Home of Love Island seeks relationship with viewers

By Ian King, business presenter
Inevitably, the headlines concerning ITV's results today will be about how successful Love Island and the World Cup have been at delivering good ratings for the commercial broadcaster.
The results themselves were pretty much in line with the City's expectations: sales for the first six months of 2018 were up 8% to €1.848bn, while earnings on an underlying basis slipped by 7%, to €375m, which largely reflected higher costs and, in particular, the cost of bringing the World Cup to millions of UK homes.
The City's ITV-watchers have also been struck by the fact that, for the first time, the company is not providing a number for 'net advertising revenue'.This reflects the view of Dame Carolyn McCall, who became chief executive at the beginning of the year, that ITV should instead report 'total advertising revenue' which, unlike the other metric, includes ad revenues from online and on-demand services as well as sponsorship deals for programmes such as Superdrug's tie-in with Love Island.
Home of Love Island seeks relationship with viewers

Dame Carolyn McCall joined ITV from easyJet
So far, so predictable, which is why ITV's shares have barely budged.Perhaps the more interesting part of the story, though, is the strategic update delivered by Dame Carolyn.This can be summed up by a slide in the presentation to investors that says "ITV's vision is to be more than TV".In other words, ITV now sees itself as not just a television broadcaster, but as a business that develops relationships direct with its customers and encourages them to spend more money with it.In the past, ITV - like the BBC and other traditional broadcasters - has merely broadcast programmes to viewers, without seeking to develop much of a two-way relationship.:: What's behind our love affair with Love Island?Non-traditional broadcasters such as Netflix and Sky, the owner of Sky News, have a more direct relationship with their customers and that is now the kind of relationship Dame Carolyn wants ITV to have with the people who consume its content.That will mean investing more in the ITV Hub, ITV's video-on-demand service, which will seek to offer a more personalised service to viewers over time.It will also mean 're-positioning' the ITV brand.Dame Carolyn, who joined after nearly eight years at easyJet but who spent the first two decades of her career in advertising and marketing, admitted that ITV has not really done much market research on its viewers in the past.Now that it has, she believes there are some 15 million 'light viewers' who could be persuaded to watch ITV's output more than they do at present.She also intends that the company should spend more on data analytics so it can get to understand its viewers better over time. This, she hopes, will not only enable ITV to make more out of its relationship with viewers but also enable advertisers to better target their advertising at them.
This is not a revolutionary idea - companies like Sky have been doing it for years - but it is for a traditional broadcaster like ITV.And, lest anyone be tempted to think these are airy-fairy aspirations, Dame Carolyn has also set out some firm targets.She wants the ITV Hub to have 30 million registered users by 2021 and for digital online revenue growth to double each year between now and then.The second part of the strategy unveiled is a continuation of the work done by Adam Crozier, Dame Carolyn's predecessor, who sought to reduce ITV's dependence on advertising by spending heavily on TV production.
Home of Love Island seeks relationship with viewers

Adam Crozier began ITV's shift from a dependence on ad revenues towards production streams
ITV Studios is now a major producer of shows for other channels, such as Poldark and Line of Duty for the BBC, as well as being a major export of shows and programme formats overseas.Mr Crozier spent €1bn between 2012 and 2017 buying up production houses and the benefits of that work are now paying off: more than half of ITV's revenues in the period now come from sources other than advertising.Again, Dame Carolyn has set targets here, aiming for 10,000 hours of production by 2021 and aiming for ITV Studios to grow its sales by an average of 5% each year between now and then.The third strand is to build a 'direct to consumer' business that is making €100m worth of sales by 2021.The foundations for this business are in place, such as the one million or so visitors to the Coronation Street and Emmerdale sets, the 350,000 Love Island water bottles sold and the 95 million votes cast during ITV shows, but Dame Carolyn feels the surface has only been scratched in fields such as pay-per-view and gaming.To that end, she is also talking to other broadcasters about setting up a joint video-on-demand service that would showcase British productions to compete with the likes of Netflix and Amazon Prime. That sounds an awful lot like the 'Project Kangaroo' on which ITV, the BBC and Channel 4 worked until it was blocked by the old Competition Commission in 2009.However, Dame Carolyn argues the attitude of regulators may have changes since then, pointing out that Sharon White, the head of Ofcom, recently urged the BBC, ITV, Channel 4 and Channel 5 to collaborate to create what she called a 'British Netflix'.In the meantime, there are plenty of every-day challenges. The traditional TV ad market remains brutal: ITV took 7.3% less in advertising revenues from retailers during the half and 14.7% less from airlines and travel and tour operators.And, as the likes of Sky, Netflix and Amazon spend ever more on production, ITV is having to step up its own investment in production and particularly in 'scripted' production, such as drama and comedy, which is traditionally expensive to make but which delivers the most viewers.
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Grappling with those challenges alone would test most managements - let alone making real the strategic vision Dame Carolyn has set out.The next few years at the 63-year old broadcaster, which was set up by Sir Winston Churchill's government as a patchwork of regional commercial broadcasters, promise to be busy indeed.
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