This week produced an interesting note from analysts at Berenberg focusing on ITV’s prospects for success in the SVOD world and the launch of BritBox, the commercial operator’s planned UK JV with the BBC.
Most commentators who are sceptical about BritBox and similar initiatives by public and commercial broadcasters have focused on the supposed weakness of such a proposition in the face of strong competition from Netflix and Amazon, and the unlikeliness of late-arriving archive-based services gaining scale at a time when growth in the market is beginning to level off.
Berenberg’s team gave a downbeat assessment of BritBox, but pointed to the threat that it could cannibalise the commercial broadcaster’s existing core advertising-supported free-to-air business. In other words, even if the likes of BritBox is successful it is questionable whether it will have a positive impact on its parent’s bottom line.
In the case of BritBox, Berenberg pointed to a double-risk. First, ITV’s promise of original content for the service – content that would presumably otherwise air in primetime on its main channel – could drive subscriptions but eat into advertising revenue for the free-to-air business by taking viewers away from the primetime audience.
Second, the use of extensive library content to populate the new service could hollow out the schedule of ITV’s secondary channels – ITV 2, 3 and 4 – and also deprive the broadcaster of revenue from the onward sale of rights to third-party platforms such as Netflix.
There is a third risk implicit in this analysis. As Berenberg points out, the planned budget for the new service is not huge, and if the original content line-up is too thin, it could be hard to attract subscribers. ITV could end up losing out on two fronts simultaneously by diminishing the appeal of its free-to-air assets while failing to build a significant alternative subscription video business.
These risks are shared across the free-to-air broadcaster business. Traditional advertising revenues are in decline thanks to fragmentation of the market and the growing appeal of the SVOD business. At the same time, political pressure is being put on public broadcasters to cut cost. As a result, public and commercial broadcasters are increasingly getting together to attempt to build offerings that can provide additional revenue and ensure that they stay relevant to digital-savvy audiences.
Hence the Salto initiative between France Télévisions, TF1 and M6 in France, the LOVEStv collaboration between RTVÉ, Atresmedia and Mediaset España in Spain and ProSiebenSat.1’s collaboration with Discovery in Germany.
BBC director-general Tony Hall this week used the Media & Telecom conference in London to describe BritBox as “a new model of public service and commercial partnership in the UK” that would provide “an unrivalled collection of British boxsets as well as new original series that you won’t see anywhere else, on demand, all in one place”. He added that “crucially, UK audiences will always know who to credit for what they’re watching”. And this is in essence the key unquantifiable benefit of the venture. Without it, the BBC and ITV brands could eventually simply disappear as content they make ceases to be uniquely associated with their brands. If viewers can see the same content on Netflix as on BBC One, they may be unsure who is responsible for the decision to commission it.
Both the BBC and ITV – and the UK’s other broadcasters – ultimately face an existential threat. If people associate a top-rated BBC or ITV drama with an SVOD brand on which it subsequently appears rather than with a UK public service broadcaster brand, then support for public service broadcasting and the commercial underpinning of the ITV brand will fall away.
Collaboration between broadcasters and the big SVOD players also carries other dangers. The latter are masters of gathering and analysing data. If they acquire content commissioned by a BBC or ITV or co-finance such content, they will be in a unique position to use the audience data gathered as a result to commission similar content and effectively steal the audience of their local broadcast partners. And they have the resources to do this. As Hall pointed out in his speech this week, the BBC’s TV content spend amounts to £1.5 billion for a whole year, while Netflix spent a reported US$13 billion last year and Amazon is setting aside a reported US$1 billion just for five series of Lord of the Rings.
So free-to-air broadcasters are caught between the rock and a hard place: if they get into SVOD they could cannibalise their existing businesses, but if they don’t, the global players could in the end eat them for lunch. (And if they get into SVOD in a way that fails to engage viewers because they lack the marketing wherewithal, and above all the financial resources, to get it right, they may only damage their brands rather than reinforce them.)
A lot is riding on getting BritBox and similar schemes elsewhere right, and there are plenty of traps in the way.