From Deadline|London editor Tim Adler: Analysts tell me that the biggest challenge facing incoming CEO Adam Crozier is sorting out ITV’s digital channels. The UK’s largest non-BBC channel has started a 12-week strategic review across its business, including what its pay TV future should be. The way things are now, all of ITV’s channels are currently available free-to-air, which means that ITV just survives on advertising. But its nemesis BSkyB has 3 income streams by comparison. (Not only does it carry advertising, but people pay subscriptions to watch BSkyB. And it also makes money by selling its popular Sky One entertainment, sports, and movie channels to cable rival Virgin Media.)
Paul Richards, analyst at Numis Securities, told me that ITV could even turn its flagship ITV1 into a pay TV channel. “When you’ve brought in a new chief executive and chairman, you’re going to explore all the options,” Richards said. He thinks the likelihood is that Crozier will turn ITV2, 3, and 4 channels subscription only after he starts work in April. “They’ve got to reduce their dependence on advertising revenue,” agreed one TV executive I spoke to. But consultant Claire Enders of Enders Analysis said that according to her models, ITV would end up making less money if it charges Sky and Virgin Media for carrying its programs. Making ITV a pay TV channel would mean fewer advertisers, Enders told me.
Archie Norman, the new ITV chairman who used to be chief of the Wal-Mart-like supermarket chain Asda, has admitted that, although ITV needs to compete effectively in the New Media world, “we’re not there yet”. Whatever Crozier decides to do digitally is not as important as how he executes it. Previous ITV managements have bungled digital strategy. One regime knew it had a golden opportunity to trounce BSkyB when the satellite broadcaster was launching its digital service. Both were competing neck and neck with their digital TV offerings. ITV had warehouses full of set-top boxes whereas BSkyB’s weren’t ready. ITV’s pay TV executives urged the broadcaster to give them away for free, arguing BSkyB would never be able to catch up. But ITV management thought it was too risky — and has been playing catch-up ever since.
Nobody could accuse Crozier and his boss Norman of not being ballsy enough. The British press has painted them both as tough operators. Enders says Crozier got the job because he’s a tough negotiator and has a track record in shaking up ailing organisations. He was chief executive of soccer body the Football Association, but quit because his reforms were too unpalatable for club bosses. Then Crozier was poached from UK postal service Royal Mail where he has made nearly 54,000 people redundant since 2003 and closed nearly 6,000 post offices by the time he leaves. The CWU union complains that all Crozier has done is cut jobs and worsen service. “He’s not very inspiring. I mean, anybody can cut costs,” one Royal Mail insider told me. “Now he’s going to rip a lot of the costs out of ITV,” said a TV executive I spoke to. Norman has claimed to journalists that cost reduction is not “our top priority”.
But it’s difficult to see what there’s left to cut. ITV has fired 1,400 staff members over the past year-and-a-half. It’s on track to have squeezed out £155 million of costs last year alone.
It’s not as if previous ITV managements haven’t known what problems are facing the company, Enders said, because “the problems are the same ones that have dogged ITV for a decade.” For too long, ITV has been cruising alongside that great ship of state the BBC. It’s always thought of the Beeb as its natural rival, not brash upstart BSkyB. The tidal wave of recession caught ITV side on, almost overturning the ship. Compared to BSkyB, its performance has been miserable. BSkyB announced that it’s closing in on its 3-year goal of 10 million subscribers by the end of this year. Norman’s predecessor Michael Grade set his own target to make £150 million this year from the internet. Last year online contributed £36 million. Grade’s online revenue target has now been abandoned.
Crozier’s other problem, a TV executive told me, is getting in-house production arm ITV Studios to supply more of its programming. Today ITV Productions supplies just above 40% of ITV’s shows, including soap perennials Coronation Street and Emmerdale. But it doesn’t own ITV’s highest-rating show The X Factor — that’s Simon Cowell. (Norman has said that he still supports Grade’s target of ITV Studios supplying 75% of programming. He’s been sending buck-your-ideas-up emails to ITV Studios department heads.) One thing that ITV does have going for it, though, is its ability to deliver big audiences. ITV may not own the show, but more than 17 million people tuned in to the final of Cowell’s Britain’s Got Talent on ITV1 last June.
Crozier will certainly be well remunerated if he does turn round the fortunes of ITV. The Sunday Times has reported ITV is putting the finishing touches to a £15 million pay package that locked in Crozier for five years. Of course, some carp that the same magic circle keeps getting these top jobs. Crozier’s current Royal Mail chairman is Allan Leighton, who used to be Norman’s chief executive at Asda. On the other hand, you could argue the UK’s management talent pool is so shallow that of course they know each other. ITV’s Peter Fincham, director of television, is said to be smarting after missing out on the top job. But observers say that Fincham will stay put. An executive told me, “As long as Peter is made to feel special, he’ll be happy.”
Subscribe to Deadline Breaking News Alerts and keep your inbox happy.