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At a time when Hollywood giants are refocusing their streaming businesses amid signs of slowing profitability, fierce competition and subscriber growth, UK TV giant ITV is looking to take its “more than TV” strategy to a new level with Thursday’s launch. ITVX, its new free, ad-supported streaming service that will replace its ITV hub.
The company’s positioning and promise for the service is that it is “the UK’s newest streaming service”. For example, ITVX will offer “more than 10,000 hours” of content, compared to around 4,000 on the ITV hub so far. It includes a new original every week, starting with the likes of the six-part Cold War drama A spy among friendsand teen drama starring Damian Lewis and Guy Pearce say me everything, and “one of the UK’s largest free film libraries” with 250 movies available at any one time and around 1,000 a year. ITVX will also present highlights of ITV News in the form of bite-sized news updates and top stories of the day, a live section offering livestreams of ITV’s broadcast channels and themed FAST channels. All this is designed to increase engagement by making ITVX more of a destination and place to discover.
The acceleration of the company’s push into streaming is designed to increase its monthly average users, its UK subscribers, its streaming hours and its digital revenue to £750 million ($915 million) by 2026, management said. Getting “more eyeballs” for its streaming services, thanks to originals debuting on ITVX, and its content is a key part of the formula for overall success. Therefore attracting viewers outside of ITV’s traditional audience, for example by offering anime-like programming on ITVX.
Analysts called ITVX a “step-change” for ITVX and its streaming ambitions, but also noted the need to increase upfront investment, which will impact earnings, at least in the near term. For example, ITV has said that its streaming originals will mean an additional investment of £160 million ($195 million) in 2023, which is seen as the peak year for its ITVX investment. Some observers also wonder whether ITVX could eat into ITV’s traditional TV business more than management expects.
“ITVX will represent the most significant change to ITV’s offering since the arrival of digital,” JP Morgan analyst Daniel Kerwen, who has an “overweight” rating on ITV’s stock, highlighted in a Nov. 3 report, in which he spoke of the new streamer. “Expanded content offerings, improved user experience and better monetization.”
The bullish expert continued: “It will significantly expand ITV’s content offering and improve the user experience. This should increase consumption and more importantly improve ITV’s ad inventory mix.” Curwen has also said that “ITVX is the future of ITV” and, in a word, called it an “exceptional opportunity”.
But ITV’s stock has fallen more than 30 percent this year and remains under pressure amid financial concerns and related advertising revenue impacts, as well as concerns from other analysts and investors about original content and further investment for ITVX.
Others are focusing their attention on whether ITVX can take away viewership from traditional TV. ITV management, led by CEO Caroline McCall, has indicated that it expects a strong streaming push to boost its overall business, saying that some people will watch shows on streamers when they are released, while others may catch them later when all the episodes have aired. will be available. Online. With so much great TV programming available on so many platforms these days, “you have to fight harder” to get people to watch your channels and services, ITV managing director, media and entertainment Kevin Lygo said this summer. Overall, “more people will watch” the ITV program thanks to ITVX, he vowed. “We’ll get more eyeballs.”
But even when ITV unveiled a more aggressive push into streaming in early March, analysts had mixed reactions.
“X marks the place to buy,” headlined a report by Bernstein’s Matti Littunen a few days later, in which he upgraded ITV shares from “market perform” to “outperform”. “Investor reaction to ITV’s new streaming platform ITVX and its accompanying investment plan has been brutal, with the stock down 33 percent since the announcement,” he highlighted. “We think the steep margin reset is now waiting to see how bad (things) will be otherwise.”
The Bernstein expert also expressed optimism about ITV’s chances of hitting its streaming subscriber target. Analysts aim to double subscribers by 2026, meaning an increase from 1.2 million in 2021 to around 700,000 Britbox and 500,000 ITV Hub+ subs, to 2.4 million. “As a bear, we think the subscriber growth target is the most difficult of the ITVX growth targets, but think adding 1.2 million subscribers by 2026 is possible due to broad distribution, bundling effects and demographic tailwinds,” Littunen wrote.
In contrast, Barclays analyst Julian Roach downgraded ITV’s stock from “overweight” to “equal weight” in March, noting, among other things, the costs of streaming ambitions. “ITV unexpectedly announced that they will move to phase 2 of digital acceleration, beyond their TV strategy,” he wrote in a report at the time. “This comes with significant upfront investments.”
Other observers worry about the potential impact of growing streaming viewership on ITV’s traditional core network business. “We believe (ITVX) will be a step change for ITV’s online engagement, however, we believe ITV may be underestimating the potential cannibalization of its linear,” Anders Analysis analysts Tom Harrington and Gill Hinde argued in a Nov. 9 report. .
“It’s refreshing to see ITV publicly address its current streaming service, hub, failings – its clumsiness, dated feel and lack of content – that have been obvious to consumers for years,” Anders analysis duo wrote. “Nothing was done about it sooner due to the decline of linear cannibalism and the relative difficulty in monetizing online audiences. If ever there was a tipping point in Linear’s decline, it’s this: least tech-minded broadcasters pushing hard into streaming.
On the subject of monetization, Anders Duo mentioned that ITV “flipped-flopped on the question of ad load for ITVX,” first saying it would be equivalent to the ITV Hub (0-7 minutes per hour), but “now saying It will be lower, likely incentivized by Netflix offering four to five minutes to its ad-level users.” His takeaway: “It’s all less than linear, typically between seven and 12 minutes on ITV’s main channel.”
Experts are keen to see how ITV’s future focus will evolve between a free, advertising-funded version of ITVX and an ad-free premium version, which will include the company’s Britbox streaming service and cost the same as Britbox. £5.99 ($7.34) per month.
“We would not be surprised to see changes to the ad load, windowing and ITV puts on the subscription component – which includes remnants of Britbox, other licensed content and ad-free – about which ITV has been surprisingly quiet,” Anders’ team said in its report. .
Analysts will certainly be keeping a close eye on ITVX’s success and how that plays into ITV’s broader business trends.
Credit Suisse’s Matthew Walker outlined a “grey sky scenario” for ITV’s stock in a Nov. 4 report, including a 15 percent decline in total advertising revenue in 2023. In comparison, their “blue sky scenario” assumes “a compound growth rate of 2 percent in total advertising revenue from 2022 to 2027, driven by success for ITVX in driving digital advertising.” This also means that AVOD competitors do not take a significant share of broadcast TV budgets.
Predicted Walker: “By providing a large volume of targeted advertising inventory, ITVX should lead the company to its targets of doubling its digital revenue to over £750 million, doubling SVOD subscribers and doubling monthly active users.”
Some analysts wonder if potential deals could materialize before ITV can match its actual performance to these targets. Curwen recently noted: “ITV (ITV) is exploring strategic options for the studio, and we see a risk that a bidder may emerge before it has a chance to deliver for ITV (as a whole) to take advantage of its depressed valuation and strong dollar. . His strategy.”
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