#ITV Unveils Restructuring Program as 2023 Studios Results Hit Record, Ad Revenue Drops 8 Percent

U.K. TV giant ITV reported record results for its ITV Studios production unit and an 8 percent advertising revenue decline for 2023, compared with 2022, on Thursday, also unveiling a new efficiency program to boost profitability.

ITV, led by CEO Carolyn McCall, also saw total external revenue drop 2 percent in the latest full year to £4.26 billion ($5.43 billion). Adjusted profit before tax for the year fell 41 percent to £396 million ($504 million).

The company made good on its previous forecast that ad revenue would be down around 8 percent for the full year 2023 after a 7 percent drop over the first nine months of the year as November was expected to be down around 15 percent and December down 10-15 percent, compared with the same periods in 2022 which included the positive impact of the FIFA soccer World Cup. The ad haul for the year amounted to £1.78 billion ($2.27 billion).

Total revenue at its production arm ITV Studios grew by 4 percent in 2023 though to hit a new record of £2.17 billion ($2.76 billion). The studio arm’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) also hit a record of £286 million ($364 million). “ITV Studios delivered record revenues and profits as the business continued to demonstrate its strong market position, with outstanding creative deliveries globally,” McCall said.

The company recently forecast that ITV Studios would “deliver total organic revenue growth of at least 5 percent per annum on average to 2026 and to grow ahead of the market as we further strengthen the business.”

ITV touted on Thursday that ITV Studios has grown its scripted business “with 316 hours of high-end scripted content delivered in 2023, an increase of 14 percent from the prior year,” adding that “this has helped to further diversify our customer base, with almost a third of Studios revenues coming from streaming platforms in 2023, up from 22 percent in 2022.”

McCall emohasized her team’s priority was “to attract and retain the leading talent in the industry,” adding: “We have seen outstanding creative deliveries from recent talent deals and acquisitions, including Fool Me Once and After the Flood from Quay Street Productions, One Piece from Tomorrow Studios, and Big Beasts from Plimsoll Productions.”

The global content market is large and attractive, with all platforms needing a mix of content to succeed in a very competitive landscape to attract audiences. We expect to see growth in key segments in which we operate – content licensing, demand from streaming platforms for unscripted content and cost effective premium scripted content.

ITV Studios is very well positioned to take advantage of this growth and to grow our market share over the medium term, driven by our scale and diversified position, our investment in development and creative talent and our high-quality IP.

As previously guided, 2024 will be impacted delays in production as a result of the writers’ and actors’ strike in the US, combined with the continuation of weaker demand from FTA broadcasters in Europe who are holding back spend until they see more certainty in the TV advertising market.

“In 2023 we saw the benefit of the actions we have taken to reposition ITV towards higher sustainable growth,” McCall said. “Our Studios business recorded the highest ever revenues and profits and in its first year, ITVX delivered strong growth in viewing and digital revenue with investment on plan. This growth in production and streaming substantially offset the challenging linear TV advertising market conditions.”

She added: “2023 was the year of peak investment for streaming, which together with the successful execution of our strategy and the efficiencies delivered to date have made ITV more robust. ITV has a leading, scaled, global Studios business, a high-growth streaming service and a cash-generative linear advertising business.  This ensures that we are well placed to grow profits from here as we continue to drive material efficiencies, invest behind our strategic priorities and deliver returns to shareholders.”

McCall also unveiled that ITV’s existing cost saving program targeting £150 million between 2019 and 2026 has delivered £130 million of annualized savings to date. “We are on track to deliver the full £150 million by 2025 – one year early,” she said and unveiled a new cost savings initiative.

“We are now in the early stages of a new strategic restructuring and efficiency program across the group to reshape the cost base, enhance profitability, and support the growth drivers of Studios and streaming,” McCall said. “By the end of 2024 we expect the program to have delivered incremental annualized gross savings of at least £50 million per year, giving a £30 million in year gross benefit in 2024. The ongoing programme is designed to deliver further material incremental savings over a number of years.”

BBC Studios, the BBC’s commercial content studio and streaming business, recently unveiled a deal to acquire ITV’s 50 percent stake in BritBox International for $322 million. The tramsdaction will give BBC Studios full ownership of the BritBox streaming platform and values it at $631 million. As part of the agreement, BBC Studios has extended its licensing agreements with ITV to ensure that the latter company’s British content will continue to appear on BritBox.