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Operating and Performance Review Continued Strategic Report Operating and Performance Review continued Broadcast & Online street was weak while supermarkets Viewing The media environment in which we increased their spend and some of the On-screen we performed strongly with operate is constantly changing. Our Broadcast FMCGs returned to spend in the second half viewing up for the second consecutive year. & Online business is robust and evolving of 2017. Entertainment & Leisure was down, We increased our spend on entertainment to take advantage of the significant impacted by tough comparatives from the but sports costs were lower as a result of opportunities for growth. European Football Championship in 2016. there being no major sports tournament Cars and Telecommunications increased in 2017. ITV through its free-to-air channels offers their spend around product launches and unique audience scale and reach as well digital brands continue to spend heavily ITV Family SOV grew 2% with a strong as the key demographics demanded by on television to build brand awareness. performance across the schedule. This level advertisers. The ITV Hub, the digital home of growth is the second biggest in ITV’s for all our channels and content, is growing Total costs were down as the cost savings recent history and never before has ITV rapidly, driven by viewers’ appetite for catch and lower schedule costs offset the increased delivered two years of consecutive growth. up and VOD and the quality of our content. investment on the ITV Hub, ITV Hub+ and ITV Daytime shows including Good Morning We continue to explore and trial new ways, Box Office (our pay-per-view channel used Britain, This Morning and The Chase grew both free and pay, to distribute content to to show boxing matches). their audiences and Coronation Street broadcasters and platform owners as well and Emmerdale continue to perform well as directly to consumers. Overall Broadcast & Online adjusted EBITA and are now the UK’s two largest soaps. declined 7% to £599 million (2016: £642 We launched the sixth weekly episode Financial performance million) which has led to a one percentage of Coronation Street in September, which Broadcast & Online total revenue was point reduction in the adjusted EBITA margin has further strengthened its performance. down 3% in the year at £2,075 million (2016: to 29% (2016: 30%). We successfully aired a range of new dramas £2,132 million). We delivered 7% growth in Online, Pay & Interactive, driven by double- 2017 2016 Change Change Twelve months to 31 December – on a continuing basis £m £m £m % digit growth in online advertising, but this NAR 1,591 1,672 (81) (5) was offset by the 5% decline in NAR. Including sponsorship, VOD and self-promotion, Online, Pay & Interactive revenue 248 231 17 7 ITV total advertising was down 3%. SDN external revenue 70 67 3 4 Other commercial income 166 162 4 2 Advertising categories such as Retail, Finance Broadcast & Online non-NAR revenue 484 460 24 5 and Food continued to see declines due Total Broadcast & Online revenue 2,075 2,132 (57) (3) to the uncertain economic outlook, along Total schedule costs (1,025) (1,050) 25 (2) with the weaker pound causing inflationary pressures, leading advertisers to reduce Other costs (451) (440) (11) 3 spend in order to maintain margins. Within Total Broadcast & Online adjusted EBITA 599 642 (43) (7) Retail, spending has been mixed: the high Adjusted EBITA margin 29% 30% Good Karma Hospital was the third most watched drama on ITV in 2017, averaging 6.9 million viewers and a 26% share. It has been recommissioned for a second series in 2018. 24 ITV plc Annual Report and Accounts 2017 Operating and Performance Review Strategic Report Strategic Governance Diana, Our Mother: Her Life & Legacy was ITV’s highest rated factual in over 14 years. It had 9.4 million viewers and a 36% share. Financial Statements Unforgotten returned to ITV for its second series. It is produced by Mainstreet Pictures, part of ITV Studios UK. It averaged 6.1 million viewers and has been recommissioned for a third series in 2018. including Liar, Good Karma Hospital, and have seen a significant increase in Long-form video requests were up 34% Fearless, Bancroft and Little Boy Blue and our target demographics on ITV2 and ITV4. and online viewing consumption, which new entertainment shows, The Voice, The Our 16–34s share of commercial impacts measures how long viewers are spending Voice Kids, The Keith and Paddy Picture (SOCI) on ITV2 was up 17% helped by the online, was up 39%. The ITV Hub has now Show and Five Gold Rings, as well as new phenomenal success of Love Island as well been the fastest-growing public service sitcom Bad Move. We continued to drive as Celebrity Juice, Family Guy and American broadcaster online service for the last three significant audiences with our returning Dad. Male SOCI on ITV4 was up 12% helped years