ITV’s new streaming platform, ITVX, came out of the blocks firing today.
Launched in December, ITVX is a free-to-air platform that hosts a catalogue of discontinued series, sports highlights and ITVX exclusive shows.
Revenue is generated from adverts, although there is a premium service available for £5.99 a month.
In the two months since its launch, it has attracted 1.5mln new registrations, saw streaming hours grow 69% and 'lighter' viewers grow 94% compared to the same period last year on the old platform.
ITV has big aspirations for ITVX, with hopes that it can help grow its digital revenues to £750mln by 2026.
However, its growth is not without some obvious obstacles that could impede it on the road to success.
One such problem is cash.
Already today, full-year results showed investment in its Media & Entertainment division led to a 12% slump in underlying profit to £717mln, while the group’s net debt position increased to £623mln from £414mln.
Available cash for streaming platforms is integral to success, as it funds content creation which is vital in attracting new customers.
As ITVX looks to grow, more investment is necessary to churn out new content, which at least in the short term looks like it will eat away at margins.
This is where ITV could find itself between a hard place and rock, sacrificing margins for content, a move which may not satisfy investors if registrations and viewership start to plateau.
Add into the mix that the group’s total advertising revenue, which still contributes more than 50% of its total income, is expected to tumble because of the current macroeconomic environment.
“At a time when the company is trying to get its ITVX platform off the ground it is particularly unhelpful that advertising is challenging,” said Russ Mould, an investment director at AJ Bell.
Cash for content creation, seemingly, is a problem that the established streaming sites don’t have.
Netflix said it would be spending roughly US$17bn on content in 2023, funding the likes of record viewership shows Wednesday and Dahmer-Monster: The Jeffrey Dahmer Story.
Elsewhere, Amazon spent about US$16.6bn in 2022 while Apple reportedly spent slightly less at a measly US$6.65bn.
Competing with these streaming giants, which have huge amounts of cash put aside for content, raises some concerns about the outlook of ITVX.
It is already too late to the game, according to Victoria Scholar, head of investment at interactive investor.
“ITV still needs the content to attract sufficient eyeballs to drive advertising spend to the platform and it cannot afford to spend the kind of sums Netflix, Amazon and Apple do on programming,” Mould said.
While it cannot compete financially with the likes of Netflix, its free-to-air service may have tapped into a gap in the market.
At a time when consumers have clawed on streaming subscriptions in the face of the cost of living crisis, a free-to-air service could offer binge watchers an alternative, especially given Netflix has not cut its price for UK subscriptions which start from £6.99.
ITVX has started strongly, but it will need further igniting if it is to leave a mark in the streaming world.