What just happened?

BBC studios and ITV PLC have agreed the sale of ITV's 50% stake in their international joint-venture streaming service, BritBox International, to BBC Studios for £255 million ($322m). BritBox UK – a full subsidiary of ITV – will be unaffected. As part of the agreement, ITV will continue to supply content to BritBox International, and will receive revenue in return at comparable levels to present. 

Q. What does this development mean for BritBox?

BritBox International currently maintains a subscriber base of a little less than 4m subscribers worldwide – which positions it at less than 2% of the scale of Netflix, and less than 4% the scale of Disney+.

The service has occupied an uneasy position in the market to-date. As a joint-venture between ITV and the BBC it has inevitably faced the same sorts of challenges that any joint-venture faces in navigating the differing strategic aims, incentives and priorities for the parent businesses. 

As a joint-venture, BritBox will not easily have been able to make the strategic trade-offs that many of its US-based studio-backed peers have made – namely to significantly shift the supply of content away from international sales and distribution and exclusively into direct-to-consumer streaming. This content exclusivity strategy – while highly costly – has helped US streamers drive significant scale in their global subscriber bases. 

While many streaming businesses are now focused on rationalising costs and are looking again at onward licensing, bringing BritBox under a single parent group simplifies the decision-making process for both it, the BBC and its former parent ITV, and will enable the organisation to more easily discuss investment plans with its sole parent, and focus on its onward growth strategy.

Q. What does it mean for the BBC? 

 Bringing BritBox fully under the control of BBC Studios provides the BBC’s commercial wing with a way of monetising the corporation’s extensive content catalogue directly on a global basis.

To-date, BBC Studios’ international strategy has been built around two core components: 

i) its global channel business, which faces the same pressures from viewing and subscriber migration as any other broadcast channel network business; 

ii) its content production and distribution arm, which focuses on making content for the BBC and other parties, and selling finished material to broadcasters and streamers around the world. 

In BritBox’s joint venture form, it will have been challenging for the BBC to have made trade-offs against these existing operations. However, with BritBox as a fully-owned subsidiary the BBC will now find it easier to decide on the balance of content supply to the service, to the BBC’s international channels business, and which titles should be reserved for distribution to third parties.

In theory, UK-originated content has a strong opportunity on an international scale. In particular, with the reduction in content commissioning in the US market stemming from streamer cost rationalisation and from the recent Hollywood strikes, relative demand for UK content will have risen. The BBC is now in a better position to capitalise on this demand given the full control over BritBox.

Longer term, a successful global BritBox is important for a strong UK creative economy. Given domestic funding challenges stemming from below-inflation growth in the TV licence fee, a significant global revenue stream through a BritBox able to take a clearer commercial direction could help support the the BBC’s domestic operations, and its onward investment in UK-originated content.

Q.  What does it mean for ITV? 

ITV has secured a stable revenue stream post-sale in return for ongoing content distribution to BritBox, but the move will free ITV to focus on driving maximum returns in its international distribution business. The deal will effectively reduce ITV’s commitment to providing content exclusively to the service. As a result, ITV will be able to refocus on the international licensing of ITV content without the distraction of supporting an international streaming service in which it only has a partial share.

ITV is no doubt focused on the value of international licencing, which is set to grow over the course of the next few years as the major international streaming services seek to make more cost-conscious decisions about their expenditure on new original content. The international portability of UK-originated English-language content will support ITV’s distribution strategy in this new profit-centric era. 

Ampere clients can read further recent analysis of the UK broadcasting market here and here.