ITV’s overdue threesome pays immediate dividends

The launch of a third channel has strengthened ITV’s satellite profile

Three is a magic number – or so insists BBC3, which uses the song in its channel idents. And having three channels is certainly proving valuable for ITV, which has belatedly discovered the value of a multi-channel strategy as a way to offset the inevitable decline in the market share of ITV1.

ITV3, its newest channel, has got off to a good start. It arrived with a bigger than expected bang on November 1 last year, when it popped up on satellite thanks to a last-minute deal with BSkyB, instead of being confined to Freeview and cable, as originally announced.

Sky had been reluctant to put ITV3 on satellite at that stage, saying there was a queue of other channels waiting to get on. The story goes that when ITV’s on-screen promotions revealed that ITV3 was available only on Freeview and cable, dozens of viewers complained to ITV – which promptly passed them onto Sky.

The solution lay in the two companies’ joint venture, Granada Sky Broadcasting, which had two satellite channels, Granada Plus and Men and Motors. On November 1, ITV announced it had bought Sky’s 49.5 per cent share in GSB for &£10m and was turning Plus into ITV3. That meant it reached the entire digital universe of about 13 million homes.

ITV says ITV3 – which broadcasts drama and movies – is now outperforming the old Granada Plus and most of its multi-channel rivals. In its first three months on the air, it had a viewing share of 1.11 per cent, overtaking Hallmark and Living and approaching the channel it regards as its chief rival, UKTV Gold.

Its reach since launch is more than 19 million viewers, which ITV says is exceeded only by ITV2, BBC3 and Sky One among non-terrestrial channels. And in Freeview homes, which don’t receive Sky One, ITV3 was second only to ITV2 as the most popular non-terrestrial channel.

So far, so good. But of course ITV3 should do well, given the cross-promotion it gets from ITV1 and the amount of familiar, high-quality ITV drama it is able to show – from Inspector Morse and A Touch of Frost to Cold Feet and Heartbeat.

The fact is that ITV has finally come up with a multi-channel strategy. ITV3 is just one channel, but its presence alongside ITV1 and ITV2 (and to a lesser extent the ITV News Channel) makes real sense to viewers and strengthens ITV’s overall position in the market.

ITV2 – which has been around for several years and has a younger target audience – is also growing fast. ITV says that last year it was the third-most popular non-terrestrial channel, behind Sky One and Sky Sports 1. In the first four weeks of 2005, it has overtaken Sky One to become the most popular multi-channel station, with a viewing share of 2.02 per cent – a 50 per cent increase in the past year.

“ITV2 is now bigger than Sky One and 50 per cent of the growth in multi-channel viewing in the past year has come from ITV2 and ITV3,” says ITV Broadcasting chief executive Mick Desmond. “We can now grow our new channels by building on the strength of ITV1, through cross-promotion, complementary scheduling and programming.

“These are not niche channels,” he adds. “ITV1 is aimed at the whole of the UK, ITV2 is primarily for 16- to 34-year-olds and ITV3 is aimed at ABC1s aged over 40. But we also try to make sure that if there’s a female bias on ITV1 at some point, we’ll have a show for a younger audience on ITV2 and a male-oriented film on ITV3.”

Desmond says the launch of ITV3 means ITV is getting a much better return on its programme investment, because ITV3 already gets much higher audiences than Granada Plus.

And that is a reminder of just what a mess ITV’s previous owners – Granada and Carlton – made of their digital strategy. Instead of accepting that ITV was their strongest brand from the start, the two companies insisted on launching their own channels – Carlton Cinema, Carlton Food Network, Granada Men & Motors and Granada Plus.

The one time they agreed to embrace the ITV name was spectacularly ill-judged – changing the name of On Digital, the digital terrestrial pay-service, to ITV Digital just before it went comprehensively bust.

That’s now history and Desmond believes the multi-channel strategy gives ITV a chance to persuade advertisers and the City that it can still build its business in the long term, rather than simply manage inevitable decline. It has plans to launch more channels, including pay-services. “As we move towards digital switchover, it would be Canute-like to think that ITV1 won’t decline, as will BBC1,” says Desmond, “but we now need to focus on ITV as a whole. Our advertising revenue is 11 per cent up in the first quarter of 2005 and we believe that in years to come we can start to increase our overall audience share.”

That would be an achievement.

Torin Douglas is media correspondent on BBC News

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