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Scotland's Home of News and Entertainment

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Scotland's Home of News and Entertainment Scotland’s home of news and entertainment Strategy Update May 2018 STV in 2020 • A truly multi-platform media company with a balanced profit base across broadcast, production and digital o Expect around 1/3rd of profit from sources other than linear spot advertising (vs 17% today) • A magnet for the best creative talent from Scotland and beyond • A brand famous for a range of high quality programming and accessible by all Scots wherever they are in the world via the STV app • One of the UK’s leading producers, making world class returning series for a range of domestic and international players • Working in partnership with creative talent, advertisers, businesses and Government to drive the Scottish economy and showcase Scotland to the world Scotland’s home of news and entertainment 2 We have a number of strengths and areas of competitive advantage Strong, trusted brand Unrivalled Talented, connection with committed people Scottish viewers and advertisers Robust balance sheet and growing Scotland’s most returns to powerful marketing shareholders platform Settled A production relationship with business well ITV which placed for incentivises STV Profitable, growing “nations and to go digital digital business regions” growth holding valuable data 3 However, there is also significant potential for improvement •STV not famous for enough new programming beyond news •STV brand perceived as ageing and safe BROADCAST •STV2 not cutting through •News very broadcast-centric and does not embrace digital •STV Player user experience lags competition •Limited two-way relationship with our audience •VOD content proposition not broad enough •Sub-scale and no strong USP •Needs to be more of a magnet for creative talent •Doesn’t make the best of the STV “shop window” •Insufficient organisational focus on growth areas •Risk averse and lack of leadership in places •Culture is corporate not creative 4 We have developed a clear vision for the kind of business STV needs to become Agile, creative, fun place to work A magnet for Giving back creative talent to Scotland Connecting Making a with audiences Scotland’s home of news range of great and advertisers and entertainment content Embracing the personalised Clear and future of TV committed Digital front and branding centre 5 To implement the vision we will focus on 3 strategic objectives Maximise the value of our broadcast business by delivering high quality, 1. cost-effective news and entertainment 2. Drive digital growth by creating an STV for everyone 3. Build a world class independent production business 6 Objective 1 Maximise the value of our broadcast business by delivering high quality, cost-effective news and entertainment •Create single, integrated news gathering function across broadcast & digital Create a distinctive, cost effective, •Invest in technology and multi-skilling to improve on-screen output future-facing news organisation •Deliver cost savings of £1m p.a. and a headcount reduction of 34 Invest in a wider range of new, original •Close STV2 in summer 2018, saving £1m p.a. and reducing headcount by 25 content for our main channel and STV •Invest in new original programming for STV and STV Player, focusing on formats Player, replacing STV2 and returnable series Make the most of our unique •Pilot new in-house formats on STV main channel Channel 3 marketing shop window •Refocus marketing spend on STV original programming and the Player Maximise our share of the advertising •Launch STV Growth Fund, investing £5m of airtime to support Scottish businesses market •Improve addressable advertising capability Work in partnership with the TV •Strategic partnership with a platform platforms to drive more value •Launch STV Player on Sky and Virgin 7 BROADCAST Overall, television viewing is highly resilient, with STV protected from any market volatility by a favourable deal with ITV Live TV TV Playback Broadcaster VOD Subscription VOD ITV/STV deal •Programming and advertising agreements provide significant protection to STV’s Broadcast business •Only 40% of any fall in national airtime or sponsorship revenues flows through to STV •If ITV increases programming spend, STV’s costs only increase if our advertising and sponsorship revenues increase •On screen, STV has had the strongest start to the year since 2009, with share of viewing +8% so far in 2018 This means that STV’s Broadcast business is likely to outperform the ITV Network and that STV is incentivised to push VOD viewing 8 BROADCAST Our main channel consistently outperforms ITV driven by the soaps and anything Scottish STV peaktime share STV STV local programming vs. ITV Share vs. Share vs. network Network Soaps +2 Elaine C Smith’s +7 Burdz Eye View The Loch +6 Broadchurch +3 Thingummyjig +7 Hogmanay Ceilidh The Voice +2 Scotland’s +3 Ross Kemp: Barlinnie +6 Scammers Source: BARB 2007-2018, share for STV is STV/HD/+1 individuals Billy Connolly and Me +3 People’s History +3 Scotland vs England football +34 Animal 999 0 9 BROADCAST We deliver high quality, popular news, but our STV2 news is not building an audience News at Six on STV: Share by region STV2 Bulletins (Average Audience) ITV Border 40 Mon – Fri ITV Ulster 38 STV 26 10:00 - 10:05 STV News 549 ITV North West 24 ITV Yorkshire 22 13:00 - 13:30 STV News at One (Scotland) 1,846 ITV Wales 21 UK Terrestrial Network 21 14:00 -14:05 STV News (Ayr) 2,392 ITV North East 20 16:00 - 16:05 STV News (Aberdeen) 1,881 ITV East 19 ITV South, S.East & Channel Isl. 19 17:00 - 17:05 STV News (Ayr) 1,145 ITV Midlands 18 ITV South West 17 19:00 - 19:30 STV News Tonight (Scotland) 4,121 ITV London 16 ITV West 16 21:00 - 21:05 STV News (Dundee) 6,471 Source: BARB 2017, All ITV Regions, Mon –Fri, 18:00 -18:28, Share. 