Is ITV really in financial crisis?

What I don't quite understand is the constant budget cuts and closing studios and so on to save money; is ITV really in such a dire situation?

Surely, at the end of the financial year, even if they only report for example £1million profit... it's still £1million profit on top of running costs.

I know the shareholders want the network to make massive profits, but why can't they say "Look, we're doing ****, so rather than focus on making enormous profits, we're going to make less of a profit for a while and focus on building the business up to greatness again at which point we will make profits naturally".

Or is that too logical? Is ITV making huge losses year on year and literally facing collapse?

We are in a RECESSION! thus there is less money about thus itv have to keep cost down

It's the oil companies I feel sorry for, only making a few billion pound profit every six months. How will they cope?

ITV's last annual results were posted 5th March 2008, so we should find out the current state of play within the next week or two, but last year pre-tax profits had fallen 35% to £188m, with revenue down 5% to £2.1bn - and you can expect figures to be down again this year.

Yes, it's easy to say - £188m, but it's the decline in profits which is the cause for concern as if they continue declining at that rate, ultimately the company will begin making a loss and then be at risk of bankruptcy.

Source: http://www.pressgazette.co.uk/story.asp?storycode=40490

If this was a small firm, then yes, that would be logical.

The overheads of ITV plc will be massive - including, but not limited to, things like their pension scheme.

£1M sounds a lot, and indeed it is, but its a drop in the ocean for ITV, and I would hazard a guess they pay that type of money out in one month's salary run. And then some, come to think of it.

So - £1M in the bank doesn't sound so great when revenues from advertising continue to dwindle, with no clear signs of improvement on the horizon. It wouldn't take very much at all for that to erode - and if they get to a point where their incoming monies are less than their outgoings... well, you can guess the rest.

All they can hope to do at this stage is to minimise their expenditure and overheads. Its unlikely ad revenues will go up - so everything else has to go down.

Or they can do what is being touted at the moment and look to merge with other broadcasters who also have large numbers of staff looking after the administration of their firms, and try and consolidate those expensive departments together.

I should point out that the "1£M" is only an example figure, but that holds true if its £188M or any other (ever reducing) sum.

One problem with making a decision to prefer investment rather than profits (and therefore low dividends for shareholders) is that the share price drops to a very low level. There is no point owning shares in a company if you don't get an annual return, so many people would sell - lowering the price.

That either makes them ripe for takeover by another TV concern as they would be very cheap, or by an 'investment house' who would turn the company private with a view to stripping the assets for sale. The other problem with a low share price is that you can't get credit for new ventures, and that's difficult enough at the moment.

However, that's only my opinion. I'm sure our resident economics guru, Mr Q, will be able to explain better the full implications of allowing a company's share price to drop too low.

I wouldn't want to see the pension bill at ITV...

A lot of staff layed off after the 91 franchise round were offered fairly small redundancy payments, with the option to take their pension immediately. Many of these people are still working as freelancers, several working on the same programmes they used to when with ITV.

It seems to me that people who work in television need to take a reality check.
I read somewhere that ITV pays in the region of a million pound for a single episode of x factor. Some actors in soapland are on a couple of hundred grand a year, its not just ITV but television in general.
When ITV are paying people like Phillip Schofield a staggering £45.000 per episode to co host tacky game shows like mr & mrs is it any wonder that ITV are in dire straits.

For cheaper TV options, tune into channels 200+ on Sky.

To be fair I think the majority of soap stars are on less than £100,000 a year, which is relatively little when you consider many in US drama get more than that per episode.

You also have to consider the cost versus the revenue. Roughly speaking over the series The X Factor gets 20-25m votes at 50p (I think, possibly 35p) a vote - that's bringing in over £10m, over half of which can be considered profit. And that's not even to think about the advertising revenue.

So The X Factor may be costing £1m an episode to make, but it's more than making that money back.

You get what you pay for. Good presenters or actors command good money but the better or more popular the performer, the more viewers and therefore revenue they will pull in.

It's like any other line of work - if you want the best you've got to pay the money to get the best

That would be the case if The X Factor was an ITV Production - but it isn't... I don't know how the split of telephone revenue between Syco and ITV is handled...