Strategic Priority 3:
Our Online, Pay & Interactive business is rapidly growing and profitable.”
Build a global pay and distribution business
As digital media and consumer behaviour continue to evolve, our ability to create and distribute high-value content in new and efficient ways is of increasing significance. ITV is continually exploring and experimenting with new ways to distribute our content to broadcasters and platform owners, both free and pay, while also seeking new opportunities to extend the reach of our content for the consumer.
Changes in technology and the growing base of connected devices are driving rapid growth in audiences’ appetite for VOD and in turn fuelling demand from advertisers for VOD inventory. ITV as a creator and owner of content, particularly sought after drama and entertainment content, is well placed to exploit this growing customer base.
Our Online business has grown rapidly over the last few years and is contributing meaningful revenue to the Group. In November we successfully launched the ITV Hub to replace ITV Player and ITV.com across mobile, PC and connected TV, through which audiences can access ITV content on different devices, live or on demand. This is a major step forward in the quality, innovation and ease of use of ITV’s online services. The biggest change is that live content is now central to the ITV Hub and live simulcast viewing is becoming increasingly popular particularly around sporting events and large entertainment shows, as viewers are using their connected devices as a television set. Simulcast viewing now represents about 30% of viewing on the platforms on which it is available.
To drive growth in our online audiences and online advertising revenues we have also been working to increase the distribution of the ITV Hub which is now available on 27 platforms, most recently launching on Amazon Fire, YouView Sony and Freeview Play. Long-form video requests continue to grow strongly up 14% in 2015, driven by mobile and connected televisions. Online consumption, which is the measure of how long viewers are spending online, has also increased by 42% reflecting the quality of ITV’s content and the improved viewing experience of the ITV Hub.
To date there have been 21 million downloads of our app and to further increase usage we will continually extend and enhance the ITV Hub with improvements in technology and new content, such as premieres, box sets and short-form content.
Overall the new service has been very well received by both audiences and advertisers, with consumption growing strongly since launch, particularly for live viewing where our audiences enjoy the new ‘live swipe’ feature on smartphones and tablets and the ITV Hub’s improved streaming quality.
Additionally, we are working to maximise the value of our digital data. We have introduced new digital advertising features like AdSync+ as well as dynamically- served advertising on ITV’s live simulcast channels on PC and Apple platforms. With 13 million registered users of the ITV Hub, we are not only able to understand and engage with our audiences better but we are also developing more targeted advertising online in 2016.
Talpa Connect Since 2014:
ITV earns revenue from pay television through licensing our channels and content. 2015 pay revenue grew by 38% as we continued to develop our services across multiple platforms.
Our pay business in the UK includes deals with Sky and Virgin for our HD channels and catch-up VOD, an advertising free subscription version of the ITV Hub on iOS and a deal with Sky to make ITV’s content available through its connected platforms including Sky Go and Now TV. In 2014 we launched our first pay channel, ITV Encore, which we are strengthening with more exclusive content including original commissions such as The Frankenstein Chronicles and Houdini & Doyle and critically acclaimed acquired series such as The Americans and Jordskott.
Outside the UK we have established a number of smaller pay propositions including Cirkus, a subscription VOD service that offers the ‘Best of British’ content to international pay platforms which is available in the Nordics and more recently in Iceland. We also distribute ITV Essentials, an online service for expats, and ITV Choice, a general entertainment channel for emerging markets which was recently launched in South Africa.
As we look to increase ITV brand loyalty, we have already increased our exposure to new types of content including short-form and younger focused long-form programming and new types of distribution. We are widening our digital reach by expanding our presence on YouTube to bring new audiences to our programmes. In 2015 we launched 22 new ITV branded channels across a range of our biggest programme brands. We saw usage increase over 400% across the year on the ITV branded channels to deliver over 160million views, the equivalent of over 8 million hours of viewing.
Talpa has a very strong digital presence internationally across its range of formats. Since 2014 it has developed 10 successful connected live formats including The Voice, The Voice Kids and Dance Dance Dance, in 40 countries, with 90 apps/sites and 100 YouTube channels, in total delivering over 12 billion views.
We have made investments in the digital arena as we look to develop our expertise in monetising online audiences. These include: Believe Entertainment Group, a producer of digital-branded short-form entertainment; Zealot, a digital content multi-platform network; Indigenous Media, a producer of scripted digital content; and Channel Mum, the first ever online video network dedicated to young mothers.
Looking ahead we will further develop our pay offering both in the UK and internationally exploring opportunities for both pay and online as we seek to monetise our content further. We will look to do this through a mixed economy of organic growth, partnerships and acquisitions. We will also increasingly look for opportunities to ‘window’ our content across our free channels, pay channels and the ITV Hub to derive maximum value for audiences, platforms and advertisers.
In 2015 Global Entertainment, the distribution arm of ITV Studios, delivered revenue growth of 9% to £157 million (2014: £144 million) as we have continued to drive value from the investment we have made in creating and owning the rights to quality content with international appeal.
Our distribution business has a substantial archive of over 40,000 hours of television and film content that we distribute to broadcasters and platform owners around the world. In 2015 we have continued to enhance our distribution network, benefitting from our increased rights ownership and strong network relationships as ITV Studios has grown in scale.
We have a strong and balanced portfolio of scripted and unscripted programmes and formats, both new and returning. We continuously strengthen this using ITV’s strong cash flow to create and fund new content and acquire third-party rights. ITV Studios creates new programmes in the key genres of drama, entertainment and factual entertainment.
Our scripted content has sold well internationally with programmes such as Poldark, Aquarius, Texas Rising, Endeavour, Jekyll & Hyde and Mr Selfridge all selling to over 100 countries. Our entertainment and factual entertainment content also continues to sell well with programmes such as Come Dine With Me, The Voice, The Voice Kids, I Love My Country, The Chase, I’m A Celebrity... Get Me Out Of Here! and the Price of Beauty.
During the year we have also signed a number of new multi-year and multi- territory deals including a seven year deal for Coronation Street with CBC in Canada. In early 2016 we agreed a multi series and territory deal for Thunderbirds Are Go! with Amazon covering the US and India for first run and UK and Germany for second run. We are now starting to benefit from merchandising around Thunderbirds Are Go! as we look to extend the franchise beyond the television set.
Global Entertainment also invests in the funding of scripted content with international appeal. ITV has invested around £160 million in the year, up £60 million, in scripted programmes such as Texas Rising, Aquarius and The Good Witch, two of which have been recommissioned and they are selling well internationally.
Our scripted content has sold well internationally with programmes such as Poldark, Aquarius, Texas Rising, Endeavour and Mr Selfridge all selling to over 100 countries.”
In addition to distributing ITV’s own content, we have also acquired the third-party distribution rights to a number of international shows including Schitt’s Creek from Canada and Nordic thriller Jordskott.
Reality dating show Love Island generated significant activity on the ITV Hub with 11 million requests on ad-funded platforms across the series. It was the first ITV programme to generate two million views in a week.
Looking ahead we expect to deliver double-digit growth in our Online, Pay & Interactive revenues as we further develop our ability to distribute and sell our content. We will continue to invest to enhance the ITV Hub and through a mixed economy of organic growth, partnerships and acquisitions, we will develop our pay and online services and channels and explore new ways to package and sell our content to take advantage of demand for quality content in the UK and internationally from consumers, broadcasters and platform owners.
Lastly, we are also continuing to drive the debate around the implementation of retransmission fees in the UK to ensure that we are fairly compensated for our investment in content for the ITV main channel when it is carried on pay TV platforms.