ITV, BBC to Bring BritBox Streaming Service to U.K.

Carolyn McCall Chief Executive Officer easyJet Airline - Getty - H 2018
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ITV in its full-year earnings report said its advertising revenue rose 1 percent despite the "uncertain economic and political environment" due to Brexit, which is also affecting its ad trends in the early part of 2019.

U.K. TV giant ITV and the BBC said on Wednesday that they are in the final stages of talks to bring their BritBox subscription VOD service to the U.K.

The goal is to launch the service, offering "an unrivaled collection of British boxsets and original series," in the second half of 2019. While the partners couldn't confirm pricing plans on Wednesday, they said that "it will be competitive." They also said that additional partners could join the collaboration as British TV and other companies have been looking to take on Netflix's dominant position in the streaming space. 

But ITV CEO Carolyn McCall emphasized Wednesday that the service is not designed to replace global streamers Netflix and Amazon. "We have never said that this is the British equivalent of Netflix. Netflix is global, it commissions globally," while BritBox will commission for local audiences, she said. "It is complementary to Netflix ... We are not a substitute for Netflix."

In that context, she also reiterated ITV's guidance that the launch of the U.K. streaming service will get an investment of up to 25 million pounds ($33 million) from the company this year and then peak at up to 40 million pounds ($53 million) in 2020 before declining.

Asked what the BritBox plans mean for ITV’s strategy on producing for streaming giants, McCall said: “Our studios business has very strong relationships with all the OTT platforms. They will continue to have those, and there will continue to be co-productions and also commissions from Netflix, Amazon and many, many others. … Nothing really changes on that side at all.” She mentioned that, for example, ITV Studios makes Queer Eye for Netflix and that Bodyguard is produced by ITV Studios' World Productions, but airs on the BBC in Britain and Netflix in the rest of the world.

Will the company, similar to Walt Disney ahead of the launch of its streaming service Disney+, stop licensing programming to Netflix and Amazon? “We will clearly honor any content rights deals that we have currently in existence. It is obvious really to assume that ITV content that has been commissioned by the network will end up at some point on BritBox. So I think that is the only tweak." She mentioned, for example, that ITV previously licensed seasons one and two of Love Island to Netflix, which wouldn't happen in the future.

BritBox launched in the U.S. in 2017 with partner AMC Networks and has since also become available in Canada. The service, which has started doing some original programming but is mostly built around catalog fare, has crossed the 500,000 subscriber mark, the companies previously said. 

"Both organizations are delighted with the success of their BritBox streaming service in North America, which is ahead of expectations, having already broken through targets with over half a million subscribers," the partners said. "This success shows the BBC and ITV have the know-how to launch and manage a streaming service and research with the British public shows that there is a real appetite for a new British streaming service — in addition to their current subscriptions."

McCall said that BritBox would be "the home for the best of British creativity," also highlighting on a call with reporters that Channel 4 and Viacom's Channel 5 have been among the potential additional partners in BritBox. Added BBC director general Tony Hall: "The service will have everything from old favorites to recent shows and brand new commissions."  

ITV and the BBC noted that more than 12 million households in Britain have at least one SVOD service, with 4 million homes paying for multiple subscriptions. McCall said Wednesday that the partners will hold talks with U.K. pay TV giants Sky and Virgin Media about distributing the streaming service. 

Research commissioned by ITV also shows Brits' desire for homegrown content, with 43 percent of all online homes interested in subscribing, in addition to any current subscriptions, to a new SVOD service featuring British content. "This increases to over 50 percent in homes with a Netflix subscription," the company says. 

ITV early Wednesday also reported lower full-year 2018 earnings, but said the profit at its TV production unit grew even though revenue for ITV America fell sharply amid the cancellations of such shows as Duck Dynasty. Its advertising revenue rose 1 percent during the year despite the "uncertain economic and political environment" due to Brexit.

ITV, which last year announced a strategy refresh, warned though that advertising is taking a hit amid the Brexit uncertainty early in 2019. The company forecast its total advertising revenue to be down 3 percent-4 percent for the first four months of 2019. "First-half revenues and profits will also be impacted by tough comparatives against the revenues of the [soccer] World Cup, the investments we are making and ITV Studios deliveries being weighted to the second half," the company said.

“We have started 2019 with strong onscreen and online viewing," McCall highlighted. "However, the economic and political headwinds for the U.K. will have an effect on the advertising market and while ITV is increasingly diversified, we remain sensitive to this. We continue to be very focused on delivering in the areas we can control and actively mitigating the factors outside the company’s control."  

ITV's full-year adjusted earnings before interest, taxes and amortization (EBITA) fell 4 percent, and adjusted earnings per share fell 4 percent as well, while statutory earnings per share rose. Production arm ITV Studios posted a 5 percent increase in EBITA for 2018 to 255 million pounds ($338 million).

Revenue for all of 2018 rose 3 percent, with its ITV Studios arm up 6 percent to 1.7 billion pounds ($2.3 billion). "ITV Studios continued to show good growth, producing a range of great shows including The Voice, Bodyguard, Love Island and a host of other hits," McCall said. 

ITV America's 2018 revenue fell 21 percent to 245 million ($326 million), though as the company had previously guided. "We have delivered a lower volume of programs from our entertainment portfolio with Duck Dynasty and American Grit not returning, a reduction in the volume of Pawn Stars episodes delivered, and no Hell’s Kitchen delivered following the delivery of two [seasons] in 2017," the company said. "This volume decline was partly offset by new series The Four and Knife or Death and a higher volume of Emmy award winning Queer Eye delivered."

McCall last year unveiled ITV's "More than TV" strategy refresh and said that the company sees an opportunity to build a new subscription VOD service in Britain, potentially with partners, as part of its recent focus on direct-to-consumer initiatives.