A generation ago, ITV was regarded as such a precious jewel in the UK broadcasting firmament that there was outrage when BSkyB, as it was, bought a 17.9% stake to stop anybody else getting their hands on the business. After a drawn-out saga, the then Murdoch-controlled Sky was forced by regulators to divest in the interests of plurality. Politicians breathed a sigh of relief.
That was 2006. To say the UK television game has changed since those days is to understate matters grossly. As ITV unveiled its £1.6bn deal to sell its broadcasting business – but not its more valuable programme-making studios operation – to Sky, now under the ownership of US group Comcast, it was hard to detect any political uproar that might threaten the deal.
While everybody in TV-land agreed the transaction marks the end of an era (bringing an end to 70 years of ITV history, assuming regulators give a green light), Westminster has shown little concern in the seven months the talks have been running. Instead, there has been a general air of inevitability about the Sky/ITV combo – a sense that, in the age of Netflix, YouTube, Amazon, Disney+ et al, ITV’s broadcasting division needed to seek shelter under a bigger roof.
That, roughly speaking, has also been the message from ITV’s boardroom. A decade ago, before the streamers and social media platforms grabbed chunks of the UK advertising market, ITV’s broadcasting business could make topline earnings of £600m in a good year; last year it did £234m. The latter figure is still a long way from capitulation, but the trend has only been in one direction, which is why ITV’s share price has been becalmed for years.
One can still view the price-tag of £1.6bn as underwhelming for an operation which still has £2bn of revenues and a top-line profit margin of 11.7%. That is especially so since £200m of the sum is a contingent payment that depends on a 2027 revenue target being achieved. Yet it is probably also true that Dame Carolyn McCall, ITV’s chief executive, would have been castigated by her shareholders if she’d turned down £1.6bn.
The sad fact is that dominance of free-to-air commercial broadcasting in the UK, which was once viewed as a licence to print money, has become seen by the stock market as a way to get poorer slowly. McCall’s plan A for a remedy was to join the streamers via the launch of ITVX and, up to a point, that venture has worked: ITV’s digital advertising revenues improved 12% last year.
Unfortunately, the sheer size of the older linear business meant that investors were never truly interested in mini-digital triumphs. Since the day in 2022 that McCall announced the heavy investment in the launch of ITVX, the share price, now 82p, has never seen 100p again. In the absence of a full takeover bid, a break-up of ITV – separating broadcasting from more exciting business of making the programmes – has been seen as the only way to get investors to tune in.
Sky counts as a more credible buyer than most alternatives, since it still retains a vague air of Britishness even under US ownership. That might help to smooth a regulatory process that will take a year at least. The debate on that score is about which measure of advertising market share you prefer: the combined 70%-ish in commercial TV or the 6.5% of the overall UK advertising market. One suspects the Competition and Markets Authority (CMA) may wish to insert anti-price-gouging remedies to protect TV advertisers. But Sky made the required noises on day one about public service commitments, including on news provision, and maintaining the necessary quota of UK content.
The real sadness about the deal is that, 20 years ago, regulators and politicians weren’t wrong about ITV’s status. It was a power in the land. But then the predecessor body to the CMA drew entirely the wrong conclusion in 2008 and quashed a proposed digital tie-up between ITV, Channel 4 and BBC Worldwide known as Project Kangaroo. If the venture had been allowed, it might have seen the creation of a serious UK rival to Netflix, which at that stage had barely got out of the blocks.
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Instead, we’ve now arrived at a point where ITV must throw its broadcasting and streaming lot in with Sky, a business which itself is far from being the main event at Comcast. In terms of a great British commercial television empire, one is left with a sense of what might have been. ITV will be better off concentrating on television production and its studios business; in time, its share price may re-rate. But it’s hard to feel uplifted by how we’ve got to this point.
