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ITV – Betting On Streaming And Studios

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Total first quarter revenue rose 17% to £1.0bn, with double digit growth across Media and Entertainment and ITV Studios. Second quarter total advertising revenue is expected to fall 6%, as ITV plc (LON:ITV) laps last year’s Euro Football championships. The group also warned it’s mindful of macroeconomic and geopolitical uncertainty.

ITV’s on track to launch its free, ad-funded streaming service, ITVX, in the final quarter. The group expects this to generate at least £750m of revenue by 2026.

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The shares rose 1.5% following the announcement.

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“ITV is betting on streaming and its studio productions, as traditional advertising revenue becomes harder to come by in the digital age. That will become an even bigger challenge in the face of economic turmoil. As Netflix Inc (NASDAQ:NFLX) has shown us though, streaming is an incredibly competitive place to be, and even the industry stalwarts are struggling. The true final scale of ITV’s digital business is hard to predict, but any market share will be very hard won. ITVX, the free ad-supported streaming service due to come online soon, may be a more attractive option for cost-conscious consumers in the current environment. Getting any sign ups at all will require having an excellent slate of content – good is no longer good enough for today’s discerning binge-watching audiences.

ITV Studios has real potential - it’s the UK's biggest production and distribution company. Providing the content for global streaming giants is an attractive spot to be in. It’s encouraging to see Studios revenue making up a reasonable portion of the whole. Productions are cost intensive though, so plans to make the editing process more efficient make a great deal of sense. The real elevation to margins though is going to come from signing a sustained and elevated number of deals.”

Article by Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdown

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