Why Securing Platform Carriage Deals Is Vital for Britbox a Report Prepared by Oliver & Ohlbaum Associates Ltd

March 2020 Why securing platform carriage deals is vital for BritBox A report prepared by Oliver & Ohlbaum Associates Ltd Why securing platform carriage deals is vital for BritBox Summary: • Ahead of BritBox’s launch in the UK last November our research found that 19 per cent of people were interested in it; we predicted this might translate into 1.7 million subscribers at the end of the first year • Having conducted further research almost four months after launch, we found that only 1.5 per cent of respondents have a subscription, representing around 380,000 subscribers • A further 560,000 have tried the service but won’t be subscribing, while 100,000 have already cancelled their paid subscriptions – suggesting that BritBox has failed to capitalise on the initial interest • The net promoter score of -46 indicates that a sizeable majority of consumers would not recommend the service to friends • With Disney+ launching on March 24, following its strong performance in the US, there is a risk that BritBox will struggle to establish itself in the face of significant and increasing competition • If BritBox is to have any chance of success in the UK, ITV and the BBC need to act fast to capitalise on brand recognition, and implement platform carriage deals as soon as possible BritBox – ITV and the BBC’s subscription video on demand (SVoD) service – arrived in the UK last November, offering a library of British content and a small number of original programmes. At a cost of £5.99 per month, BritBox is slightly cheaper than the standard plans from the biggest subscription video on demand (SVoD) players in the UK market: Netflix costs £8.99 per month, while Amazon Prime Video costs £7.99 per month. Competition is fierce though, and these services are also available more cheaply; with Netflix’s basic plan priced at £5.99 (limited to one screen at a time and no HD video), while Amazon Prime Video is available for £6.58 per month if a year is paid for upfront, and includes numerous other benefits. Almost four months since launch, we wanted to know how successful BritBox has been. So, in collaboration with our research partner, Fly Research, O&O conducted a survey of over 5,000 UK respondents to find out. What does BritBox offer and how is the SVoD market developing? Alongside recent boxsets, including the BBC’s Rev and Les Misérables, and ITV’s Broadchurch, BritBox offers older episodes of returning hits such as ITV’s Endeavour, as well as a large library of classic ITV and BBC series like Morse, The Good Life, and Keeping Up Appearances. Plus, there’s a classic film catalogue including Olivier’s Hamlet, Hitchcock’s The 39 Steps, and over a dozen Carry On titles. BritBox has also promised some original programming1 though, at present, the exclusive non-broadcast content is relatively limited, including early releases of the latest Midsomer Murders and the exclusive import of Lambs of God, an Australian drama. Since launch, BritBox has struck deals with Channel 4 and Channel 5, which will see some of their content added to the service, including some films from the Film4 catalogue. As depicted in its marketing campaign, one of BritBox’s USPs is the ability to search by actor, as well as more usual content discovery systems such as A-Z and genre (which is a little harder to access). This is an interesting angle, but ultimately, it is the available content which distinguishes a service. In an increasingly competitive SVoD market, will BritBox offer enough to attract subscribers? 1 We previously estimated the original content budget in the first year might be enough for a couple of high-end drama series: Matthew Moore, ‘Viewers more likely to watch Disney TV than BBC’s BritBox’, The Times, 13 September 2019, https://www.thetimes.co.uk/article/viewers- more-likely-to-watch-disney-tv-than-bbcs-britbox-kq5q23qv7 Oliver & Ohlbaum Associates Ltd 2 Why securing platform carriage deals is vital for BritBox Consumers already face some tough decisions in terms of where to allocate their entertainment budgets. Around 44 per cent of households subscribe to Netflix, while 25 per cent have Amazon Prime Video, and 6 per cent use Sky’s NowTV service. With Disney+ due to launch on March 24, this decision on what to pay for will get even harder, and services from other US Studios such as NBCU’s Peacock, Warner’s HBO Now (albeit likely dependent on the existing HBO licensing deal with Sky Atlantic), and CBS’s CBS All Access – or a new Viacom/CBS equivalent are expected to follow. It has also been announced that Acorn TV, a US SVoD service owned by ITV/BBC’s partner in the USA version of Britbox, AMC, will launch in Europe this year – it will specialise in non-US programming including UK output. But the Disney+ launch probably presents the most immediate challenge