ITV and the BBC are hoping to grab a slice of the revenues sloshing about in the online video streaming market after revealing they are working together on a paid-for streaming service called BritBox.
BritBox will mainly feature archive BBC and ITV shows, although there will be some original programming. The broadcasters have described the pricing as “competitive” and speaking on an earnings call this morning, ITV CEO Carolyn McCall said it would be ad-free.
The idea, she added, is that BritBox would be “complementary” to Netflix rather than in direct competition. She pointed to research which shows that 12 million UK households have at least one subscription video-on-demand (SVOD) service, with 43% interested in subscribing to a new service that features British content, rising to half in Netflix households.
“This is not the equivalent of Netflix, which commissions globally. When they look at content, they look at it working in different markets. When we commission content we’re looking at it working in the UK specifically,” she explained. “[BritBox] is a permanent, comprehensive home for the widest range of British content available in one place.
“[People] are looking for an additional service featuring British content. We are not a substitute for Netflix, we are a complement.”
BritBox is already available in the US, where it has 500,000 subscribers just two years after launching. However, this pales in comparison to Netflix’s 63 million paying users.
And analysts believe a new service in the UK will be a “tough sell”. Most consumers are used to getting content either for free via ITV or included in the cost of the licence fee via for the BBC.
BritBox is not a substitute for Netflix, it is a complement.
Carolyn McCall, ITV
Yet it is a move both the BBC and ITV feel they must make given the growing popularity of streaming services and decline in live TV viewing. In the US, Disney is making a similar move with the launch of its own streaming service, Disney+.
Research done by BARB shows that while live and seven-day catch-up TV viewing is by far the most popular activity on a TV set, minutes spent fell by 5% year on year in the 12 months to the end of September 2018. There was a 5% rise in seven- to 28-day timeshifted viewing, although the relative sizes of the audiences mean this increase does not make up for the decline in live TV. And SVOD viewing was up 17%.
ITV’s results, also out this morning, show ITV expects ad revenues to decline by up to 4% in the first third of this year. Data from AA/Warc shows TV ad revenues in slight growth this year, at 0.4%.
“The low costs involved mean this isn’t a massive risk for the two broadcasters and there is a reasonable chance that it could become profitable at some point, given there is certainly a market for the full series of quality British drama even if most of them have been on Netflix for years,” says Tom Harrington, senior research analyst for television at Enders Analysis.
How to position BritBox given people aren’t used to being charged for BBC and ITV content will be a key challenge. There are also questions over how to differentiate between what is available on BritBox and the content that catch-up services ITV Hub and BBC iPlayer offer.
Currently, ITV programmes are available on Hub for a month after initial broadcast, with BBC operating a similar policy. But the BBC is hoping to increase that to a year, meaning people paying for BritBox would have to wait to gain access to shows they can watch for free elsewhere.
“[BritBox] will muddy the iPlayer/Hub waters as both are trying to bulk up those services with full series,” adds Harrington.
And despite McCall’s insistence BritBox doesn’t compete with Netflix or Amazon Prime Video, BBC and ITV will still need to build brand awareness and a strong positioning if it is to succeed. This is an area where Netflix in particular has been so effective, helped by a marketing budget thought to be around $1bn globally.
According to YouGov BrandIndex, Netflix has one of the strongest brands in the TV and radio industry in the UK. Its awareness score is 92.5% among the British population, somehow ahead of the BBC on 92.3% and just behind ITV on 95.3%. And it has the highest brand attention – a score of 28.5 compared to 22.7 for the BBC and 9.6 for ITV – and ad awareness (2.9, ahead of the BBC on 10.1 and ITV on 8.7).
In terms of its overall index score (a combination of metrics including quality, value and impression), Netflix comes top of the pile on 36.9, ahead of the BBC on 29.6, ITV on 23.2 and Amazon Prime Video on 15.4. And it manages to strike a balance between quality and value, topping the list for most measures with a score of 39.8 and 31.5 respectively.
By comparison, the BBC has a quality score of 35.8 and value score of 18.1. ITV is on 22.8 for quality and 16.5 for value, while Amazon Prime Video’s scores are 18.4 and 19.7.
Going up against the Netflix brand will be difficult. Clearly both BBC and ITV will be able to promote it, which will add to the firepower. But ITV’s plans to invest £25m this year and £40m in 2020 pale in comparison to Netflix’s investment. For context, £25m is about equal to what it costs to make three episodes of hit Netflix series The Crown.