22 C
Mumbai
Friday, January 27, 2023

How the ad-supported service will change UK TV streaming – The Hollywood Reporter

At a time when the Hollywood giants are refocusing their broadcast businesses amid a rising bull’s-eye on profitability, intense competition and signs of slowing subscriber growth, UK television giant ITV is is looking to take its “more than TV” strategy to a new level with the launch on Thursday of ITVX, its new ad-supported free streaming service that will replace its ITV Hub.

The company’s positioning and promise for the service is for it to be “the UK’s newest streaming service”. For example, ITVX will offer “over 10,000 hours” of content, compared to ITV Hub’s 4,000 so far. That includes new originals every week, starting with six-part Cold War dramas. A spy among friendsstarring Damian Lewis and Guy Pearce, and teen drama Tell Me All, and “one of the UK’s largest free movie libraries” with 250 movies at any given time and around 1,000 available throughout the year. ITVX will also present highlights from ITV News in the form of short news updates and key stories of the day, a live section offering live streams from ITV broadcast channels and thematic FAST channels. All of this is designed to drive engagement by making ITVX more of a destination and a place to discover.

The acceleration of the company’s drive into streaming is designed to double its average monthly users, UK subscribers, streaming hours and digital revenue, to £750 million ($915 million), by 2026, the company said. management. Getting “more looks” for your streaming services, thanks to originals debuting on ITVX, and your content in general is a key part of the formula for success. So is attracting viewers beyond ITV’s traditional audience, for example by offering programming like anime on ITVX.

Analysts have called ITVX “a game changer” for ITV and its broadcasting ambitions, but have also signaled the need for more upfront investment, which will hit earnings at least in the short term. ITV, for example, said that its broadcast originals will mean an incremental investment of £160 million ($195 million) in 2023, which is seen as the peak year for its investment in ITVX. Some observers also wonder if ITVX could affect ITV’s traditional television business more than management expects.

“ITVX will represent the biggest change to ITV’s offering since the advent of digital,” JP Morgan analyst Daniel Kerven, who has an “overweight” rating on ITV shares, noted in a November 3 report, in which he promoted the new streamer. “expanded content offering, improved user experience, and better monetization.”

The pundit optimist continued: “It will significantly expand ITV’s content offering and improve the user experience. It should drive higher consumption and, more importantly, it will improve ITV’s ad inventory mix.” Kerven has also said that “ITVX is the future of ITV” and, in a play on words, has called it a “rare opportunity”.

But ITV shares have fallen more than 30 per cent this year and have remained under pressure amid economic concerns and the impacts on related ad revenue, as well as concerns from other analysts and investors about increased investment in original content and more for ITVX.

Others focus their attention on whether ITVX could take audience away from traditional television. ITV management, led by chief executive Carolyn McCall, has signaled that it hopes the intensified broadcast push will boost its overall business, saying some people will watch shows on the transmitter when they are released, while others can watch them later when all episodes are available. online. With so much great TV programming available on so many platforms these days, “you have to fight harder and harder” to get people to watch your channels and services, ITV director general of media and entertainment Kevin Lygo said this summer. Overall, “more people will watch” ITV shows thanks to ITVX, he promised. “We will get more eyeballs.”

But even when ITV unveiled the most aggressive push towards streaming in early March, analysts had mixed reactions.

“X marks the place to buy”, was the headline of a report by Bernstein’s Matti Littunen a few days later, in which he upgraded ITV shares from “market performance” to “outperformance”. “Investor reaction to ITV’s new broadcasting platform, ITVX, and the accompanying investment plan has been brutal, with shares down 33 percent since the announcement,” he noted. “We think a steep margin reset now is better than waiting to see how bad (things) would get otherwise.”

The Bernstein pundit also expressed optimism about ITV’s chances of reaching its target broadcast subscribers. Analysts considered the target of doubling subscribers by 2026 to mean going from 1.2 million in 2021, consisting of roughly 700,000 BritBox subscribers and 500,000 ITV Hub+ subscribers, to 2.4 million. “Like the bears, we believe the subscriber growth target is the most difficult of ITVX’s growth targets to meet, but we believe adding 1.2 million subscribers by 2026 is possible thanks to broader distribution, clustering effects and demographic tailwinds,” Littunen wrote.

By contrast, Barclays analyst Julien Roch downgraded ITV shares in March from “overweight” to “equal weight”, noting, among other things, the cost of broadcast ambitions. “ITV unexpectedly announced that they would move to Phase 2 of their more-than-TV strategy, digital acceleration,” he wrote in a report at the time. “This comes with significant upfront investments.”

Other observers worry about the potential impact of increased broadcast audiences on ITV’s traditional core network business. “We are confident that (ITVX) will be a game changer for ITV’s online engagement, however we believe that ITV may be underestimating its potential cannibalization of linear,” Enders Analysis analysts Tom Harrington and Gill Hind argued in a report. of November 9.

“It has been refreshing to see ITV speak publicly about its current streaming service, the Hub, pointing out the flaws – its clunkiness, dated feel and lack of content – ​​that have been obvious to consumers for years,” the Enders duo wrote. Analysis. “That nothing was done about it before was clearly due to the mitigation of linear cannibalization and the relative difficulty of monetizing online audiences. If ever there was a sign of a tipping point in the decline of linear broadcasting, it’s this: the least tech-savvy broadcaster pushing hard into broadcasting.”

On the subject of monetisation, the Enders duo mentioned that ITV “has changed the ad-loading thing for ITVX”, first saying it would be on a par with ITV Hub (0-7 minutes per hour), but “now saying it would be lower, potentially driven by Netflix’s offer to its ad-level users of four to five minutes.” His conclusion: “It’s all less than linear, which on the main ITV channel is generally between seven and 12 minutes. “.

Insiders are curious to see how ITV’s future focus will play out between the ad-supported free version of ITVX and an ad-free premium version, which will include the company’s BritBox streaming service and, like BritBox, will cost £5.99 ($7.34) per month.

“We wouldn’t be surprised to see changes to ad load, windows and ITV’s emphasis on the subscription component, which includes the remnants of Britbox, other licensed content and is ad-free, which ITV is not surprising about.” . Enders’ team said in its report.

Analysts will surely be closely watching the success of ITVX and how it relates to ITV’s broader business trends.

Credit Suisse’s Matthew Walker in a 4 November report described a “grey sky scenario” for ITV shares, including a 15 per cent drop in total ad revenue by 2023 “assuming a severe recession”. and other business impacts. By comparison, their “Our “blue sky scenario” assumes “a 2 per cent compound annual growth rate in total ad revenue from 2022 to 2027, driven by ITVX’s success in promoting digital advertising. This also implies that AVOD’s competitors do not obtain a significant part of broadcast television budgets”.

Walker predicted: “By providing increased volumes of targeted advertising inventory, ITVX should propel the company towards its goals of doubling digital revenue to over £750m, doubling SVOD subscribers and doubling monthly active users.”

However, some analysts wonder if the potential deals could materialize before ITV can compare its actual performance against these targets. Kerven recently noted: “ITV is reportedly exploring strategic options for (ITV) Studios, and we see the risk of a bidder emerging for ITV (in general) to take advantage of its depressed valuation and dollar strength before it has the chance to fulfill. your strategy.”

Related Articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest Articles