LONDON — ITV, the U.K.’s most watched commercial broadcaster, was handed a £135 million ($243 million) lifeline as media regulator the Office of Communications (Ofcom) halved its license fees on Wednesday.
The cuts exceeded analysts’ expectations and may reignite speculation regarding a possible U.S. takeover.
ITV will pay less than $144 million this year for its licenses compared with $387 million last year.
Rival Five, owned by pan-European media giant RTL and United News Media, is also celebrating as its annual license has been cut by $7.2 million.
Ofcom said high license fees could no longer be justified as some 60% of Brits now watch TV via digital services like BSkyB and Freeview.
“As homes continue to migrate from analog to digital, the share of advertising derived as a result of access to the analog spectrum will continue to decline and the proportion of advertising revenue earned by analog channels overall is likely to fall,” Ofcom said in a statement.
The cuts are a victory for ITV chief exec Charles Allen and come as flagship net ITV1 struggles amid poor ratings.
Allen said, “These terms mean a very significant reduction in license payments for ITV this year, with further steady reductions to come.
“Across ITV1, ITV2, ITV3, ITV4 and the ITV News Channel, ITV will invest around £1 billion ($1.8 billion) in high-quality programming this year. It is critical that ITV has the firepower to sustain this investment and take forward its digital strategy.”
Five topper Jane Lighting was equally upbeat. She said: “We believe this new settlement will act as an increased incentive towards building the digital future and will strengthen our ability to contribute to public service broadcasting.”
Also affected by the changes is breakfast station GMTV, whose shareholders include Disney; SMG, owner of the STV and Grampian ITV licenses; and Belfast-based Ulster TV.
The license fee cuts triggered a 5.6% surge in ITV’s stock in trading Wednesday.
It remains to be seen whether ITV’s new financial arrangements will prompt another round of takeover speculation.
In the U.K., equity group Apax, via its association with veteran topper Greg Dyke, has been linked to a possible attempt to seize control of the broadcaster.
And at the recent L.A. Screenings, there was talk that Viacom was interested in ITV.