U.K. commercial broadcaster ITV is restructuring its business as it struggles to weather the coronavirus pandemic. The company has laid out plans to pivot to a VOD focus, and reduce its physical footprint in London.
Variety understands the “Love Island” broadcaster informed staff of its plans via an internal vodcast on Monday afternoon, noting that it is “resetting the business” and will more keenly focus on its digital strategy. The broadcaster has been hard hit by the pandemic, revealing in August a 17% dip in both broadcast and production revenues to £824 million ($1.08 billion) and £630 million ($830 million), respectively. It’s believed the SVOD strategy is a 15-year plan that will be overseen by director of television Kevin Lygo.
Under the plan, ITV will establish a new Media and Entertainment division with two new business units: broadcast and on-demand.
Crucially, the on-demand business unit will be the focus of digital product development and growth for the broadcaster. The new unit will encompass three existing services: ITV’s main catch-up service Hub; ad-free version Hub Plus; and BritBox, its SVOD platform run jointly with the BBC. Variety understands the restructure means there will be more investment in Hub and BritBox commissions.
The BritBox U.K. service took some time to get going following its November launch, but made a splash with the debut of original series “Spitting Image.” The platform will soon launch in Australia. Meanwhile, Hub generally sees gangbuster viewership during “Love Island,” which now airs twice a year in the U.K., but will stay off air due to COVID-19 until summer 2021.
“Our new Media and Entertainment Division will enable ITV to continue to deliver mass, live audiences while investing in the future to create the sort of content and viewing experience that younger, and other harder to reach viewers want,” said ITV boss Carolyn McCall.
“ITV will continue to broadcast shows which entertain millions of viewers. Most are watched live and that fact together with the scale of these audiences will continue to offer unrivalled opportunities for brands to reach consumers. Linear channels will be around and be profitable for many years but we also need an on-demand business which will increasingly be the focus of our new investments in content and technology and which will be our growth engine attracting younger and more targeted audiences to ITV.”
The Media and Entertainment division will have full P&L responsibility for all its activities, costs and revenue. Both divisions will be supported by “leaner central support services” that will help ITV cut on costs and boost efficiencies.
The restructuring process is now underway and will be completed by March 2021, ITV said.
Although ITV has made clear its broadcast business will remain “the home of award-winning drama, the biggest entertainment shows and sport,” it’s still unclear what the rejig will mean for linear channels such as ITV2, ITV3 and ITV4, with insiders whispering that the channels could be scrapped in time.
Lygo will be MD of the Media and Entertainment Division and will continue to run the broadcast business unit. Meanwhile, Rufus Radcliffe — currently ITV’s chief marketing officer — will head up on-demand. The company will be recruiting a new CMO as well as a new chief operations officer for Media and Entertainment, with both roles reporting into Lygo.
Elsewhere, ITV also plans to reduce its London office space over the coming years. The company has said “no decisions” have yet been made about its current London offices, but sources tell Variety that working from home is strongly being encouraged and it’s likely that staff will move out of the Waterhouse Square location on Chancery Lane. ITV staff are also based out of Grays Inn Road on Chancery Lane and WestWorks at White City, just west of London.
In March, ITV reduced its program budget by £100 million ($131 million) in the wake of restrictions imposed by the coronavirus pandemic. ITV Studios said in September that 80% of its productions impacted by coronavirus have now resumed shooting or have been delivered, but that international travel restrictions have limited the scope of filming.
The company’s 2020 half-year earnings recently showed expected declines due to the effects of the pandemic. Total broadcast revenue in the six months to August declined 17% to £824 million ($1.08 billion) from 2019’s $1.3 billion. Similarly, there was a 17% decline in total ITV Studios revenues to £630 million ($830 million) from £758 million ($999 million).
Meanwhile, advertising revenue for the six-month period to the end of June dipped to £671 million ($883 million) from £849 million ($1.1 billion) for the period last year. Overall, ad revenue fell by 43% in the second quarter and by 21% from the period in 2019.
Total external revenue also fell 17% £1.21 billion ($1.6 billion), while adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) plunged a steep 50% to £165 million ($217 million).