A recap from ITV’s full year results 2023 released yesterday. First, the good news.

Digital performance – that is, OTT – is up across the board:

• – Total streaming hours viewed increased 26% YOY to 1.5bn hours
• – Monthly active users rose 19% to 12.5m
• – Overall digital revenue also rose 19% from £411m to £490m
• – Digital advertising revenue increased 21% to £415m
• – And SVOD revenue grew by a more modest 9% to £59m
• – Side note: ITV wants to grow digital revenues to at least £750m across Media & Entertainment

The real story, though, is in the varying fortunes of ITV’s two biggest revenue streams: linear advertising and ITV Studios content production and distribution.

The former was down by 15% reflecting what CEO, Carolyn McCall, called “worst advertising recession since the global financial crisis” [of 2008]. McCall does expect the next 12 months to be better (with more than half the world’s population voting in national elections plus major sporting tournaments like the Euros, 2024 is set to be big for scheduled viewing) but linear ad revenues will never return to the levels of their pre-streaming era pre-eminence.

Income from Studios, however, swelled 4% to £2.17bn. Some of this was down to organic growth (ITV has targeted 5% organic growth by 2026) and some through greater distribution of content on other streaming platforms (32% of Studios revenue came from this channel, up 22% YOY).

Overall, and despite pre-tax profits falling sharply by 61% (to £193m in 2023 vs. £501m in 2022), ITV’s share price yesterday rose 12.2% (or 7 ½ pence) to 68 ½ pence. (For reference, two years ago when McCall announced plans for ITVX, ITV’s share price crashed by 27% in a day.)

Undervalued? Possibly… Probably.

Remember that the company has stated that it is focused on three strategic pillars to deliver the vision of being “a leader in UK advertiser-funded streaming, and an expanding global force in content”.

1. Expanding its UK and global production business. [On that score, check.]
2. Supercharging its streaming business. [Getting there.]
3. Optimising its broadcast business. [If optimising means the managed decline of linear advertising while ramping up digital, a partial check.]

The sale of ITV’s BritBox International shares to the BBC last week (a deal worth £255m), the broadcaster’s current hiring freeze and “a new strategic restructuring and efficiency programme” which is expected to deliver incremental annualised gross savings of at least £50 million per year, may also suggest that the company is streamlining itself in preparation for acquisition.

Another aside: Morgan Stanley has recently “calculated that corporate buyers and private market investors have built up cash piles of $5.6 trillion and $2.5 trillion respectively to spend on deals as the mergers and acquisitions market continues to thaw” according to The Times this week.