Leila Abboud is a Bloomberg Gadfly columnist covering technology. She previously worked for Reuters and the Wall Street Journal.

Investors' four-year love affair with ITV, Britain's biggest commercial broadcaster, looks to be ending.

End of the Affair?
ITV shares surged under Chairman Archie Norman
Source: Bloomberg data

Concerns the company will have to spend more on developing shows to replace hits like Downton Abbey, as well as fading chances of a takeover, mean that the return to earth could be painful.

Since the year began, ITV shares are down 12 percent compared with the European media index's 2.5 percent drop. That's in part because ITV gave a weaker outlook for advertising for the first quarter on Wednesday, although it predicts the European soccer championships will lead to a pick up later this year.

But there are deeper issues that ITV's incoming chairman, veteran producer Peter Bazalgette, will have to grapple with as he takes over from Archie Norman.

Even after a successful diversification into producing TV shows such as crime drama Broadchurch and the X-Factor talent show, ITV still relies on advertising for 50 percent of sales.

With young people watching fewer hours of live television, the value of the medium is only going to fall over time. Bernstein analysts have found that the number of minutes of TV watched in Britain fell nearly by a tenth between 2013 and 2014, a trend explained by the rise of online video streaming services like Netflix and the BBC's iPlayer. ITVs' share of the audience is also shrinking.

Channel Surfing
Year-on-year growth in ITV's audience
Sources: Bloomberg Intelligence / Eurodata TV Worldwide / Auditel / Nielsen Television

The only real question is the pace of the disruption to traditional broadcasters and how fast it hits valuations.

Just look at Viacom: the U.S. television company's price-to-earnings ratio has fallen 45 percent in the past year to about 7 times amid concerns about falling viewership. ITV's trades at about 19.2 times trailing earnings and almost 14 times estimated earnings for 2016, according to Bloomberg data.

ITV Preview?
ITV's valuation remains high versus U.S. peer
Source: Bloomberg

In its defense, ITV does have some weapons to avoid Viacom's pain.

The company is helped by the concentration of the advertising market in Britain. The state-funded BBC doesn't carry advertising, so ITV captures almost 40 percent of the market -- more than Channel 4 and Sky combined. Media buyers who place ads on behalf of companies are forecasting growth of between 4 percent and 7 percent in U.K. TV advertising this year, according to Citigroup.

Spearheaded by CEO Adam Crozier, ITV's strategy in content production is also a smart hedge against the vagaries of advertising.

But it isn't without risks, namely that ITV tries value-destroying acquisitions in a bid to boost revenue from content. After Endemol Shine, ITV is Europe's second-biggest independent producer of content. As the broadcaster tries to snap up more producers, it will face competition from Vincent Bollore's Vivendi as well as Sky and risks overpaying.

Crozier said on Wednesday that ITV isn't a takeover target but is looking to be a consolidator. Often mooted bidders are John Malone's Liberty Global, which owns a 9.9 percent stake in ITV, or U.S. cable group Comcast. A takeover, especially by the heavily indebted Liberty, seems less likely in today's tightening debt markets, and Comcast denied any interest in December.

Crozier is probably right -- but that won't cheer ITV investors.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Leila Abboud in Paris at labboud@bloomberg.net

To contact the editor responsible for this story:
Edward Evans at eevans3@bloomberg.net