Why the Square Mile has tuned out of latest ITV drama (for now)

If you only had your eyes on the stock quote screens and followed ITV last week you might not have guessed that the broadcaster was in crisis.

Shares closed at 72p on Friday, little changed from four days earlier, clearly demonstrating that investors in the City have hardly blinked an eye. So what effect will the Phillip Schofield affair have on shareholders?

It certainly is a blow to ITV to lose one of its greatest ‘talents’.

Schofield, 61, was forced to leave This Morning following The Mail on Sunday’s revelation that he was dating a much younger colleague, only to lie about it repeatedly when questioned.

His departure is the latest in a series of high-profile departures – which also included Jeremy Kyle and Piers Morgan – under CEO Dame Carolyn McCall, which began in 2018.

She has also dealt with scandals related to Love Island, the group’s flagship summer reality TV show, which suffered serious setbacks following the suicides of two former contestants and the former host, Caroline Flack.

There are now serious questions about the wider culture of the group under McCall.

However, the consensus in the Square Mile seems to be that ITV also has business distractions to contend with.

Richard Hunter, head of markets at Interactive Investor, said: “The situation in Schofield is a pointless development, but investors probably have bigger fish to fry.”

McCall’s focus, Hunter says, is on its core strategy of making the company less dependent on TV advertising, expanding the studio’s production division and positioning the new online platform ITV X as a serious rival to streaming groups like Netflix .

In 2022, the company’s profits rose 4 per cent to £501 million and revenue rose 7 per cent to £4.3 billion – although one of the key measures investors looked at, advertising revenue, fell slightly. Digital ad revenue rose sharply, as did studio revenue, suggesting McCall’s pivot may be working.

This update also revealed that ITV X’s late 2022 launch had been a success. But this optimism has not been reflected in the share price, which is down about 16 percent over the past three months.

“A few things have hit the stock price lately,” Hunter said.

This includes vague speculation that the lucrative studio arm could be spun off and recoup the £180 million spent on the launch of ITVX. While initial adoption was good, there’s a list as long as your arm of streaming services to compete with, like Netflix, that have deep pockets.”

Alice Enders, head of research at Enders Analysis, said: ‘Most ITV shareholders are looking at the bigger picture. This isn’t a top prime time show and the ad costs are a fraction of what it is nightly.

“This seems like a big media story, but it’s not a big business story to the same extent, there’s quite a gap there.”