Deeper problems than Jeremy Kyle are making ITV a turn-off for investors

As ITV became embroiled in the scandal over the death of a Jeremy Kyle Show participant last week, its top brass moved quickly to purchase £200,000 of stock in the troubled broadcaster. The move by chief executive Carolyn McCall, chairman Sir Peter Bazalgette and finance chief Chris Kennedy came as ITV faces a battle to regain the faith of investors after shares fell to a six-year low.

But despite the potential severity of the scandal – following the deaths of former Love Island contestants Mike Thalassitis and Sophie Gradon – investors are still most concerned about fundamental commercial off-screen issues. Blame has been laid on advertisers pulling out of TV campaigns citing Brexit uncertainty. However, by the referendum in June 2016, ITV’s stock market value had already almost halved – to £6.5bn, from more than £11bn the previous year.

“Brexit is a factor for sure, but it is far from the only factor,” says media analyst Alex DeGroote.

What is plaguing ITV and other broadcasters is the inexorable rise of Netflix, YouTube and Facebook, which take both viewers and advertising money away from traditional TV.

One day last January, ITV was the biggest faller in the FTSE 100, after a report warned that the market was underestimating the decline of traditional TV viewing and the impact of services such as Netflix and YouTube.

When former easyJet and Guardian chief executive McCall joined in January 2018, ITV’s share price stood at about 180p. It is now around 113p, valuing the business at about £4.5bn – 60% less than its 2015 peak.

“The market is saying it thinks these businesses are facing structural decline,” says Berenberg analyst Sarah Simon. “It’s saying it doesn’t know if ITV can be fixed: that’s why the share price is 110p.”

In traditional TV viewing, ITV is more than holding its own. Its family of channels increased their share of viewing by 7% last year, the fastest growth in recent years, and its overall share of 23.2% of all UK viewing was a 10-year high.

“Share of viewing in a declining market is becoming less important,” says Simon. “Investors want stable growth. They want to see [new streaming service] BritBox work.”

BritBox is McCall’s big subscription gambit: a joint venture with the BBC launching later this year, its aim is to stake a claim in a video-on-demand future that threatens to be dominated by Netflix, Amazon and others. BritBox’s modest success in the US – it has 500,000 subscribers two years after launching – bodes well, but Netflix’s headstart in the UK is immense: it has more than 10 million UK subscribers.

The service will be well-stocked with top-class content – potentially Line of Duty and Broadchurch, Doctor Who and Top Gear – though the shows will already have aired on TV and been available on iPlayer or ITV Hub first.

It is hoped the premium archive will help make up for the vast gap in programming budgets. Netflix has a $13bn annual budget, compared with about £1.5bn for BBC and ITV combined. Even though the US streaming service has to spread that spend ing globally, the bulk goes on English-language content with direct appeal to UK TV fans.

McCall is also making significant strides with ITV Hub, its free on-demand and catch-up service, which has grown fast, but has plenty more revenue-generating potential. It saw a 32% rise in viewing last year, from 337m to 446m hours, and has 88% of the key 16-to-24-years demographic in the UK as registered users.

A recent deal with ad tech company Amobee will bring highly targeted advertising to ITV Hub. One tech analyst says this will transform ITV’s ability to make money from the service.

Nevertheless, the shares’ steady crumble toward £1 – they have not fallen below this since 2012 – is fuelling new speculation about the broadcaster becoming a takeover target.

“The £1 barrier is an important psychological support level,” DeGroote says. “There is no investor confidence in the story. The share price chart is shocking – like a punctured balloon for the past few years. ITV looks vulnerable in a consolidating industry.”