to BritBox in the UK. When Disney+ launches on 24 March, it enters the market at the same price point as BritBox – or for £49.99 if the whole year is paid for upfront (£4.17 a month). The service will offer new content such as the Star Wars series The Mandalorian, along with film titles such as: The Force Awakens, Avengers: Infinity War and Ice Age: Continental Drift, and exclusive programming from the Marvel Universe. The combination of Disney’s strong brand and the broad appeal of its content could see it succeed in the UK. Indeed, a previous O&O survey found that a quarter of UK respondents would be interested in taking up a Disney+ subscription.2 When Disney+ launched in the US last November, at $6.99 per month, estimates suggested it could reach 18 million subscribers worldwide by the end of 2020 3. Our own survey indicated that 42 per cent of respondents were interested in the service, which we predicted might translate into 46 million homes by year three. After just three months, Disney has now signed up 29 million subscribers in the US; and although this is bolstered by a free access deal for Verizon customers, it has still significantly surpassed expectations. To put this in context, BritBox had been in the US market for over two years, at same price point, and had a modest 600,000 subscribers at the time of the Disney+ launch.4 How is BritBox performing so far? Our previous survey, conducted prior to the launch of BritBox, found that 19 per cent of respondents were interested in it, which we predicted might translate into 1.7 million subscribers by the end of year one (taking into account respondent’s tendency to overstate their likelihood of committing to a service). On this basis, almost four months after launch, we might have expected the service to have attracted 560,000 subscribers or more. Our new survey sought to test this and asked about respondents’ awareness of BritBox and, where relevant, their experience in using it now that it has launched. We found that the pre-launch interest from 19 per cent of the population has translated into use by just 6 per cent of respondents, despite a free 30 day trial being available. Indeed, 94 per cent of respondents reported that they hadn’t used BritBox, and at least 26 per cent of respondents had never even heard of the service. Overall, only 1.5 per cent said they had a subscription – which equates to roughly 380,000 UK households at a national level. This suggests BritBox will struggle to reach our estimate of around 1.7 million subscriptions by the end of its first year (this November). Though there is some hope in the 2.0 per cent of respondents, representing around 500,000 potential subscribers, who reported that they have tried BritBox and might subscribe. 2 Matthew Moore, ‘Viewers more likely to watch Disney TV than BBC’s BritBox’, The Times, 13 September 2019, https://www.thetimes.co.uk/article/viewers-more-likely-to-watch-disney-tv-than-bbcs-britbox-kq5q23qv7 3 Todd Spangler, ‘Disney Plus land grab: analysts up subscriber forecasts with Verizon free-giveaway pact’, Variety, 23 October 2019, https://variety.com/2019/digital/news/disney-plus-subscriber-forecasts-verizon-1203380470/ 4 BritBox was launched in Canada in the following year, priced at CA$8.99 per month. Samuel Roberts, ‘BritBox has launched in the UK, but the streaming service doesn’t feel worth it yet’, Tech Radar, 7 November 2019, https://www.techradar.com/uk/news/britbox-has-launched-in-the- uk-but-the-streaming-service-doesnt-feel-worth-it-yet; Julia Alexander, ‘Disney+ has surpassed 28 million subscribers since launch’, The Verge, 4 February 2020, https://www.theverge.com/2020/2/4/21122106/disney-plus-subscriber-numbers-mandalorian-hulu-espn-q1-earnings Oliver & Ohlbaum Associates Ltd 3 Why securing platform carriage deals is vital for BritBox If all of respondents who reported that they ‘might subscribe’ could be persuaded to sign up by November, BritBox might end year one with a total subscription base of almost 880,000 subscribers – even if it did not persuade any of those who have not yet shown an interest in it to sign up. UK respondents’ awareness of BritBox 67.6% 26.0% 2.2% 2.0% 1.5% 0.4% 0.3% I think I’ve heard of No – never heard of Tried but won’t Tried & might Currently a paid Subscribed in the Access via somebody it but never used it it subscribe subscribe subscriber past but not now else’s subscription Note: Have you ever heard of, or tried, any of the following subscription video on demand services [BritBox]? Source: Fly Research (n=5,104), Oliver & Ohlbaum analysis Perhaps most concerning though, is the fact that 2.6 per cent of respondents, representing around 660,000 households reported that they have tried the service and either won’t subscribe after the free trial (560,000) or have cancelled their subscription already (100,000).

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