TV Growth Opportunity Is TV Executives

Michael Hedges May 8, 2017 Follow on Twitter

Transitional media environments create considerable froth among top executives. The hardest-charging eventually want to “seek new opportunities” or are asked. Stability is a warm-fuzzy memory as audiences, platforms and owners change. Growth - however possible - is still the priority. Getting there is the journey, not the destination.

In an official statement confirming several months of speculation (May 3), ITV plc chief executive Adam Crozier will be leaving at the end of June. He has led the company since 2010, quite successfully to the major leagues of television operators. The executive hole will be absorbed in the short-term, at least, by chairman Peter Bazalgette adding executive duties and CFO Ian Griffiths taking on COO roles. At the first of the year the ITV plc board hired a headhunter, reported Sky News (January 3), to look at “long term options” should Mr. Crozier and Mr. Griffiths depart. Neither Mr. Bazalgette nor Mr. Griffiths are presumed in the running as permanent chief executive.

Marching orders for a chief executive (CEO) come from the chairman, who negotiates with the board of directors, the ultimate representatives of owners. Board members typically have simple demands: “where’s my money?” Though, anybody experiencing a media company board meeting has heard rancorous arguments about a board member’s aunt’s favorite shows. The chief executive negotiates the strategic dimensions, and those other interests, then articulates it all to subordinate executives.

The strategy at ITV plc, post-turnaround, articulated by then chairman Archie Norman and implemented by Mr. Crozier, was lowering the company’s reliance on advertising sales and raising the production business. Mr. Norman stepped down in January 2016 and will become retailer Marks & Spencer’s chairman from September. He recruited Mr. Crozier from notable turnarounds at the Royal Mail and the Football Association (FA).

Every indication points to Mr. Crozier leaving fully of his own accord. That and a few other factors fuel speculation that ITV plc is a near-certain take-over target. Through an interesting transaction (best explained by your friendly, neighborhood hedge fund manager) big investment bank Goldman Sachs and Liberty Global swapped and traded ITV plc shares at the end of March, leaving Goldman Sachs with a 22% stake hedged by Liberty Global’s 9.9% stake, noted investor portal thestreet.com (May 3). Take-overs can be painful and, often, career-enders.

The television realm in the UK is certainly poised for turmoil in the short-term if not longer. Though ad spending forecasts by the Advertising Association/WARC, released in April, project a 2.5% gain this year over last, TV spot advertising, roughly a quarter of all UK ad spending, will fall 0.5%. The business, more and more, is producing shows, movies and features for other broadcasters and the ever-expanding video-on-demand industry. ITV plc owns the well-respected and successful ITV Studios production arm. Liberty Global and Discovery Communications jointly own the mammoth production stable All3Media.

The contentious slog to leave the European Union (Brexit) has pushed the GB£ lower against the US$ and Euro. (Exchange rates fluctuate for all sorts or reasons, sometimes none at all. Ask your happy Forex trader for details.) This has helped create buying opportunities for those with US$, Euros or the capacity to borrow in either. Seizing that opportunity was 21st Century Fox, bidding €14 billion last December for the Sky plc pay-TV operation that includes business in Ireland, Germany, Italy and Austria.

Jeremy Darroch has been Sky plc chief executive since 2007, when it was commonly known as BSkyB. He is, reportedly, the highest paid UK media chief executive. In the last published financial data, nine months ending March 31st, Sky plc posted 4% revenue gain year on year. That was pinched by Premiere League football rights fees, affected by exchange rates. “Despite the broader consumer environment remaining uncertain, we continue to deliver on our strategy and are on track for the full year,” he said in a statement (April 20).

Uncertainty at a different level persists. UK regulators are due to pass judgment on the 21st Century Fox takeover, delayed to accommodate the June general election. There are no other bidders. Some UK media watchers expect Mr. Darroch to head for the garden if and when the takeover occurs. Both he and COO Andrew Griffith are invested in a share allocation that, upon the takeover, could be lucrative. James Murdoch was renamed Sky plc chairman in January 2016 after a four year hiatus.

Also in transition is publicly-owned, commercial broadcaster Channel Four. The company announced in March, quite mercurially, that chief executive David Abraham will exit “by the end of 2017.” The current UK government has rumbled about putting Channel Four up for sale. A successor for Mr. Abraham has not been named. He joined the company as chief executive in 2010.

The 3.7 billion pound gorilla in UK television is, of course, the BBC. Director General Tony Hall was appointed in 2013. In recent years BBC directors-general have served four-year renewable terms. He succeeded George Entwistle, who served 54 days, after a half-year search.

Common to each of the aforementioned UK TV chiefs is significant change. Change agent is not too strong a term to describe the current positions, generally, of ITV, Sky, Channel Four and the BBC since the Great Recession and the Digital Revolution. Tony Hall at the BBC has brought recovery to an organization in management chaos precipitated by political meddling.

The skill-sets required for a television chief executive are now vastly different. David Abraham and Adam Crozier have roots in advertising, Jeremy Darroch in consumer marketing. Tony Hall came from the public sector, the Royal Opera (a successful turnaround) and the BBC. The Financial Times (May 7) suggested the next UK TV chief executives be well-versed in technology. Others see content creation and production. An accountant is more likely. What doesn’t change - and never will - is a talent for negotiating changing times.

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