blames weaker ratings for X Factor and Coronation Street at the end of last year, and says, only half-joking, "there wasn't enough snow" so fewer people stayed at home to watch television compared to December 2010.
On the plus side, the digital channels ITV2, ITV3 and ITV4 continue to grow, and Mr Crozier maintains that ITV is outperforming the wider ad market. However, the breakfast show Daybreak remains without any permanent presenters after Adrian Chiles and Christine Bleakley were axed in December. The new game show Red or Black was also a flop. He admits that ITV needs to "step up" with a new entertainment hit, as I'm A Celebrity and Dancing On Ice have been around for a long time.
Arguably, making money from new platforms such as online and pay is ITV's biggest weakness. Online revenues were £34m against £28m a year earlier – just 1.5 per cent of turnover.
ITV has been woefully slow to start charging for online content, while new entrants such as the US website Net Flix rush in. Mr Crozier said last summer that he planned to begin charging online micropayments by the start of 2012. Now he admits that the launch of the ITV "Pay Player" won't happen for many more months, with internal testing only due to begin in June. He blames poor technology that he inherited.
Mr Crozier insists he is still making progress: high-definition versions of ITV2, ITV3 and ITV4 are on pay-TV – although he won't say how much that makes. ITV has belatedly become available on Apple and Android phones and on computer games consoles. And it should also make more money when it renegotiates long-running deals with Virgin Media and BT, which don't carry advertising around ITV's on-demand content at present.
City analysts are backing Mr Crozier as they forecast higher profits for 2012, despite the ad market looking flat again in this Olympics year. There's a third series of the ratings blockbuster Downton Abbey to come, and another new, high-end drama series, Mr Selfridge, an adaptation of Lindy Woodhead's history of the department store and its late boss Harry Gordon Selfridge.
Some say Mr Crozier should make a big acquisition to transform the business. The Big Brother production firm Endemol, which has a big international presence, could fit the bill, but he maintains he doesn't think it's for sale.
Instead he is focusing on organic growth and talking about the possibility of expanding overseas by launching an ITV channel in several unnamed overseas countries. Mr Crozier can justly argue that ITV has its destiny in its own hands.
- 1 JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
- 2 The West has it totally wrong on Lee Kuan Yew
- 3 #FreeTheNipple: Women in Iceland bare breasts in solidarity with trolled student
- 4 Video shows what happens when lava is poured onto ice
- 5 Cate Blanchett loses temper during interview: 'That's your f**king question?'
Andreas Lubitz: Who is Germanwings co-pilot who 'locked out captain and crashed flight 9525'?
Germanwings crash: The poignant final photograph taken by Iranian journalist on doomed flight after watching Barcelona play Real Madrid
#FreeTheNipple: Women in Iceland bare breasts in solidarity with trolled student
Cate Blanchett loses temper during interview: 'That's your f**king question?'
Jeremy Clarkson calls on trolls to leave producer Oisin Tymon alone: 'None of this is his fault'
Nigel Farage brands LGBT activists 'filth' and 'scum' and accuses them of scaring away his children after they invade his local pub
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
Russia threatens Denmark with nuclear weapons if it tries to join Nato defence shield
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
Vote Ukip, says far-right group Britain First
iJobs Money & Business
£16000 - £18000 per annum: Recruitment Genius: A position has arisen within th...
£50000 - £63000 per annum + excellent benefits : Ashdown Group: IT Manager / D...
£16500 per annum: Recruitment Genius: Applicants must hold a valid SIA Door Su...
£50000 per annum: Ashdown Group: Business Analyst - Financial Services - The C...