The proposed £1.6bn takeover of a big chunk of ITV by Sky would be the biggest consolidation in British broadcasting in more than 20 years, and reflects fundamental changes in viewing habits and commercial realities.
For Sky, a deal that brings together Ant and Dec with Gary Neville and Jamie Carragher would make it the UK’s largest commercial broadcaster, and strengthen its hand in the battle with US streaming giants that have upended the entertainment business.
For ITV’s shareholders, who have seen the value of their investment decline as advertising revenue, like viewers, has migrated online, it may be a chance to say, “I own a terrestrial broadcaster, get me out of here.”
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Neither Sky or ITV would publicly discuss who made the initial offer, and both stress that talks are at an early stage, but privately both sides emphasise the mutual opportunity.
For Sky, owned by US giant Comcast since 2018, there is the opportunity to create a larger pool of content and subscribers.
The deal would see it acquire ITV’s media and entertainment business, including its free-to-air channels and public sector broadcaster (PSB) licence, which runs to 2034, as well as the ITVX streaming platform, which has 40 million registered users.
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The ITV brand is likely to be retained and the two companies run separately, but Sky would look to leverage its commercial and technology strengths.
ITV’s PSB licence includes the requirement that ITV’s app be “available, prominent and easily accessible” on online platforms, a crucial shop window as viewers access content directly.
Added to Sky’s existing 13 million subscribers for largely pay-walled content in the UK, it would add muscle as the broadcaster competes for attention, subscription revenue and advertiser spend.
The acquisition would be a restatement of commitment to Sky from Comcast. Having paid £31bn for Sky in a bidding war with Disney seven years ago, it wrote down that investment by more than £6bn in 2022, and earlier this year announced the sale of Sky Deutschland.
While it is navigating the conclusion of exclusivity deals with content providers, including with HBO that gave it rights to hits including Succession, the £5bn renewal of Premier League rights this season underlined the centrality of sport to Sky’s offer.
Scale matters because even companies as prominent in the UK as Sky and ITV are competing with giants, both for audiences and advertisers.
Netflix has 301 million subscribers worldwide and annual revenues approaching $40bn. Amazon, the largest retailer in the world, is now an entertainment content provider. In the US, Warner Brothers Discovery is considering a sale, having already rejected reported offers worth more than $60bn.
Google and Meta meanwhile gobble up up to 60% of all UK advertising spend, a shift in the last decade that has hit ITV particularly hard.
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When it was founded 70 years ago, the third channel was the only way advertisers could reach television viewers. Today it and Sky are competing for a slice of a shrinking pie, with one source citing an estimate that their combined UK advertising revenue is nine times smaller than Google and Meta’s.
Any proposed deal will face regulatory scrutiny from Ofcom and the Competition and Markets Authority, but both parties will argue that these commercial realities mean consolidation would strengthen the broadcast sector rather than weaken it.
ITV still generates critical and commercial hits and live moments. Last year the largest audiences for sport (England’s Euro 2024 semi-final) drama (Mr Bates v the Post Office) and entertainment (I’m a Celebrity) were all on ITV.
Translating that into a commercial model that satisfies investors has proved difficult, with the general drift of the UK economy not helping. The 19% bump in the share price on news of the proposed takeover may be a welcome series finale.
