Has ITV gone completely barmy?
That’s what many hardened media pros in London are asking themselves as they digest the implications of marketing boss Fru Hazlitt’s brutal clearout of sales director Gary Digby and his team, the allegedly old-fashioned bruisers who have brought a tidal wave of advertising money in the UK terrestrial broadcaster this year.
In essence Digby and co have been chopped because ITV wishes to pursue a new strategy of operating across a range of media platforms (in other words digital) rather than focussing its main efforts on TV spot advertising. This is the joint brainwave of newish CEO Adam Crozier (left) and chairman Archie Norman. Hazlitt, who made her name in radio, finds herself in the unlikely role of hitwoman.
Which all sounds fine and good but it doesn’t reflect the numbers. Here’s Mark Sweney’s report in the Guardian (it’s worth reading in full).
When Adam Crozier took the helm at ITV in April one action he probably didn’t envisage was firing the senior executive team who revived its fortunes by milking a bumper £1.5bn from advertisers last year. On the face of it, the ousting of ITV’s tough ad sales chief Gary Digby and his lieutenants, after producing a market-beating 16%-plus increase in ad sales revenue, doesn’t seem to add up.
The cull has shocked the media sales industry, with some already predicting that the new “softer” regime, under former Channel 5 sales chief Kelly Williams and Fox Interactive executive Simon Daglish, will lead to advertisers and agencies getting the upper hand in negotiations, and the loss of millions in ad revenue.
“Are the replacements better than what was there before? I would say not,” says one senior media industry executive. “The reinvention of the channel, the X Factor factor and all that, is funded through TV ad sales. ITV management can convince themselves they are something else – a [digital] content business – but they are not.”
However, Fru Hazlitt, the ITV managing director of commercial and online, says it is wrong to interpret the cull as a signal that ITV is taking its eye off its core revenue stream of TV advertising, and insists she will remain “tough” and focused on deals. She says the thinking is to go beyond a culture where the “siloed” stress on TV ad deals “almost strangles and prevents smaller revenue streams from flourishing”.
Hazlitt argues this although ad revenues from ITV.com, which came under Digby’s remit, doubled in the past year – albeit from a low base – to just above £20m. Nevertheless, digital revenues account for just 2% of total income, and Crozier has made it clear that the UK’s largest advertiser-funded commercial broadcaster is nowhere near “punching its weight” online.
Meanwhile, ITV managers have pledged to rebuild the business for a digital future beyond spot advertising. Chairman Archie Norman and Crozier, like former chairman Michael Grade, have spent countless hours trying to convince the industry, regulators and government that a new-look ITV can be trusted not to abuse its market position. ITV1’s market dominance may have dropped from 59% to 39% of total UK TV advertising over the past decade, but it has not convincingly argued that removing safeguards such as contracts rights renewal, which protects advertisers from ITV abusing its power, would be anything other than courting disaster.
Digby and his lieutenants, all of them respected negotiators with more than 20 years’ experience in ad sales, personified an ITV relentlessly exploiting its supremacy and do not fit with the image it now aims to engender. “This is the biggest culture change and shift in 25 years. You’d have to say it is a bold, brave move – Crozier is fearless,” says Marc Mendoza, chief executive of media agency MPG Media Contacts.
Hazlitt believes it is critical to change the “tone” and “perception” of the commercial operation, and is putting together a team which has a “mutual respect for all revenue generation opportunities” and a “spirit of collaboration”. “I want a combination of new and existing, credibility and experience that represents the possibility of change,” she adds. “We rise with the tide and suffer declines when the market falls. ITV panics when the market falls, is complacent when it rises and does not focus on alternative revenue streams for the future.”
The ad sales operation is so critical to ITV’s fortunes, providing 70% of total revenues, that it has been run as an untouchable fiefdom. It is widely speculated in the industry that Digby had at best a fractious relationship with Hazlitt. “How are you meant to control someone who is meant to report to you but didn’t because he doesn’t have to?” asks one source. “One had to go, it was probably necessary as Digby will forever be associated with the ‘hitman’ style of ITV trading of which he is the master.”
Hazlitt rejects any suggestion of a rift within the commercial department. “This is absolutely not personality based,” she maintains. “This is why I found it so tough. These people have done a brilliant job within the definition of what they were here to do.” Nevertheless, pushing out such veterans will cost ITV millions, fuelled nicely by sizeable bonus payments after the stellar performance in 2010. “I shudder to think what it is costing them,” says one senior industry executive.
While some question the wisdom of Hazlitt’s day of the long knives, she timed it well. Digby and his team locked in more than 80% of ITV’s TV ad deals for 2011 during the trading season with agencies in the run-up to Christmas.
Analysts forecast that ITV, expected to produce healthy profits in March – thanks primarily to the endeavours of the ad sales operation as the content division continues to struggle – will see ad revenues rise by about 5% this year. For Daglish and Williams, who is not expected to start until August due to contractual obligations at Channel 5, there will be a grace period of sorts until trading for 2012 advertising commitments starts in earnest in the autumn.
As for Digby, he has already been linked with a role at Channel 4, despite being just days into his gardening leave, as rumours continue to circulate about the long-term plans of its sales chief Andy Barnes. “It is very dangerous that they have effectively got rid of the brains, he knows where all the skeletons are buried and in some ways Crozier was a bit of a hostage to his knowledge,” says one TV executive. “Believe you me he will have plenty of offers.”
Many are left asking if there is a real strategy behind ITV’s management changes. “Clients and agencies have huge traction with ITV and that is not going to change regardless of who goes in or out in sales,” says Chris Locke, group trading director at Starcom MediaVest Group. “What I want to know is what they are going to acquire, what they are going to do to really grow the business?”
Me too Chris.
Apart from the general dismay two things stand out from this.
Firstly what’s going to happen at ITV until Williams ships up in August?
And will Digby decide to try his hand at Channel 4?
He could though just spend his compensation on buying Puerto Banus.