ITV is to launch a revamped streaming service in its latest bid to retain viewers, although an associated cost increase has heightened concerns over the threat deep-pocketed US rivals pose to the UK broadcaster.
Shares of media group FTSE 100 fell 14% on Thursday as a drop in viewership and a dip in earnings outlook overshadowed a rebound in annual revenue and plans for its “ITVX” platform.
Along with the results and strategy update, ITV said it would stop selling adapted versions of shows, including I’m a celebrity get me out of here to customers in Russia. In addition, the London-based company said it had asked broadcasters across the country to stop airing programs they had already ordered from ITV, although it could not confirm whether they would.
ITVX, which chief executive Carolyn McCall said would help “boost” the company’s streaming offering, will replace its existing national online services, ITV Hub and ITV Hub+. Viewers will have the choice to stream for free or pay for an ad-free premium offering.
As part of the reshuffle, analysts said Britbox, a joint venture with the BBC, would become less significant. ITV revealed in its earnings statement that the BBC had sold its 10% stake in the project.
The Britbox brand will remain in the UK, but within ITVX and not as a standalone app. It will remain a separate platform in other markets.
ITV said it plans to invest £1.23billion in programs this year – more than its previous forecast of £1.16billion – and £1.35billion next year. The Prime Ministers are to be shown on ITVX as part of a new ‘digital-first’ content strategy.
The company has also defined a range of data and technology costs, as well as expenses associated with setting up ITVX.
McCall said ITV was making the investments from a “position of financial and creative strength”. The company has set a target of at least doubling its digital revenue to £750m by 2026.
The chief executive, who joined easyJet four years ago, has had some success pushing digital and also expanding his production arm, ITV Studios, which makes shows for other broadcasters around the world, including Course of action. She said Thursday’s plans mark the second phase of her “More Than TV” strategy.
However, the update brought long-standing investor concerns back to the fore about ITV’s ability to stop viewers switching to pay-TV and online rivals.
Britain’s biggest free-to-air commercial broadcaster said viewers watched 15.1 billion hours on ITV Hub as well as its linear channels last year – a 9% drop from 2020, when Lockdown restrictions have encouraged more consumers to binge on TV.
“They’re spending more because they’re losing eyeballs,” said Berenberg analyst Sarah Simon. “You have Netflix, Amazon, Peacock, Discovery+, Facebook Watch, YouTube – there’s so much [competition].”
Due to rising costs, the consensus operating profit forecast for next year is expected to drop from £800million to £550million, she said.
Despite falling viewership, a rebound in advertising from the depths of the pandemic and sales of content to other broadcasters helped ITV’s annual revenue rise from £2.78billion to a record of £3.45 billion.
Pre-tax profits rose from £325m to £480m and the board proposed a final dividend of £3.3 per share.