Summary:

So much for sacred cows – this is even worse than anticipated. ITV (LSE: ITV) is taking drastic measures including paring back its online st…

So much for sacred cows – this is even worse than anticipated. ITV (LSE: ITV) is taking drastic measures including paring back its online strategy to recoup cash, as it swung from a £188 million 2007 profit to a massive £2.7 billion overall loss in 2008…

Friends Reunited on sale: As widely reported, ITV aims to sell the ailing social network, which it bought for £120 million in 2005, “when the time is right”. Since it’s been overtaken by the likes of Facebook and has removed Friends’ premium subs, ITV may be challenged to sell it for very much.
Scoot on sale: One property that hadn’t been mooted – the business search directory that was once a tour de force and which ITV bought for £3 million in 2006, will also be offloaded; another once-proud online asset that ITV has done little with.
ITV Local to close: The video websites, which map on to ITV franchise regions but which always looked rather lacklustre, will “close as a standalone business”. Unclear whether this means the whole ITV Local project will shut, denying newsreaders the opportunity to tell viewers “for more on that story, go to ITV Local”, or will continue to operate under ITV.com.
SDN on sale: As expected, the Freeview Multiplex A operator, which ITV bought from S4C, United News & Media and ntl for £134 million in 2005, will also be offloaded.
More savings, job cuts: ITV now plans to save £155 million this year, £175 million in 2010 and £245 million in 2011. It’s cutting 600 jobs in addition to the 1,000 announced in September and will shave £65 million from its TV programme budget this year plus another £70 million in 2011, planning to to “focus on existing stock” (ie. repeats) and entertainment. Regional news will be cut by £40 million this year.

It adds up to a huge retrenchment. Though sales slid only three percent to £2.02 billion, ITV is writing off a massive £2.69 billion in Broadcasting and Online operating costs – accounting for the £2.7 billion loss – leaving it staring at one of the worst performances in British media history. Ad sales are down four percent from the year before but are forecast to be down 17 percent by March.

Online sales had increased nine percent to £36 million, but half of this is from Friends Reunited, which nevertheless, lost 18 percent of its sales, as was always likely to happen after abandoning its paid subscription model mid-year. Also within online, ITV.com sales were up 60 percent to £18 million, half of which is now from video ads. But the overall loss from online ops grew from £12 million to £20 million thanks to the “weakening’ online ads market and Kangaroo being blocked.

ITV’s annual report today says: “Friends Reunited remains a highly profitable and successful online business, but our new strategic focus on streamed video does not play to its strengths and we will look to dispose of the business when the time and the price are right.” Instead, “online, ITV is focused on delivering ITV content via itv.com and VOD. ITV is clinging to ITV.com’s growth in video views to 85 million. The annual report says ITV will make ITV.com a “premium VOD entertainment site” – but it’s not clear that “premium” means pay-for.

ITV recorded a £1 million loss on Kangaroo in 2008. In its absence, it will “exploit our catalogue to deliver ITV programmes via open and closed VOD services“: “We do not want there to be any further delay in exploiting the ITV archive online via itv.com and we will not be appealing the decision.” Online job losses coming? “With Kangaroo not going ahead … there is the opportunity to simplify structure and reduce costs.”

Release | Annual Report | Webcast (9.30am GMT)

Executive chairman Michael Grade’s full statement…

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