Originally Posted by rzt:
“I agree with others that ITV aren't investing enough money into their schedules. The annual programming budget for ITV1 is £800m compared to £1.02m BBC One has (BBC1's budget will get a £30m drama boost too once BBC3 gets the axe). The difference is way too much and it's really clear to see in the schedules when you look at them. The annual profits ITV makes are excellent - over £400m pre-tax profit for 2013. But they have to get the balance right between profits and the quality of their schedules, otherwise in the long-term their profits will start taking a hit once the few hit shows they have start declining.
I don't see why they couldn't increase the programming budget by say £100m. Yes it would probably decrease profits by about £50m or so (and yet they'd still make a healthy profit of £300m+ for the shareholders). That kind of extra investment really would help give them the ability to compete more and would be the equivalent of an extra 140 hours of drama or many hours of sport or high quality entertainment, the kind of programming which tend to generate higher ratings than cheaper filler and factual. ITV are coming towards the end of their '5 Year Transformation Plan', the aim of which was to increase profits and increase number of shows sold abroad which they own the rights to (which they kind of have achieved on both counts). But it's coming to the stage now where they need to shift strategy and reinvest into the schedules once again by increasing the budgets, otherwise it really will be too little too late if they leave things as they are and let things slide for another 2-3 years.”
Originally Posted by rzt:
“I just don't understand why ITV don't reinvest some of their profits into their programming budget. If they were losing money or making annual profits of under £50m, for example, then obviously I'd understand why they wouldn't want to reinvest it into increasing the programming budget. But their annual pre-tax profit for 2014 was £435m! It's not like they're a company who are on the verge of going bust or anything like that. There's plenty of leeway there for them to invest more into their schdule, even if it means accepting a slight dent in how much profit they make. But if it means it will help in terms of the long-term, which it would, I really don't see why they don't consider doing it. I just find it quite strange - even an extra £50m invested could result in 75 hours more drama per year - an extra 1.5hours of drama per week - would would help bolster the schedules.”
Surely the key question is whether (and if so, when) are the falling ratings ITV has been experiencing going to have a knock-on effect on advertising revenues.
The final 2014 results aren't out yet but indications are that profits rose significantly despite the ratings falls. Essentially what has been happening up to now is that they are controlling costs very tightly and whilst ratings have fallen advertising revenues haven't really been affected. The result has been rising profits.
But how long will this carry on for?
Losing share to the BBC doesn't really matter in the sense that they are not taking away any advertising revenue. So what matters is ITV's share relative to other commercial broadcasters. But even here, ITV has so far "got away with it" - its share of commercial impacts has been falling but it's share of advertising revenues has still been rising - for various reasons which we have discussed before.
So what happens next? The posts about C5 losing advertising contracts suggest that ITV is continuing to "defy gravity" - losing audience share but still maintaining (and indeed growing) advertising revenues.
If ITV can continue to do this, they have little incentive to boost programming spend. But can they continue to do it?
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