Shares fall as...

Investors nervous over cost of ITV streaming plans

ITV has grown through a number of ratings successes

Shares in ITV plummeted by more than a quarter despite chief executive Carolyn McCall describing the broadcaster’s performance as “outstanding” on the back of a number of highly rated series.

Profits and revenue for the year rocketed and Ms Mcall said the company aims to double its digital sales by 2026.

But investors were worried over the costs involved in planned new services as viewers switch to rival networks such as Netflix and Disney. Shares closed 30.43p (27.50%) lower at 81.15p

ITV, which produces Love Island, Dancing on Ice and is soon to deliver the Ipcress Files, posted a 48% rise profit before tax to £480 million for the year to the end of December (2020: £325m) on a 24% rise in revenue to £4 billion.

Total advertising revenue saw a record year and within this video on demand advertising was up 41%.

ITV Studios has enjoyed both ratings and critical success and currently has around 500 programmes in production in the UK and internationally. 

The board proposes a final dividend of 3.3p for the full year 2021, based on two-thirds of a notional full-year dividend of 5p. It intends to pay an ordinary dividend of at least 5p per annum which can grow over time.

Ms McCall said: “ITV delivered an outstanding financial performance in 2021”, adding that further investment will follow in new digital platforms.

“The successful execution of the first phase of our More Than TV strategy puts us in a strong financial and creative position, from which to launch the next phase – ITV’s Digital Acceleration, to supercharge our streaming business,” she said.

“With the success of ITV Hub, ITV Hub+, Planet V and BritBox we see an exciting opportunity to at least double our digital revenues to £750m by 2026.”

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At its heart will be ITVX – the first integrated AVOD/SVOD streaming platform in the UK.  It will be a seamless viewer experience with a digital first content and windowing strategy and significant content investment providing weekly premieres and over 15,000 hours of content at launch. 

This will enable ITV to double streaming viewing, double monthly active users, double subscribers and deliver valuable addressable advertising inventory at scale.

Market reaction

Russ Mould, investment director at AJ Bell, said: “Just as the BBC has shaped iPlayer into a must-watch streaming service and often the first place that people now go to watch its content, ITV is to reshape its digital services in a bid to capture a greater share of the highly competitive streaming world.

“ITVX is not as revolutionary as the company might like you to believe. It is effectively offering viewers a chance to see some of its programmes before they are broadcast on linear TV as well as its back catalogue of shows.

“The first-watch opportunity and the option to pay for a premium service without adverts are the key differentiators, otherwise it is just a rebooted version of the existing ITV Hub.

“Traditional broadcasters are embracing the digital-first strategy as fewer people are sitting down to watch live TV. Viewers are increasingly switching on Netflix or Disney+ first and media groups like ITV need to find a way to make sure their brand also stays front of mind when someone is looking to put their feet up and choose something to watch.

“ITV is hedging its bets when it comes to revenue. YouTube and Spotify have both shown that consumers are happy to pay a subscription to avoid advertising so ITV appears confident that it will enjoy a decent amount of recurring revenue from monthly fees for those who take the premium version of ITVX.

“Equally it might be happy with people watching the free version if there are enough eyeballs to generate a decent advertising income.

“Ultimately the proposition will only be as successful as its content, and here’s where ITV might have to dig deep to compete against the ever-growing number of rival streaming platforms. Yes, it has some classics, but will the lure of endless Carry On films be enough to get people to keep watching ITVX?”

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