ITV (LSE:ITV) has usually regarded like a dirt-cheap FTSE inventory to me, and I’ve tried to speak myself into investing (probably out of nostalgia for exhibits like Heartbeat and A Contact of Frost!). However after I examine in each few months to evaluate the share, it’s gone nowhere.

Not a lot has modified on this entrance. The share price is up 1% in 12 months and down 1% over 5 years. Not nice drama then, although somebody who invested 4 years in the past can be down by 38%.

But I can nonetheless see the attraction. There’s a well-supported 6.3% dividend yield on supply, and the price-to-earnings (P/E) ratio of seven.7 may be very undemanding. Certainly, it may show to be an outright cut price if traders begin reassessing the broadcaster’s prospects.

Let’s take a more in-depth look.

ITV at a look

Like one in every of its two-part dramas, ITV is cut up into two companies. There’s the Media & Leisure unit, which homes its broadcasting (conventional TV channels) and streaming (ITVX) operations. This earns cash primarily via promoting.

The opposite half is ITV Studios, which is its manufacturing enterprise. This creates content material for each itself and third-party streaming corporations like Disney, Netflix (NASDAQ:NFLX), and Amazon Prime Video.

For instance, it made Rivals (Disney), Run Away (Netflix), and The Satan’s Hour (Amazon Prime Video). And it licences out in style TV codecs like I’m a Superstar... and Love Island around the globe.  

In Q1, Studios’ income edged up 1% because it recovered from the Hollywood strikes, however the different division reported a 2% fall in advert income. Group income was down 1% to £875m.

Worrying decline

My view is that I just like the Studios operation and suppose there’s worth in it. In actual fact, I’m stunned a content-hungry streaming big hasn’t swooped in and bought it — or the entire firm — by now.

In spite of everything, ITV’s enterprise worth is £3.37bn. For context, Netflix plans to spend roughly $18bn (£13.3bn) on content material this 12 months alone!

For me, these figures put into sharp focus what ITV is up in opposition to. Netflix has grow to be the worldwide TV channel and has ambitions to grow to be a $1trn firm by 2030. In distinction, ITV’s income is forecast to rise by lower than 2% this 12 months.

It’s essential to know the aggressive dynamics right here. Whereas Netflix’s income and content material price range march upwards, conventional UK broadcasters are having to make cuts.

For instance, the fantastic BBC interval drama Wolf Corridor: The Mirror and The Mild needed to reduce a great deal of deliberate scenes set outdoors on account of price range constraints. Solid members needed to take a pay reduce to get it completed.

Wolf Corridor‘s director Peter Kosminsky said there is no way the BBC or ITV could afford to make Netflix’s hit collection Adolescence (too many paid extras, for one). I concern this can ultimately present up in programming high quality, cementing Netflix’s dominance additional.

Just lately, MPs recommended taxing streaming giants to avoid wasting the UK TV business from oblivion. This presents some regulatory danger for Netflix. Whereas I’m broadly supportive of this, I’m additionally not eager to put money into an business that may want saving by the federal government.

After all, ITV may very well be acquired, doubtlessly creating respectable returns from immediately’s 78p. However I’d somewhat contemplate investing within the disruptors (Netflix, Disney, or Amazon) than the disrupted.