At a time when the Hollywood giants are refocusing on their streaming businesses amid growing profits, fierce competition and signs of slowing subscriber growth, the giant British TV giant ITV is looking to take its ‘beyond TV’ strategy to the next level with Thursday’s launch of ITVX, a new ad-supported, free streaming service that will replace the ITV Hub. .
The company’s positioning and promise for the service is to make it “the UK’s newest streaming service”. For example, ITVX will deliver “10,000+ hours” of content, compared with about 4,000 on ITV Hub so far. That includes new originals every week, starting with the six-part Cold War dramas A spy among friendsstarring Damian Lewis and Guy Pearce, and teen film Tell I Everything. ITVX will also feature ITV News highlights in the form of minor news updates and key stories of the day, a live section offering live broadcasts of ITV and FAST channels. Themed. All of this is designed to drive engagement by making ITVX a destination and a place to explore.
Management says the company’s accelerated streaming push is designed to double average monthly users, UK subscribers, streaming hours and technical revenue the company’s numbers to £750 million ($915 million) by 2026. Get “more eyeballs” for its streaming services thanks to originals launching on ITVX and its content in general is an important part of the formula for success. So it’s about attracting viewers beyond ITV’s traditional audience, for example, by offering shows like anime on ITVX.
Analysts have called ITVX “a step change” for ITV and its streaming ambitions, but also noted the need to increase upfront investment, which will affect earnings at least next time. For example, ITV says its streaming originals will mean an additional £160 million ($195 million) in investment by 2023, which is seen as the peak year for their ITVX investment. . Some observers also wondered if ITVX could be more ingrained in ITV’s traditional television business than management expected.
“ITVX will represent the most significant shift in ITV service since the advent of digital,” said JP Morgan analyst Daniel Kerven, who has an “overweight” rating on ITV shares. , highlighted in a November 3 report in which he introduced the new streamer. “enhanced content offering, improved user experience, and better monetization.”
The optimist continued: “It will greatly expand ITV’s content offering and will improve the user experience. It will drive increased consumption and more importantly, it will improve ITV’s inventory mix.” Kerven has also said that “ITVX is the future of ITV” and, in a play on words, called it a “special opportunity”.
But shares of ITV are down more than 30% this year and remain under pressure amid concerns about the economy and impacts related to advertising revenue, as well as concerns among analysts and analysts. other investment on increasing investment in original content and more for ITVX.
Others are focusing their attention on whether ITVX can take away viewership on traditional TV. ITV management, led by CEO Carolyn McCall, has signaled that it hopes the push to stream will boost its overall business, saying some people will watch the shows. on streamers as they’re released, while others can watch them once all episodes are available Online. Today, with so many great TV shows available on multiple platforms, “you have to fight harder” to get people to watch your channels and services, executives, media and ITV entertainment Kevin Lygo said this summer. Overall, “more people will watch” ITV shows thanks to ITVX, he claimed. “We will have more eyeballs.”
But even when ITV revealed its streaming push in early March, analysts had mixed reactions.
“X marks a buy position,” was the headline of a report by Bernstein’s Matti Littunen a few days later, in which he upgraded ITV stock from “doing well in the market” to “doing well.” than”. Investor reaction to ITV’s new streaming platform ITVX and the investment plan that comes with it has been brutal, with the stock down 33% since its announcement. “We think a steep reset now beats waiting to see how (things) turn out.”
Bernstein also expressed optimism about ITV’s chances of hitting its streaming subscriber target. Analysts aim to double the number of subscribers by 2026, which means growing from 1.2 million in 2021, including around 700,000 BritBox and 500,000 ITV Hub+ to 2.4 million. Littunen wrote: “Like the bears, we think the subscriber growth target is the most difficult to achieve among the ITVX growth goals, but we think the 1.2 million increase is the most difficult to achieve. 2026 subscribers is possible thanks to wider distribution, package effects, and demographic factors.”
By contrast, Barclays analyst Julien Roch downgraded ITV’s stock in March from “overweight” to “balanced,” noting, among other things, the cost of its streaming ambitions. “ITV suddenly announced that it would be moving into Phase 2 of its strategy not just for TV, which is digital acceleration,” he wrote in a later report. “This comes with substantial upfront investments.”
Other observers worry about the potential impact of increased streaming viewership on ITV’s traditional core network business. “We are confident that (ITVX) will be a step change for ITV online engagement, however, we believe that ITV may be underestimating linearity’s cannibalistic potential.” Enders Analysis’s Tom Harrington and Gill Hind argued in a Nov. 9 report.
“It is refreshing to see ITV openly talk about its current streaming service, Hub, pointing out the flaws – frills, outdated feel, and lack of content – that consumers have seen clearly in the past few years. many years,” wrote the Enders Analysis duo. “The fact that nothing was done earlier was clearly due to linear cannibalism minimization and the relative difficulty of monetizing online audiences. If there’s ever been any sign of a tipping point in the decline of linearity, it’s this: the least tech-minded broadcaster is ramping up streaming.”
On the topic of monetization, the Enders duo mentioned that ITV “unmasked the question of ad loading for ITVX,” first saying it would be on par with ITV Hub (0-7 minutes per hour), but “ now says it will be lower, likely driven by Netflix giving users 4 to 5 minute ad levels.” Their takeaway: “It’s all less than linear, on the main ITV channel it’s usually 7 to 12 minutes in length.”
Experts are curious to see how ITV’s future focus will evolve between a free, ad-sponsored version of ITVX, and an ad-free premium version, which will include a streaming service. The company’s BritBox and will, like BritBox, cost £5.99 ($7.34) a month.
“We wouldn’t be surprised to see changes around ad loading, windows, and the emphasis ITV places on the subscription component — including the rest of Britbox, other licensed content, and no content. advertising — which ITV was unsurprisingly silent about,” the Enders team said in their report.
Analysts will no doubt be keeping a close eye on ITVX’s success and how it contributes to ITV’s broader business trends.
Credit Suisse’s Matthew Walker in a November 4 report outlined a “gray sky scenario” for ITV stock, including a 15% drop in total advertising revenue in 2023 “assuming there is a a severe recession” and other business impacts. For comparison, our “Blue Sky Scenario” assumes “a compound annual growth rate of 2% in total ad revenue between 2022 and 2027, driven by ITVX’s success in driving digital advertising. This also implies that AVOD competitors do not account for a significant portion of TV broadcast budgets.”
Walker predicts: “By providing a larger volume of targeted inventory, ITVX will propel the company towards its goal of doubling digital revenue to more than £750 million, doubling it SVOD subscribers and doubled monthly active users.”
However, some analysts wonder if potential deals could materialize before ITV can compare its actual performance with these targets. Kerven recently noted: “ITV is said to be exploring strategic options for (ITV) Studios, and we see a risk that a bidder will appear for ITV (overall) to take advantage of the valuation. low prices and a strong dollar before it had a chance to execute its strategy.”