Credits roll for Crozier's ITV transformation

When Adam Crozier took charge of ITV five years ago, he had not heard of a forthcoming period drama called Downton Abbey, one of its biggest shows in decades. More importantly, he had never run a television business let alone one with collapsing revenues.

Since then, the UK's biggest commercial free-to-air broadcaster has been one of the best performers on the FTSE 100, with its market capitalisation quintupling to nearly £11bn.

Its growing studios arm - whose shows include Come Dine With Me and The Real Housewives of New Jersey - has become a blueprint for broadcasters worldwide, which are challenged by the rise of online streaming and the potential decline of live advertising.

How was ITV turned round and where does the broadcaster go next?

The push into content

"The biggest decision was saying we're an integrated producer-broadcaster - it's all about content," says Mr Crozier. On ITV's main channel, 60 per cent of the shows are now made in-house, up from 53 per cent in 2010.

ITV's previous boss, Michael Grade, had identified the need to own more programming rights to hedge against online rivals. Under Mr Crozier, ITV has continued this push, spending £1.4bn including future earn-outs to buy production companies in Europe and the US. The acquisition of Leftfield Entertainment turned it into the largest independent producer of reality and other factual shows in the US. It has also bought Talpa , maker of the reality TV singing show The Voice, for up to £781m.

"Everyone is talking about ITV now," says Thomas Dey of About Corporate Finance, an advisory boutique that worked with Leftfield on the deal. But some analysts say there is insufficient detail on potential earn-outs to evaluate ITV's recent deals. "The content strategy is good . . . but I wouldn't see it as value accretive," says Simon Baker of Societe Generale.

Mr Crozier, previously chief executive of the Royal Mail, England's Football Association and the advertising agency Saatchi & Saatchi, is credited with a strong record of execution. "Michael Grade relishes the theatrics. Adam is the opposite," says Claire Enders, media analyst at Enders Analysis.

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.

Costs have also been squeezed - by using freelance staff in production, paying down debt, buying its London headquarters and reworking transmission deals. "In general we should never think of media companies as being lean and mean - they're not," says Claudio Aspesi, an analyst at Bernstein, welcoming the focus on costs.

Employee ranks have also been renewed. Over the past five years, 60 per cent of employees have been replaced, as have 225 of the top 300 staff.

Mr Crozier has also benefited from timing. Before 2010, ITV's basic troubles were too much debt and a crash in advertising spending because of the financial crisis. By the time he and ITV's chairman Archie Norman joined, net debt had fallen from £730m to £188m. The British ad market had bottomed out. Peter Fincham, a well-regarded former BBC executive, was already in charge of ITV's programming business. His team had commissioned Downton Abbey, which first aired six months after Mr Crozier's arrival and restored ITV's reputation for high-quality programming. "A lot of people have said it was a basket case. That is just not true," says one former executive.

Nonetheless, ad spending did not grow significantly until 2013 and ITV's advertising revenues rose 6 per cent last year, outperforming rivals such as Channel 4.

Where next?

There are clouds on the horizon. The final series of Downton will air later this year. Ratings for two key franchises - The X Factor and Britain's Got Talent - are declining. Overall audience share has also fallen. "How do you sustain momentum in a company which could run out of lucky breaks?" asks Mr Aspesi. ITV once pledged to end its reliance of traditional advertising. But only 6 per cent of its revenues come from video streaming and its new pay-television channel. "ITV remains a broadcaster with content assets rather than the other way around," says Sarah Simon, an analyst at Berenberg bank.

Mr Crozier argues the transformation is only "40 per cent" complete. He is looking to improve ITV's digital platform, while also investing more in content. The company can spend more than £1bn before reaching its target leverage of net debt at 1.5 times earnings before interest, taxation, depreciation and amortisation. So far its biggest hits, including Downton and crime drama Broadchurch, have been commissioned from other companies.

ITV is trading at 17 times this year's forecast profits, thanks partly to take over speculation. US cable group Comcast, fresh from abandoning its pursuit of Time Warner Cable, is one potential acquirer.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation