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ITV: New Strategy Boosts Online and Pay TV Businesses

ITV’s core business is free-to-air television. But it’s working hard to diversify its revenue streams and has wrestled to rectify its underachieving online and pay businesses.

In annual results published in March, ITV was upbeat, noting that revenues across online, pay and interactive were $226 million, up 30% over 2013.
For ITV, interactive means voting and competitions held across its services.

“Interactive is an important part of our business commercially,” says Simon Pitts, ITV’s managing director of online, pay and interactive. “Crucially, the people who vote are a highly engaged part of our audience. They provide a valuable insight into what our audiences like.”

During the most recent season of ITV’s “The X Factor,” 40 million votes were cast, including 10 million in the show’s finale.

A key component of ITV’s online business is the ITV Player, plagued by problems since it bowed in 2008.

Users have complained of long loading times and unreliability. During last summer’s soccer World Cup, viewers missed a vital Brazil goal because the streaming service crashed. ITV blamed “unprecedented demand” for the glitch.

“For the last couple of years we’ve focused on fixing the basics,” Pitts says. “Hopefully, the shaky experience that people used to have is a thing of the past.”

He explains that prior to the arrival of CEO Adam Crozier in 2010, ITV was unclear regarding its online ambitions.

“We were trying to do too much, rather than focusing on the thing our viewers really want,” Pitts says. “They want to be put in front of their favorite shows as quickly and seamlessly as possible and have a TV-like experience.”

Certainly more people are using the ITV Player. In the past year, the number of requests for long-form video has increased by 26% to 726 million, while there have been 20% fewer complaints from users and wider distribution on different platforms — more than 20, including YouTube.

“Online we’ve taken the business from loss-making to profit-making in a short time,” Pitts adds. “We don’t see on-demand viewing as a separate thing, but as an extension of linear television. ITV Player isn’t just about catch up, it’s also (is) increasingly about live streaming of our biggest shows like ‘Coronation Street,’ above, ‘Emmerdale,’ ‘X Factor’ and ‘Britain’s Got Talent.’ ”

Pitts stresses that the top priority is to get ITV’s shows in front of people as quickly and seamlessly as they can, regardless of where and how the audience is watching.

If ITV has struggled to get its online act together, efforts to make a success of pay TV prior to the Crozier regime were dismal. In 2002, pay box ITV Digital collapsed with losses of around $1.47 billion.

The jury is still out on whether subscriber-driven services have the potential to be big earners for the firm; however, there are finally promising signs that pay can be a winner for ITV.

In 2014 ITV’s pay revenues grew by 63%. HD versions of ITV channels are now available on the U.K.’s biggest pay platforms, Sky and Virgin, and last June, ITV launched pay net, ITV Encore, in an exclusive deal with Sky.

The channel specializes in re-runs of ITV drama and some bespoke fiction, with the first of these original commissions ITV Studio’s supernatural crime drama “Midwinter of the Spirit.”

“It’s early days for Encore and it’s going well,” Pitts says. “Encore is among Sky’s top five fastest growing channels.”

Outside the U.K., ITV is experimenting with pay content. In Scandinavia, the operator owns a stake in VOD service Cirkus, while some 8 million homes in Asia and the Middle East receive ITV Choice, a basic pay channel. A trial is under way for ITV Essential, designed for expat Brits living in European countries such as Spain, France and Portugal. For a one-off fee or a monthly sub, viewers gain access to ITV’s soaps.

“We wouldn’t rule out launching other channels, be they VOD or traditional, linear channels,” says Pitts, mindful of the need to build ITV’s distribution both in the U.K. and overseas.As ITV continues to shift the business so it is less reliant on TV advertising, the hope is that online, pay and interactive will become earners of genuine scale for the company.

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