ITV reports growth in streaming, Studios
November 8, 2023
ITV has reported total revenue up 1 per cent at £2.97 billion (€3.4bn) in the first nine months of 2023 to September 30th, with growth in ITV Studios and M&E digital revenues offsetting the decline in linear advertising revenue. Total external revenue was flat at £2.53 billion.
Carolyn McCall, ITV Chief Executive, commented: “ITV continues to make good strategic progress despite the challenging macro environment which is impacting the advertising market and also the demand for content from free-to-air broadcasters in the UK and internationally. Studios and M&E digital revenues both grew strongly in the nine months to the end of September, more than offsetting the expected decline in linear advertising, delivering total group revenue growth of 1 per cent.”
“ITV Studios grew faster than the market, with 9 per cent revenue growth, driven by its position as a scaled and diversified global production business. ITVX had a successful nine months delivering 27 per cent growth in total streaming hours which, in turn, helped deliver 23 per cent growth in digital revenue. Growth in digital advertising revenues continues to outperform other broadcasters reflecting ITVX’s compelling viewer and advertising proposition.”
“We are on track to deliver £15 million of cost savings in 2023, as part of our previously announced £50 million cost saving target between 2023 and 2026. In addition, we will rephase £10 million of content spend from 2023 into 2024. It is evident that our strategy of growing the Studios and M&E digital business is helping ITV to offset the current headwinds and we remain confident in delivering our 2026 targets, when we expect two-thirds of revenue to come from these growth drivers,” McCall concluded.
Results highlights
ITV Studios
● Total ITV Studios revenue was up 9 per cent at £1.51 billion
● ITV Studios delivered a wide range of new and returning programmes and formats in the UK and internationally as it continues to diversify by genre, geography and customer
○ including Fifteen Love for Prime Video; Love Island USA S5 for Peacock; and World on Fire S2 for the BBC
Media & Entertainment (M&E)
● M&E revenue was down 7 per cent, as expected, at £1.45 billion driven by total advertising revenue (TAR) down 7 per cent
● Digital advertising revenue (a component of digital revenue) remained strong, up 25 per cent at £283 million to the end of September (2022: £227 million)
● Total M&E non-advertising revenue was down 3 per cent with good growth in subscription revenue offset by the expected decline in SDN revenue
● ITVX continued to perform strongly. Total digital revenues were up 23 per cent and total streaming hours were up 27 per cent to the end of September with monthly active users continuing to grow in line with our expectations
● We maintained our strength in delivering mass reach for advertisers through the quality and breadth of our schedule with Love Island, the Women’s Football World Cup and the Rugby World Cup all drawing large broadcast and streaming audiences
Outlook
ITV Studios
● ITV Studios expects to deliver total organic revenue growth of at least 5 per cent per annum on average to 2026 and to grow ahead of the market as we further strengthen the business
● ITV continues to expect good global demand for its content over the medium term. In the shorter term, the global content market has been impacted by lower demand from free-to-air broadcasters, reflecting the challenging advertising environment, as well as the US writers’ and actors’ strike. The latter is expected to defer revenues from 2024 into 2025
● Over the full year 2023, ITV expects to deliver around 3 per cent growth in total Studios revenue, following 19 per cent growth in 2022. On an organic basis, ITV expects average growth over 2022 and 2023 to be well ahead of its medium term target and the wider market
● Q4 2023 is impacted by the phasing of deliveries in 2023 which are weighted to the first nine months, including big budget programmes such as Franklin and Physical S3, both for AppleTV+
● ITV is committed to maintaining an adjusted EBITA margin for ITV Studios of 13 per cent to 15 per cent over the period to 2026
Media & Entertainment
● With the continued successful performance of ITVX, we remain confident in delivering at least £750 million of digital revenues by 2026
● The advertising market remains challenging and over the full year 2023 we expect ITV TAR to be down around 8 per cent versus 2022 TAR, which was the second highest in ITV’s history and included the positive impact of the FIFA World Cup
● In light of these conditions, total content spend for the full year will be £10 million lower than previously guided at around £1.29 billion as ITV rephases content into 2024
● ITV welcomed the inclusion of the Media Bill in the King’s Speech, as the UK Government sets out its legislative agenda for the forthcoming year. The draft Media Bill set out the Government’s intention to update and reform the legal and regulatory framework for television, particularly delivered online. This should ensure that the content from the public service broadcasters, including ITV, will be included in prominent positions on streaming platforms
Commenting on the results, Fiona Orford-Williams, Director of TMT at Edison Group said: “ITV’s Q3 numbers this morning show a continuation of tough linear advertising conditions, as expected, but a slightly stronger showing from the Studios division and good progress at ITVX. The sluggish overall backdrop, with Q4 advertising revenues set to be judged against tough comparatives which include last year’s FIFA World Cup, has prompted some shift in content spend into 2024. Q4 2023 from Studios was set to be on the light side anyway, with delivery weighted earlier in the year, but it should still be able to reach the lower end of the target EBITA range of 13-15 per cent”.
There is also softness in overall global content demand to contend with, from lower advertising revenues across the industry as well as the repercussions from the US writers’ and actors’ strikes. Over the medium-term, guidance for 5 per cent organic revenue growth to 2026 for Studios remains in place. The group’s digital revenue target of £750 million by 2026 also remains unchanged. The phasing across the earlier part of that timeframe is what remains in question. The inclusion of the Media Bill in [the] King’s Speech is important for ensuring prominence of the public service broadcasters’ offering on digital streaming platforms. ITV and STV will be keen to see this put into action as soon as possible.”
Roberto Rivero, Market Analyst at Admirals, commented: “After weak advertising kept total revenue flat in the first half of the year, many eyes will have been drawn to this segment of ITV’s trading update. Although Total Advertising Revenue (TAR) was down year on year in the first nine months of 2023, the numbers for Q3 remained flat. Despite ongoing uncertainty in the advertising market, ITV’s TAR benefitted from increased viewership and advertising campaigns around the Women’s Football World Cup and the Men’s Rugby World Cup. However, TAR is forecast to continue its struggle in Q4, as it will be competing with a quarter which was bolstered by the Men’s Football World Cup last year”.