ITV PLC (LSE:ITV) shares took a dive in early trading despite record revenues, above-expectations earnings and cheers from analysts,
It is not immediately clear why ITV became such an unattractive stock after earnings figures were released but what seems to have spooked investors was its big announcement - the launch of streaming service ITVX at the end of 2022 to replace its rudimentary ITVHub.
ITVX will be the UK’s first integrated advertising and subscription-funded platform, with a focus on original content as the service plans to launch a new series every week.
That means costs will inevitably mount as revenue and viewers numbers try to keep up.
ITV plans to invest £20mln on ITVX this year, in addition to £25mln in the platform’s data and technology capabilities, and £160mln in 2023.
In total, ITV will invest a whopping £1.23bn on content in 2022 and £1.35bn in 2023 across its linear and streaming channels, with the bullish aim of a subscriber base of 2.5mln and 2bn streaming hours by 2026.
In the meantime, it will be forced to compete with a globally and nationally competitive streaming environment where successful content investment has proven very pricey.
Disney spent US$16.8bn on content in 2021, while Netflix spent US$17.3bn on its original features and licences, against 221.84mln subscribers, representing a heavy premium on viewers.
The challenge for ITV will be tempting subscribers to spend money in the as-yet-unproven UK integrated streaming platform.
In the US, NBC’s three-tier Peacock service reached 24.5mln active accounts at the end of 2021, with an impressive 9mln opting to become paid members.
ITV’s plans could be revolutionary for the UK streaming market, but for now they represent an expensive gamble in the midst of a cost-of-living crisis, and one investors don’t appear fully ready to take just yet.