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Will new Ofcom recommendations help the ITV share price long-term?

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This morning, the UK media regulator Ofcom published its initial proposals from its “Small Screen: Big Debate” consultation paper. The agency has been looking into the future of public service broadcasters (PSB) in the age of streaming media. Unsurprisingly it thinks PSBs are not holding up well. Personally, I don’t think the recommendations are enough to help the ITV (LSE: ITV) share price long term.

I believe artificial support of a failing business is bad for everyone, and never enough to keep it going forever. I seriously doubt these proposals will support the ITV share price for long, unless the company can truly adapt.

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The Ofcom proposal

Ofcom has in effect suggested rather protectionist policies. It has suggested, among other things, changing its “must offer, must carry” rules for TV manufacturers. In essence this would force smart TVs to have in prominent place, the digital services provided by traditional TV channels.

Ofcom also recommended providing similar facilities for less mainstream PSBs, such as local news stations. Its argument, of course, is that traditional television is “unlikely to survive” in an era of digital streaming. This is one aspect of the report I do agree with.

According to Ofcom, while traditional PSBs account for two-thirds of viewing hours, in the 16–34 age bracket it is as little as 38%. Again this is no surprise — the younger generation always take on board new technologies first.

Despite what should be a positive proposal for ITV, however, its share price is only up about 1% today. Perhaps the market feels as I do, that trying to artificially support a dying industry is doomed to failure.

Can it help the ITV share price at all?

Personally I have a few problems with the proposal. Firstly, considering ITV as a public service channel seems a somewhat grey area to me. It is a publicly listed company that makes most of its money through advertising. Arguably the BBC should get support, but not a commercial entity.

As any free market economist will tell you, the public benefits when good businesses adapt, or poor businesses fail. ITV should step up its game if it wants to survive.

This is not that unreasonable a proposition. Some ITV shows have the highest ratings, and advertising revenue, in the UK. Better yet, these same shows appeal to the younger demographic that is most turning to digital. Shows like Love Island, I’m a Celebrity, and the X-Factor prove that ITV not only competes, but can win.

Unfortunately for ITV and its share price, lockdown has seen most of these shows suspended this year. Meanwhile, the continuing growth of streaming and the import of big US hits, is taking its toll.

Ofcom rightly cites the “deep pockets” services such as Netflix and Amazon have. Meanwhile, the combined efforts of ITV and the BBC in its new BritBox service to me seem far too little, far too late. If you could only have BritBox or Netflix, which would you choose?

Ofcom is aiming to give its full recommendations to the government in June. Personally, I think it will take more than this to really help the ITV share price in the long run. I am not sure the company is quite up to the task.

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Karl has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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