driven by the good user experience brands such as Broadchurch – which was by ITV’s horse racing coverage, The French and great content and now has 21 million Additional information the most watched drama in the year – Vera, Open and the Isle of Man TT Races. ITV3’s registered users. Unforgotten, Victoria, Cold Feet, Ant & Dec’s viewing performance improved in the year Saturday Night Takeaway, I’m A Celebrity… due to the strong performance of dramas The ITV Hub helps ITV reach valuable younger Get Me Out Of Here! and Britain’s Got Talent. such as Midsomer Murders, Lewis and audiences – 75% of the UK’s 16–24 year olds Our news programming continues to Endeavour. ABC1 adults SOCI on ITV3 was are registered together with 65% of the UK’s perform well with highlights including our up 1% making it the most popular digital 16–34 year olds. Younger viewers increasingly General Election coverage, as does our channel for this demographic. use the ITV Hub for simulcast viewing, as sporting schedule with the Six Nations well as catch up, with programmes such as Rugby Championships and the launch of ITV Hub Love Island delivering record viewing with horse racing on ITV. Some of our schedule The ITV Hub, which is now available on 1.3 million simulcast requests for the final. did not perform as well as we had hoped, 29 platforms, continues to grow rapidly, for example The Nightly Show, Fearless and driven by viewing on mobile and connected We are using the insight we gain from our Bigheads, so will not return in 2018. televisions. The ITV Hub is now pre-installed registered users to develop more targeted on around 90% of all connected televisions advertising solutions and to increasingly drive We continue to target the hard to reach sold in the UK and launched on Apple TV, viewing through personalisation. In the year, demographics demanded by advertisers – Apple’s new TV app and Microsoft XBox we launched personalised ITV Hub home particularly young and male audiences – in 2018. pages for our audiences and have introduced through our digital channels and online, data-driven recommendations and mobile notifications to registered users. 25 Strategic Report Operating and Performance Review continued ITV commercial audiences Strong advertising proposition As a result, ITV’s ‘Other commercial income’ While political and economic uncertainty increased by 2%, with new sponsorship has led advertisers to reduce their current around ITV horse racing and The Voice, 99 99 99 98 100 96 96 95 95 93 spend, television remains one of the offset by a reduction in third-party airtime most efficient and effective mediums for sales commission and revenue primarily advertisers to achieve mass simultaneous from UTV following ITV’s acquisition in reach. As viewing and advertising becomes February 2016 and successful integration 2017 more fragmented, the scale of advertising of the business. 96% that television, and particularly ITV, delivers 99% becomes increasingly valuable. Digital advertising is growing rapidly and 13 14 15 16 17 we have seen double-digit growth in our Over 3 million ITV’s unique ability to deliver mass VOD advertising revenues on the ITV Hub, Over 5 million audiences, as well as more targeted which delivers more targeted demographics demographics across the family of channels, and a high-quality, trusted and measured has enabled us to again increase our share environment for online advertisers. of the television advertising market (SOB) to 47.6% from 47.4%. ITV delivered 99% of all In 2017, ITV announced a trial for addressable commercial audiences over five million and advertising with Sorenson on connected 96% of all commercial audiences over three Smart televisions. We have also launched million. SOV provides an overall measure a trial of a self-service portal so that any of viewing performance, but because business, however small, can easily access advertisers are buying scale and breadth advertising on ITV. of audience, SOV is not necessarily a direct indicator of advertising performance. Remain responsive to a changing media environment ITV aims to maximise further the value of Linear television viewing remains resilient its airtime and drive new revenue streams despite significant changes in the availability through sponsorship, interactivity and and delivery of content. On average viewers branded extensions. ITV utilises the core watched 203 minutes of television a day in assets of its strong brand and reputation, 2017. This is lower than 212 minutes in 2016 unique commercial relationships and quality and partly is due to there being no major production capability to deliver a wide sports tournament in 2017. The majority variety of marketing solutions. of viewing remains live at over 75% as Horse Racing moved to ITV from Channel 4 television continues to have the power in 2017 with races broadcast across ITV main to bring audiences together.
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