When Rob Woodward took the helm as chief executive of Scottish media group Stv Group (LON:STVG) in early 2007 he instigated a sell off of poorly performing assets, sharpened the group’s digital strategy and began eyeing the opportunity of delivering local services across Scotland. In the three years that followed, STV has concentrated on building a brand based on quality content and services whilst expanding its audience and advertiser base and keeping a close eye on costs.
Before joining STV, Woodward was commercial director of Channel 4 Television and formerly CEO of 4Ventures. He previously spent time in the City as an MD of UBS Warburg and global COO of corporate finance in media and communications after joining from Deloitte, where he was managing partner of the firm’s European telecoms, media and technology business and UK strategy consulting practice. STV is part of the Itv (LON:ITV) Network, which also includes Utv Media Plc (LON:UTV) in Northern Ireland and Channel Television and which compete directly with the likes of the BBC and British Sky Broadcasting Group (LON:BSY) .
Last week Woodward delivered STV’s results for the first half of 2010, which saw sales from continuing operations increase by 20% to £50m and group pre-tax profits before exceptionals rise by £5m to £6m. The improved performance came on the back of an airtime market recovery combined with continuing cost controls that helped to boost broadcasting margins. In May, the latest in a string of asset sales saw the group sell loss-making cinema adverising business Pearl & Dean. The group is now pressing ahead with its efforts to integrate new digital platforms and partnerships and roll out its community-based STV Local service across Scotland.
Rob Woodward spoke to Stockopedia about STV’s progress during the last three years and how he is seeking to broaden the group’s presence on both a local and international level.
Rob, you have been responsible for STV’s restructuring over the last three years. What has been going on during that time?
It was an ailing company which needed complete restructuring, it was a turnaround situation. Basically we refocused the company around the core asset, which is its Scottish broadcasting business STV, and along the way we sold off the non-core assets. The first to be sold was a company called Primesight, which is the outdoor advertising business, we then sold Virgin Radio and just recently we announced the disposal of Pearl & Dean. I was delighted to stop the losses which were having a very detrimental effect on our overall business.
So we’ve done all that, we’ve restructured the balance sheet, we went through a very early stage rights issue, we’ve taken huge amounts of cost out of the business, we’ve effectively brought in a new team. Our content business, which is absolutely the core now of what we do in terms of production of high quality content, is headed by Alan Clements and we have just announced that Liam Hamilton is coming to join him as his deputy. Liam used to be the Head of Daytime Commissioning at ITV. We are focusing on two key areas, one is content and the other is the digital footprint, so we are continuing to grow our digital presence. We have put out some pretty strong performance metrics saying that the usage of our site, STV.tv, is now running at just under 2m unique users per month, which more than double where we were a year ago. We have more than doubled the usage of the site as well. We have recently signed a distribution deal with You Tube for our content, which is now up and live. We initially supplied 2,000 hours but over the next few weeks that will increase to about 2,500 hours. We have just launched an iPhone app, which is all part of same initiative that we call STV Anywhere, and it is about ensuring that our content is available on as many platforms as possible. We expect to make further announcements confirming that our content will be available on other distribution platforms, both fixed and mobile.
In our content business we recently announced a deal with a US company called Kinetic Content whereby they will have access to our content development slate and we will also have access to their slate, so it’s a reciprocal deal which gives us a beachhead into the North American market for the first time.
Why is that important for a predominantly Scottish broadcaster?
Because we produce content which is consumed round the world and the very strong track record that British production companies have had in operating in North America. We recognise that we need to be part of that and for that reason we’ve signed such a deal.
How challenging is it for you to keep up with rapidly changing and sometimes costly developments like this?
I think if you look across the spread of what we’ve been doing – the launch of High Definition, the launch of our North American presence, the launch on new video-on-demand platforms, the launch on iPhone – there is a lot of activity going on. We’ve just taken a stake in a product placement company called Myriad. We have reinvented the company and given it a very, very strong sense of purpose, which is to be the main provider of video based content in Scotland, both in an online sense and in an on-air sense. Then we have also made great strides in working with our advertiser base, so we are trying to change our position and work much more in partnership with advertisers even to the point, from time to time, where we will actually go on risk and work with an advertiser whereby the success of the campaign will determine our reward.
Advertisers have obviously responded well to this, given your strong uplift in revenues. Does that say as much about the strength of STV as the state of the economy and the value that advertisers see in TV as a platform?
It is a combination of factors but we have certainly benefited off the back of a strong recovery in the advertising market in the first half of this year. The good news is that the solidity in the market looks like it is going to remain and we are saying that we can see out as far as October and we are still looking at growth. Now, the rate of growth is slowing but the comparators become a lot tougher because our business in the last quarter last year had recovered quite strongly. Against those much tougher comparators we are still forecasting growth in that fourth quarter.
You have included a note of caution about the longer term strength of the market. How serious is that concern?
It is not a company specific note of caution, it is a caution because you would be a brave person to call what is going to happen in the ongoing economy. It is simply saying ‘of course we’re guarded because we have no more insight than anybody else in terms of what’s likely to happen in the overall state of the economy’.
Do you find it difficult to balance the need to bring in creative and innovative content with keeping a close eye on costs?
I think our track record speaks for itself. We are a creative organisation, creativity is at the heart of our business but, at the same time, we’ve come through the depths of a recession, we have kept the company in profit and we have ensured that our costs are in line with our revenue expectations. So hopefully we have come through that phase. Cost effectiveness is part of our DNA, it is what we do, but also creativity is also an important part of our DNA.
You have worked hard on rolling out STV Local during the early part of this year. Why is that initiative important to you? It sounds like a format that wouldn’t necessarily work well in England but could be a success in Scotland. Is that the case?
I think one of the key differences is there is a very strong sense of identity in Scotland, which is not the case in all English regions. So there is a real meaning and that identity is reflected in our brand, STV, and we believe that we are very well positioned to provide such a service. We are starting to work with local authorities, other public bodies as well as private bodies, sports clubs, in order to work to develop, in essence, a content sharing partnership whereby we are using information that they have. But we are providing a digital framework, if you like, to enable those very local messages to reach their target audience.
Is this something that you can make money from?
We believe so. We think there is a healthy classified advertising market that we currently take a very, very small share of and we think that this local initiative is the basis by which we will grow our share of that market. So people that would never have advertised with STV in the past, by basically growing our inventory and being able to offer an array of online services in the way that I’ve just been describing, means that we can have conversations with advertisers that, frankly, would never and could never afford to advertise directly on our main channel.
Does that open you up to new types of competition? Where are your competitors on a national and local level?
In the broadcasting, clearly we compete with all the other commercial stations, that kind of goes without saying. Beyond that we compete with other media in Scotland, although having said that a lot of our programming works extremely well because we’re working absolutely in partnership with either press or radio partners around the promotion of particular shows or essentially using other media to build a sense of event around a programme.
Looking ahead, given what STV has achieved during the last three years, what are your plans now to take the business forward?
To absolutely continue with the strategy, which we’ve outlined, which is all about producing more high quality unique content which we make available across as many platforms as possible, and, in particular, the roll out of STV Local and starting to penetrate those local markets and local communities. That is a long term play, so we expect to be rolling out over the course of the next 12 to 18 months, so it is not a short term reaction, it is a very long term ambition of ours to operate effectively in those markets.
Thank you for speaking to Stockopedia
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