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

If you had kept your eyes solely on the share price screens and tracked ITV last week, you might not have guessed the broadcaster was in crisis.

Its shares closed on Friday at 72p, little changed from four days earlier, clearly showing investors in the City have hardly blinked. So what effect will the Phillip Schofield affair have on shareholders?

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

Schofield, 61, was forced to leave This Morning following The Mail on Sunday’s revelation he had a relationship with a much younger colleague then repeatedly lied about it when questioned.

His exit is the latest in a string of high-profile departures – which also include Jeremy Kyle and Piers Morgan – under chief executive Dame Carolyn McCall’s reign, which began in 2018.

She has also had to manage scandals linked to Love Island, the group’s flagship summer reality TV show, which suffered serious setbacks following the suicides of two former contestants and its former presenter, Caroline Flack.

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

However, the consensus in the Square Mile appears to be that ITV also has corporate distractions with which to contend.

Richard Hunter, head of markets at Interactive Investor, said: ‘The Schofield situation is an unhelpful development, but investors have probably got bigger fish to fry.’

McCall’s focus, Hunter says, is on her core strategy to make the business less reliant on TV advertising, bulking up its studio production arm and positioning its new online platform ITV X as a serious rival to streaming groups such as Netflix.

In 2022 the company’s profits rose by 4 per cent to £501 million and revenue was up by 7 per cent to £4.3 billion – though one of the most important measures watched by investors, advertising revenue, dropped slightly. Income from digital advertising was up strongly, as was income from studios, suggesting McCall’s pivot may be working.

This update also revealed that ITV X’s launch in late 2022 had been a success. But this optimism has not been reflected in the share price – which is down around 16 per cent in the last three months.

‘A couple of things have hit the share price recently,’ Hunter said.

‘This includes vague speculation that the lucrative studios arm could be spun off and recoup the £180 m spent launching ITVX. While the initial uptake has been good, there’s a list as long as your arm of streaming services to compete with, such as Netflix, that have deep pockets.’

Alice Enders, head of research at Enders Analysis, said: ‘Most shareholders in ITV are looking at the bigger picture. This is not a peak prime-time show and the cost of advertising is a fraction of what it is in the evening.

‘This looks like a big media story, but it is not a big business story to the same degree, there’s quite a gap there.’