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ITV Braces for Brexit but Commits to Investment Program and Streaming

ITV’s advertising revenues will take a Brexit hit this quarter, but the U.K. broadcaster has the full backing of shareholders for its investment program, which includes the BritBox streaming service, CEO Carolyn McCall said Thursday.

With just days before the U.K. is supposed to exit the European Union, British lawmakers have yet to agree on a plan for working with the E.U. Prime Minister Theresa May has offered her resignation in order to get backing for her plan, but there is still no consensus.

ITV has diversified but remains heavily reliant on TV advertising, and McCall said advertisers are cutting back and doing contingency planning as they wait to see how Brexit unfolds.

“2019 for us is very much about mitigating whatever we can, the effects of economic uncertainty,” McCall told reporters at a Broadcasting Press Guild lunch in London. “There’s no question that our client companies are doing a whole load of things where they are having to cut back on not just marketing expenditure but a whole load of expenditure.

“Clients are pausing and have brought forward a lot of their funds and are spending it on contingency [planning].”

ITV has outlined cost cuts and has been doing its own contingency planning, McCall said, adding that first quarter ad revenues are tracking in line with earlier guidance and will be down between 3% to 4%. Against the backdrop of Brexit deadlock and indecision, McCall said it was vital for ITV to maintain its investment program, part of her “More Than TV” initiative, and the U.K.-listed company has the full backing to push ahead.

“Our shareholders know what our investments are and are totally behind the strategy,” McCall said, noting that that includes sinking cash into recently announced SVOD service BritBox. “If we were to stop the investment program, which is already in the middle of being implemented, it would set ITV back,” she cautioned. “It would mean that we don’t [invest in] all of these areas for the future.”

Speaking specifically about BritBox, which is a joint venture with the BBC, McCall said what would set it apart is its Britishness. The service is already up and running in North America, and is set to launch at home, in the U.K., later this year. “The thing that’s going for BritBox is that it’s not American content, it’s not Starz, it’s not Showtime, it’s not HBO, it’s not all that [stuff] you are getting on Sky, you are going to get on Apple,” she said. “This is distinctively British-originated content. It’s highly differentiated.”

The plan is not to take Netflix head-on, she added. “I have never said we are going to compete with Netflix,” McCall said. “Netflix’s model is so different to ours; Netflix’s ambition is so different to ours.”

One similarity will be that ITV will not share viewing data for its new service. The streamer is likely to also involve Channel 4 and Viacom’s Channel 5 in addition to ITV and the BBC. McCall also said that the U.S. version of BritBox is now profitable.

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