ITV’s decision to restructure its business with a new focus Broadcast and On-Demand is a “very necessary” move according to one media analyst.
Alex DeGroote tells TVBEurope he was unsurprised by the announcement that the broadcaster plans to establish a new media and entertainment unit. “Every traditional media company is being forced to reimagine itself,” he says. “ITV needs to ‘fast track’ on demand, improve share of viewing in youth audiences and address its overall cost base. And, that’s easier said than done.
“ITV has £1.6 billion of Broadcast costs in total, but £1 billion of this is the programme schedule. So they are attacking here the £600 million of other Broadcast costs. The company has already told the market that it will deliver £25-30 million permanent cost savings by 2022, on top of the £60 million already earmarked in 2020, so we thought ITV was cutting 5 per cent of its cost base. But it looks like it will be much worse, which will entail many redundancies, particularly in support functions,” he adds.
DeGroote describes the move as “not so much smart as very necessary.” He says the impact of Covid, a possible second lockdown, and Brexit are leading to tough times for an ad-funded business, putting ITV “on a war footing.”
“Linear channels are profitable but there is a growing sense that new investment in streaming content and technology is urgently needed. BritBox is loss making and needs support. This can only be funded by cost cuts.”
So, does DeGroote think this move will futureproof the commercial broadcaster? “Unfortunately not,” he says. “There are three reasons: the UK’s economic downturn and Covid; there are a number of industry reviews underway in terms of Public Service Broadcaster requirements and EPG prominence which will have a bearing on ITV’s future. ITV for example would like to exit aspects of its programming; and competition from Amazon Prime and Netflix will remain tough.”