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Transformer's origins story: ITV topper Adam Crozier stepped in and spurred a renaissance at the U.K. broadcaster.

AT MIP TV IN CANNES, ITV chief executive Adam Crazier will receive Variety's Achievement in Intl. Television Award. It is an honor that is rooted in the recent past.

Before Crazier joined the U.K. commercial broadcaster six years ago, ITV had been on the ropes.

"We are scrapping for our lives at the moment," a senior exec said in 2009. Management seemed resigned to a steady decline in its fortunes.

The company is in a far happier place now. Take, for instance, its stock price. On March 4, 2010, it was 79<f; five years later--on the day its annual report was published--it's up 339% to $3.47.

Once Crozier came onboard in April 2010, he set about implementing a plan to transform the company, with two big goals: to reduce the reliance on advertising revenue, and to widen the focus from a single territory, the U.K., into the global market.

The plan has been distilled subsequently into three strategic objectives: to maximize audience and revenue share from its free-to-air broadcast and VOD business; to grow its international content business; and to build a global pay and distribution business.

Back in 2010, morale at ITV was not high, but it is now. Staff surveys when Crozier joined showed only "around 65% were really engaged with the company, because they'd been through quite a tough time," Crozier says. "Over the last couple of years it's been into the 90s with people really enjoying what they do."

This is important, Crozier says, as it reflects the culture he has tried to create at ITV.

"We work very hard at creating a culture that is both commercial and creative in equal measure and creating an environment that encourages people to work very hard but also have a lot of fun."

The other key to the company's ethos is its commitment to making shows that are both very popular and very good.

"We are at our best when we are right at the heart of popular culture. That's what we do better than anybody else," he says. "As we all know the toughest thing in many ways is to be very popular and very good. That sweet spot is what everybody is striving for, but that certainly is what we try to do."

Although ITV has rapidly become a global entertainment business, and is on course to earn 50% of its revenue from non-advertising sources, the backbone of the business remains its dominant role among free-to-air commercial broadcasters in the U.K.

"There are hundreds of channels in the U.K., all of which can deliver for advertisers cheap frequency, which is small audiences many times over. There is only ITV that can deliver these mass audiences--99% plus of (programs with audiences of) 5 million or more, and 95% plus of 3 million or more," Crozier says. "What that means for big advertisers is you have got to have ITV at the heart of your campaign, which is why our advertising share last year was 45.9%. So that means in effect we are the most powerful marketing platform in the U.K."

The key to maintaining that dominant position is having great shows. "Generating those big audiences is only possible if you keep investing in great content," Crozier says.

Word-of-mouth helps drive ratings. So how does ITV make its shows the subject of water-cooler conversations?

"First of all having great shows, and making sure that the schedule has within it a number of great live shows that can really drive the conversation, whether it is 'I Am a Celebrity ...,' 'Britain's Got Talent' or 'X Factor.' We really drive a lot of interest in our programs, engaging people (before they are) appearing, while they are appearing and afterwards on social media," Crozier says. "Social media is a great thing for television and when you look at (our engagement with the public) on social media we are twice as big as the BBC, and three times bigger than Channel 4 and Channel 5."

He adds: "We are trying to ensure that we are the most talked-about TV station and that we are turning people from being just viewers into fans because fans engage with things in a very different way."

Dramas such as long-running soap opera "Coronation Street," crime drama "Broadchurch" and costume drama "Downton Abbey" are also central to ITV's efforts to draw mass audiences.

ITV's aim is to derive 50% of revenues from non-advertising sources, and in the last four years that amount has grown by 500 million [pounds sterling] ($739 million), and is about 45% of total revenues. One part of this effort is a stepping up of its activities in online and pay TV.

Convergence has led ITV to become partners as well as competitors with the cable and pay TV operators, Internet providers and telcos. "We have multi-dimensional relationships with them," Crozier says, citing the launch of its first U.K. pay TV channel, ITV Encore, on Rupert Murdoch's pay TV platform Sky.

It distributes its streaming service, ITV Player, on more than 20 platforms, and Crozier is leading a campaign to get cable and satellite platforms to pay retransmission fees to the free-to-air broadcasters in the U.K.

ITV also intends to expand its channels business in major international markets. It should be added that John Malone's international cable operator Liberty Glob al owns a 6.4% stake in ITV.

Another growing source of revenue is producing shows and formats for the $50 billion worldwide entertainment business, where ITV is focusing on major markets. It is attempting to hike its share of the business through organic growth at its own production hubs, through co-productions, third-party acquisitions of shows for international distribution and a determined drive to acquire production companies. The most recent acquisition was Talpa Media, the creator of "The Voice," but it has also bought several U.S. production companies, including Leftfield Entertainment Group, whose shows include "Pawn Stars" and "Real Housewives of New Jersey," Gurney Prods., the company behind "Duck Dynasty," and Thinkfactory Media, whose shows include "Hatfields & McCoys."

The U.S. is a key target for ITV activities. It has 141 programs playing on 45 networks in the U.S., and the company has become the largest unscripted independent producer in the country.

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ITV Results for 2014

$3.82b Total revenue up 8%

$2.4 Advertising revenue up 6%

$226m Online, pay and interactive revenue up 30%

$1.38b ITV Studios (production and distribution) revenue up 9%

$1.08 Profit (cash flow before exceptional items) up 18%

$1.5b Total network programming costs up 4%
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Author:Barraclough, Leo
Article Type:Financial report
Geographic Code:4EUUK
Date:Apr 7, 2015
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