This week marks the second anniversary of ITVX, but celebrations have been somewhat overshadowed by reports of ITV looking to sell parts or all of its business. A number of suitors are said to have emerged, including CVC Capital Partners, Mediawan and All3Media, though ITV has yet to comment on the discussions.
The news sent ITV’s share price up 14 percent at the end of November, giving a boost to the UK broadcaster which has lost half its stock market value over the last five years. But questions remain over whether a sale would benefit the long-term sustainability of the business or merely the short-term interests of shareholders.
Focusing on streaming
Though the details of the plans are still under wraps, Mediawan and RedBird Capital-owned All3Media are reportedly looking specifically at ITV Studios, the broadcaster’s production arm. But ITV has become increasingly reliant on the growing Studios business, making up just over half of total group revenues last year. Meanwhile ITV’s ad sales are in decline, and were overtaken by Studios revenues in 2022.
“The drawback of advertising is that it’s cyclical, which is why ITV has built its Studios business to compensate,” comments Tim Westcott, Practice Lead, Digital Content & Channels at Omdia. “While we don’t know officially exactly what the plan is for ITV, a sell-off of ITV Studios looks like a short-sighted move which would kill off ITV’s long-term strategy to diversify away from its advertising revenue.”
One potential benefit could be using the proceeds of a sale to further investment in another growing part of its business, the streaming division, which ITV has positioned at the core of its strategy. Streaming now accounts for almost 25 percent of ITV’s ad sales, and the company plans to double its digital revenue to at least £750 million by 2026. Selling ITV Studios could then help the commercial broadcaster accelerate its “More Than TV” strategy.
Breaking up the content pipeline
On the other hand, the ongoing success of ITVX will require a steady flow of content, which ITV Studios currently provides. According to Ampere Analysis, ITV represents around 30-40 percent of ITV Studios’ commissions. “A sale would need to ensure that the network and streaming service have an available pipeline of key content,” notes Matt Trickett, Head of Media at Ampere.
However, there are signs that ITV Studios is looking to diversify its client base, and has found success in selling formats such as Love Island in international markets. The studio has also launched more than 15 free ad-supported streaming TV (FAST) channels globally, including dedicated channels for The Voice and Hell’s Kitchen.
But while ITV relies on the studio division for content, Ampere’s Matt Trickett argues that ITV Studios also needs its broadcaster. ITV accounted for around 20 percent of total UK broadcaster viewing in October, according to figures from Barb, and the linear channels provide ITV Studios a launchpad for its shows to take off in other markets.
Selling ITV Studios would therefore mark a “significant departure” from the broadcaster’s strategy, according to Trickett. “Given its integrated strategy through which production, broadcast and streaming capabilities provide support to each other, there are not many obvious immediate benefits to a separation,” he says.
“Through Studios, ITV punches above its weight internationally,” agrees Omdia’s Tim Westcott. “Without it, ITV would just be a declining legacy media asset in a medium-sized, low-growth market.”