22:00 - 22:30 STV News at Ten (Scotland) 3,001 Competition in news will get even tougher when the BBC Scotland channel launches, featuring a Scottish news hour at 9pm 10 BROADCAST STV2 as a whole is struggling to cut through STV2's regular programming in 2017 (average audience across the year) STV’s local TV channels now 4 years old Taggart 9,475 Peter and Roughie's Football Show 7,982 Low brand awareness and poor audiences despite prominent EPG slot Medics of the Glen 5,644 Edinburgh Festival Live 4,222 Onerous programming obligations Murder at 9 4,010 Fair City 3,868 “Filling the schedule” requires focus on volume Take The High Road 3,038 over quality The People's History Show 2,899 Live at 5 2,601 Advertiser demand and premium remains low The Late Show 2,581 Will be significantly impacted by launch of BBC Scotland channel (with 15 x STV2’s budget) Audience uplift required vs. 2017 for STV2 to break even = 5.2X 11 BROADCAST This reflects the wider market, where the big channels and the new VOD players continue to prosper at the expense of the digital “long tail” The PSBs still account for 70% ...while smaller digital channels are in ...and VOD viewing continues to grow. of TV set viewing decline... Share change Rank Weeks 1-12 2018 (% points) 1. Drama -0.28 2. 5USA -0.23 3. Sky Sports Main -0.19 Event 4. Sky News -0.16 5. Star Plus -0.15 6. Sky Sports Cricket -0.13 7. Tru TV -0.12 8. Sky 1 -0.12 Change in “unmatched” VOD viewing on TV set, 2014-17 (mins per day) Weeks 1-12 2018 9. Disney Junior -0.11 10. ITVBe -0.11 Top 20 digital channels by share loss Source: Enders Analysis: BARB/AdvantEdge 12 BROADCAST Our advertising rates tell the same story – STV main channel remains robust but we have a strong incentive to invest in STV Player over STV2 Player Selling to advertisers at £4.50 CPT (average) £1.50-2.00 CPT £15-20 CPT 20 billion impressions 340 million impressions 400 million impressions £90m revenue £1m revenue £7m revenue We are selling STV Player impressions at 10x the value of STV2 so we could deliver a significantly lower audience to the Player and still make more money 13 BROADCAST We will invest in a range of new, original programming for STV and STV Player, funded by savings in news and the closure of STV2 Key Elements Strategic benefits • New content will be windowed across STV main channel and STV Player, similar to BBC3 model Focuses on quality - fewer, bigger, better • A range of entertainment, factual and reality targeting Much better use of opt out slots and spend 25-45 year olds Breaks STV out of Scotland • Programming will be made in-house by STV Productions Develops new STV talent and a new digital content team Sold at the same premium as VOD • Permanent home on STV Player STV Productions can pilot ideas • All episodes available immediately (boxsets) New digital unit will focus on younger formats • Accessible throughout the UK (and globally) and series We will update on our new content plans later this year 14 BROADCAST Our news modernisation plan will invest in people and technology, reinforce our on-screen advantages, and save us money overall Scotland at heart Simplified, leaner structure Rooted in Scotland's Equal emphasis on broadcast and digital communities All our journalists to be multi-skilled Investment in technology and connectivity Original stories across sites More details in Committed to localness – no changes to DMA’s attached Ofcom licence requirements in STV North First and STV Central report Headcount to reduce by 34, cost savings Truly multi-platform of £1m p.a. the home of Scottish news 15 BROADCAST In partnership with advertisers we are also launching the STV Growth Fund, investing £5m of airtime to support Scottish businesses Launch advertisers Objectives Partners Nurture the next generation of Entrepreneurial Scotland Scottish House Move Scottish businesses 5pm.co.uk Position STV as a long term partner Scottish Council for Development and Industry McTear’s Airtime offered on flexible basis: Argyle Holidays free, match funding or rev share Advertising Association Glasgow Private Hire Lead generation and pipeline to Cooke + Indi STVgrow futurebenefits advertising include: budgets Strategic use of existing assets at minimal cost to STV + many more There will be a launch marketing campaign for the Growth Fund across TV, social and email at the end of May.
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