ITV’s woes are part of a bigger British disease and investors are among the victims

The latest news over the Jeremy Kyle programme is a side-show. ITV is fast becoming a lesson on the worse thing to do when the threat of disruptive technology beckons.

Article updated: 20 May 2019 9:00am Author: Michael Baxter

I blame more than one entity. I partly blame the failures of ITV’s senior management going back years. I partly blame regulators. I partly blame what I see as a British disease — the glass is half empty way of looking at the world. I also blame politicians, the media and the public.

Image of TV and remote control

Let me explain. When he was in China, the then Prime Minister, David Cameron, was speaking to a large audience. After talking about human rights, and getting short shrift, it was the audience’s turn to ask questions. “When is the next series of Sherlock coming out?” he was asked.

Britain’s brand name abroad has got more to do with its cultural contribution to the world than anything else. From the Beatles, Cold Play, Manchester United and Agatha Christie based TV shows, the UK is good at culture.

Not that everyone would describe all of the above examples as culture, but I would — not in a highbrow way, but for me TV, movies and sport are all inextricably linked to culture.

And Britain is good at it. Good at exporting it, too.

All the more upsetting when you see the complete drubbing the British TV broadcasters are getting, in what is emerging as one of the most profitable business arenas in the world.

So, Jeremy Kyle is off the air. I was never a fan, but have seen episodes, and found it annoyingly addictive. I didn’t want to watch it, but when I did, I got sucked in.

But that is not how ITV has messed up.

No, the channel behind Downton Abbey, Broadchurch, Inspector Morse and related spinoffs, The Durrells and many more has messed up for another reason.

You don’t need the investigative powers of Poirot to know why.

Netflix has become a $154 billion company by dominating a market that ITV could be dominating.

Or at least, Britbox — the partnership with BBC, and maybe Channel Four — could be.

More to the point, this market that has opened up was widely expected. I have predicted here enough times, ever since this column has been going — and it is approaching its tenth year anniversary.

And the British companies have been found wanting. They have been found wanting despite having one enormous advantage over competitors — truly superb content. The problem is lack of it and insufficient ambition.

ITV’s share price is down by a third over the last five years. At one point in 1999, ITV’s market cap was close to £30 billion. Now it £4.5 billion.

While Netflix, Disney, Apple, Amazon and the rest fight over what could eventually emerge as a market worth over a trillion dollars (by market cap), the Brits try to get past square one.

Sure, Britbox has half a million subscribers in the US, but it should be ten times that number.

Now I read that Netflix’s budget for content aimed at the English speaking world makes the resources of the BBC, ITV and Channel 4 combined seem tiny.

ITV should have gone to the markets five years ago and raised a billion dollars to spend on content.

Of course, raising a billion dollars in the glass is half empty Britain would have been tough; companies blessed with such powerful building blocks would have had no problem in the US.

What ITV, BBC and Channel 4 should have done is clubbed together five years ago, raised big bucks, spent the money on content and BritBox, or whatever it would have been called five years ago, and would have owned the market Netflix now dominates.

Then again the BBC’s previous big idea, Project Kangaroo, got caught up in a straitjacket made by regulators and the lobbying power of the Murdochs.

Part of the problem is the British tendency to knock ourselves. Take the BBC, every day I read about its bias. The trouble is, the accusations come from both sides of the political spectrum and in equal measure. Brexit supporters call it biased in favour of Remain, the Remain camp draw up and equally long list of reasons why it is pro-Brexit. From climate change to its attitude to Israel, its haters sit on either side of the debate. And a deeply polarised British public become convinced that the BBC is biased against them — it’s liberal elite, right wing blowhards, too conservative and yet failing to protect British values.

Actually, I think the BBC is superb; in Britain we should be proud of it.

If you apply a lot of imagination, hope and faith, you could see how BritBox could eventually rival Netflix and in the process, boost the share price of one of its main owners: ITV. (Personally, I think the British public, via their de facto ownership of the BBC, should have shares too.)

But will it happen? I have my doubts — Britain is losing the race it should be dominating. There is room in the subscription TV market for more than one player — but there isn’t room for that many players. Either Britbox competes with Netflix, raises big money, and shows courage, or it will fail. As for ITV, with vision and boldness it could become a $100 billion plus company, it’s share price could rise 20-fold. I think it is more likely to be remembered in the same breath as Blockbusters and Kodak.

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.