ITV shares tumble on content cost fears despite ambitious digital overhaul

Broadcaster ITV has unveiled plans for a new on-demand platform called ITVX amid aims to double its digital sales by 2026 after posting a leap in annual profits.

The group behind hit shows including Love Island and I’m A Celebrity… Get Me Out Of Here! said it will launch the new platform – the first to integrate advertising-based video on demand and subscription video on demand streaming in the UK – in the fourth quarter.

But shares in ITV tumbled as much as 18% as investors baulked at the level of investment spend needed to drive the digital overhaul and the feared impact on earnings.

ITV is looking to boost its digital revenues to at least £750 million within four years, with the group also pledging to increase digital content investment, spending £20 million, and £160 million next year for ITVX.

Overall spend on programmes will reach £1.23 billion this year and £1.35 billion next year, it said.

The shares plunge came despite it also posting a near-50% jump in annual profits thanks to a record year for advertising revenues as the wider economy recovered from the pandemic.

ITV reported a 48% surge in pre-tax profits to £480 million last year, with total advertising revenues rising 24% to £2 billion – the highest in its history.

It said demand from advertisers has remained strong so far this year, forecasting ad revenues to rise by around 16% in the first quarter.

But it said the second quarter would be affected by tough advertising comparatives and Euro 2020 from June.

ITV chief executive Dame Carolyn McCall said the group “delivered an outstanding financial performance in 2021″.

She added that the firm is now moving on to its new phase of growth – prioritising digital content.

The new ITVX platform will replace the ITV Hub brand and will give subscribers the choice of watching ad-funded content free of charge, or to trade up and buy ad-free content, such as BritBox.

ITV confirmed it has bought out the BBC’s 10% share of BritBox UK for a “nominal” amount ahead of the launch of ITVX.

The BBC said it would “continue to supply a range of BBC commissioned content until at least 2025” and remains a shareholder in BritBox International.

In a first for ITV, it said it will premiere much of its new content on ITVX some six to nine months before it airs on traditional ITV channels.

Ms McCall said: “We are supercharging our streaming business, fundamentally shifting our focus to think digital first, as well as optimising our broadcast channels by continuing to attract unrivalled mass audiences.”

The group also confirmed that it has stopped Russian broadcasters from airing its shows, with the country previously having access to I’m A Celebrity and Come Dine With Me, which is produced by ITV Studios.

This falls in line with a wider boycott of business with Russia across the TV and entertainment sector in response to the Ukraine invasion.

ITV said it does not sell advertising in Russia.

On plans for ITVX, Richard Hunter, head of markets at interactive investor, said: “ITV has shown agility and foresight in adapting to a quickly evolving landscape.”

But he added the market had “reacted with some cynicism to ITV’s lofty ambitions and the share price reaction today reflects a mauling by the bears, with a concentration on the investment spend needed and the strength of the competition rather than improving prospects”.