It’s a hit, but Love Island shows the weakness of ITV

Inside Business: Will a double dose of the reality show turn around the broadcaster’s fortunes?

Love Island is a hit among the 16- to 34-year-olds that advertisers covet (Rex)

Love Island has sure helped to fuel a lust for ITV shares. For a day, at least, the company was among the stock market’s hottest contestants, the one investors wanted to couple up with, aided by the announcement that we’re about to be treated to a double dose of the smash-hit reality show next year.

Smart move. It highlights the the company’s key strength. It still has the capability to deliver mass audiences to advertisers in a way that’s almost unique. Love Island is beloved by the much coveted 16- to 34-year-old demographic that is usually in thrall to Netflix and YouTube. There’s nothing currently about that rivals the show’s popularity among its members.

But Love Island also highlights the company’s weakness. Without it, where would ITV be? OK, that’s a little unfair. There’s more to the company than just its most high-profile show.

The main reason for the company’s shares taking flight was, in fact, because its results weren’t anything like as bad as the City had feared, and the company’s guidance had prepped it for.

But despite Love Island and other hit shows, ad revenues were still down by 5 per cent, ditto overall revenues, off by 7 per cent.

The latter was in part because the money that its content producer ITV Studios brings in comes in fits and starts. There’ll be a lot more of it in the second half this year.

The ads were partly down because of the UK’s awful political situation, but ITV still faces the long-term problem of them shifting online, taking its biggest revenue stream with them. It’s a process that looks set to carry on even if the broadcaster continues to find hits such as the aforementioned reality show or Bodyguard, or its other winning properties.

To be fair, CEO Carolyn McCall has been actively pursuing ways to address the issue and ITV Digital’s offerings have done well on her watch. It delivered an 18 per cent rise in turnover this time around.

There’s also the forthcoming BritBox streaming venture, in partnership with the BBC.

It’s already in the US, where it has been doing well. ITV is now putting a great deal of effort into launching it on this side of the pond.

But there are questions. The £5.99 monthly price tag is competitive (although the initially rumoured £5 might have ultimately delivered still more subscribers), and it is marketing distinctively British content.

But it will, at least at first, be reliant on back catalogue, at a time when its partner is looking to extend the free iPlayer window to a year.

The latter’s stake is only 10 per cent, with an option to raise it. That looks like a less than wholehearted commitment that could easily be jettisoned.

Netflix has become a juggernaut through investing billions in new content – as much as $15bn a year. Britbox is getting £65m over two (although that’s net of forecast subscriptions), and there’ll be no standalone shows at launch. Does it have enough to secure a niche as an additional extra, a second streaming subscription, which is the pitch, amid an increasingly crowded field? It’s worthy of note that Netflix is finding resistance from consumers to its price rises. They only have so much to spend.

ITV is at a pivotal point in its history. If Britbox can help prove the doubters wrong, the City will show its passion for the company again. The questions about the dividend will die down. There won’t even be much fuss about McCall getting an Ant and Dec-style pay cheque.

If not? Do you think there’s enough appetite for three Love Island runs a year? Four?