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Strategic Priority 1:

Maximise audience and revenue share from free-to-air broadcast and VOD business

While the media environment in which we operate is constantly changing our Broadcast business remains robust and adaptable. ITV is the biggest marketing platform in the UK and because of the scale of our commercial channels, we reach around 80% of the television owning population every week. We invest over £1 billion in our programme budget, significantly more than our commercial competitors, and have an unrivalled ability to deliver mass audiences across all demographics.

As a result, there continues to be a strong demand for advertising on our family of channels, which generates significant profit and cash to reinvest across ITV. Additionally, as an integrated producer broadcaster, our broadcast channels also provide an important platform to showcase ITV Studios content and give it a proven track record, before exploiting it internationally.

Since 2009 ITV has maintained its leading position as the only commercial broadcaster consistently able to deliver mass audiences to our advertisers. In 2015 ITV delivered 98% of all audiences over five million and 93% of all audiences over three million.

ITV’s unique ability to deliver these mass audiences, as well as more targeted demographics across the family of channels and the ITV Hub, has enabled us to once again grow ITV Family NAR ahead of our estimate of the television advertising market, even though our SOV declined in the year. SOV provides an overall measure of viewing performance, however because advertisers are buying scale and breadth of audience, SOV is not necessarily a direct indicator of advertising performance.

Television remains the most efficient and effective advertising medium for advertisers to achieve mass simultaneous reach. Although television has seen some price inflation over the last few years, the cost of advertising is similar to 2004 levels and compared to many other advertising media it remains good value, especially given the reach and scale that it delivers. As the viewing and advertising landscape continues to fragment, the scale of audience that television, and particularly ITV delivers, becomes increasingly valuable.

% of commercial audiences over three and five million

% of commercial audiences over three and five million

201593% 98%

Advertising inflation 2004–2015

Advertising inflation 2004–2015

ITV is also focused on maximising the value of its airtime and driving new revenue streams through sponsorship, interactivity and branded content. ITV can utilise its core assets of its strong brand and reputation, unique commercial relationships and quality production capability to deliver a wide variety of marketing solutions. To date we have implemented many innovative sponsorship deals including Aunt Bessie’s for I’m A Celebrity… Get Me Out Of Here! and Land Rover and SSE for the Rugby World Cup. We have also produced a number of branded content solutions with our new service ITV AdVentures for Suzuki and National Lottery and we have launched AdSync+, a partnership with RadiumOne to amplify the reach of our television advertising. In 2016 we will also be introducing more targeted advertising.

Although we had many on-screen successes in 2015, ITV Family’s SOV declined by 3% with ITV main channel SOV down 4% and the digital channels SOV down 3%. This performance was a result of the launch of some new free digital channels, a number of our shows not performing as well as we had expected, particularly in the factual genre, and relatively strong competition from the BBC.

However, we enjoyed many real successes in the year – we broadcast the most watched entertainment show in Britain’s Got Talent, the most watched soap in Coronation Street, the most watched drama in Downton Abbey and the most watched sporting event with England vs. Wales during the Rugby World Cup. Our daytime schedule improved, including Good Morning Britain, and we also launched a number of new entertainment shows including Mission Survive, Ninja Warrior UK and You’re Back in the Room, as well as driving significant audiences with our returning brands, I’m A Celebrity… Get Me Out Of Here!, Britain’s Got Talent and The X Factor. Our drama schedule, which included Code of a Killer, Safe House, Downton Abbey, Home Fires, Unforgotten and the second series of Broadchurch, continued to deliver large-scale audiences.

To drive viewing and engagement in our content, we are further developing programme apps which continue to grow in popularity. Our digital engagement has grown significantly in the year, delivering 100 million votes across our big entertainment shows and 40 million paid competition entries.

Looking ahead we have new creative leadership in place and we remain very focused on strengthening our viewing performance in 2016. We believe that around £1 billion is the appropriate programme budget for ITV’s family of channels to ensure we continue to deliver standout content that drives the scale and breadth of audiences that advertisers demand. We have a strong slate of new and returning programmes across the key genres. We have 50 hours more drama, major football and rugby tournaments and will continue to invest in daytime and soaps. Our 2016 schedule includes new programmes such as Victoria, Cold Feet, The Durrells, Maigret, Brief Encounters, Family Guy, American Dad, Drive, Euro 2016 and the Rugby Six Nations and returning programmes Vera, Endeavour, Britain’s Got Talent, X-Factor, I’m A Celebrity... Get Me Out Of Here!, Love Island, Ninja Warrior UK, Long Lost Family, The Chase and the Tour de France.

Family Guy

Family Guy

Launching on ITV2 and the ITV Hub in March 2016.

The market in which we operate is constantly changing but traditional linear television viewing remains resilient despite significant changes in the availability and delivery of content. Broadcaster and other VOD is growing rapidly, but it is a gradual process and still only accounts for 7% of total viewing.

On average viewers watch 216 minutes of television a day, which is a similar level to 2004 of 222 minutes. The majority of television viewing is live, which we estimate to be 81%, as television continues to have the power to bring audiences together. Live event television in particular has demonstrated resilience and a growing relevance as viewers increasingly connect through social media and they continue to deliver very significant audiences. Therefore large sporting events, which also deliver valuable demographics, continue to be an important part of our schedule and as well as the Rugby Six Nations we have also recently secured British horseracing from 2017.

Many consumers, particularly younger viewers, are engaging in an increasing amount of content and entertainment via other platforms such as social media and video games, but television viewing continues to dominate the way people like to be entertained.

Broadcast markets differ internationally. The key European markets are structurally different to the US, driven by the strength of free-to-air television, the level of pay penetration and the cost of pay. Therefore while lessons can be learnt from other countries, there can be no direct read-across.

Three attributes lie at the heart of ITV’s successful Broadcast proposition: it’s first-class distribution and reach across all platforms; owning the rights to high-quality, must have content, for all key audiences; and providing advertisers with creative access to the biggest and most effective marketing platform in the UK.

On 29th February 2016 ITV completed its acquisition of 100% of UTV Ltd, the television assets of UTV plc. This further strengthens ITV’s free-to-air business and enables it to run a more efficient network.

As we continue to invest in our integrated producer broadcast model, our priority is to strengthen our on-screen performance and we have started 2016 well, with ITV SOV up 5% and ITV Family 2%. We are also focused on maintaining the scale of our audiences because as the viewing and advertising landscape continues to fragment, this becomes increasingly valuable to advertisers.

Over the full year we again expect to outperform our estimate of the television advertising market, although the phasing of NAR is expected to be different in 2016, driven by the timing of major sporting events. We expect ITV NAR to be flat in Q1, marginally behind the market, against 12% growth in Q1 last year. Q2, which will benefit from the Euros, should be positive.

The market in which we operate is constantly changing but traditional linear television viewing remains resilient despite significant changes in the availability and delivery of content.”