Shareholders in ITV (LON:ITV) haven’t had a great time of it of late, with the shares currently down at 18-month lows.
In early March the ITV share price plunged 30% after the company announced a $180m investment into yet another streaming service, ITVX for Q4, on top of its investment in BritBox and ITV Hub which has understandably got investors asking questions about the direction and coherence of their long-term digital strategy.
Reports that the company might be interested in a £1bn bid for Channel 4 have been treated with equal indifference with the shares sliding to their lowest levels since October 2020 earlier this week.
The timing of the additional investment is all the more intriguing given rising evidence that streaming services are reaching saturation levels after market leader Netflix (NASDAQ:NFLX) lost 200k subscribers in its last quarter, and CNN+ lasted all of two weeks before being suspended by owners Warner Brothers Discovery.
ITVX may well be the answer to how ITV can help better monetise its streaming ambitions, however, it needs to decide on a strategy, and more importantly, articulate what it is to shareholders and then stick to it.
Announcing a new streaming service at the same time as buying out the BBC’s share in BritBox suggests that we could well see BritBox rebranded, with all their other streaming services folded into one subscription service. It would certainly make sense and be a much simpler approach. If that’s ITV’s strategy it would be helpful if they said so, rather than leaving it to guesswork.
At the end of its last fiscal year, ITV said they were confident of reaching their target of digital revenues of at least £750m by 2026, a target they reaffirmed today in today’s Q1 trading update.
During Q1 the company said it had seen a 23% rise in revenues for ITV Studios and a 16% increase in total advertising revenues, while digital revenues rose by 24%.
Total revenues rose to £1bn, a 17% increase on the same period last year.
Despite a strong Q1 for advertising revenue, which came in at £468m the outlook for Q2 is more subdued, with a 6% decline expected due to tougher comparatives from last year which were boosted by the delay to Euro 2020, with June revenue expected to be down 15% from the same period a year ago.
On the digital side, while revenues were up 24% to £82m, total streaming hours fell 7% to 247m, reinforcing the wider trend that consumers are becoming more discerning about what they watch as we come out of the pandemic.
All in all today’s update, while a decent one, does little to inspire confidence that ITV has a clear strategy when it comes to its digital offering, and certainly doesn’t inspire confidence that it can reach its target of £750m of digital revenue by 2026.
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