Strategic Report Strategy and Operations Pictured: The Voice from Talpa Media, is one of the biggest selling entertainment formats in the world. It is broadcast in more than 180 countries with the format produced locally in 63 countires. 24 42840AR_09XStrategicXPriorityX2_AW.indd 24 02/03/2017 20:41 ITV plc Annual Report and Accounts 2016 Strategic Report Strategic Priority 2: Grow an international content business Growing a scaled international content business is also central to our strategy as an integrated producer broadcaster. As ITV creates and owns more content, our channels provide a platform to showcase our programmes before distributing them across multiple platforms in the UK and internationally. See page 26 for more 25 42840AR_09XStrategicXPriorityX2_AW.indd 25 02/03/2017 20:41 Strategic Report Strategy and Operations Strategic Priority 2 continued Growing global demand for content Fast growing, international producer They are Hell’s Kitchen, which has been The strong global demand for content of scale commissioned for two series in 2017 and from broadcasters and platform owners Since 2010 we have almost doubled the Texas Rising and Best Time Ever, which are provides a significant opportunity for ITV number of hours of content we produce. not returning. We delivered the second series Studios. We estimate that the global content In 2016 we produced around 7,800 hours of two US dramas, The Good Witch and market is growing at about 5% per annum, of content, through our 60 labels, supplying Aquarius. We have also benefited from the with some genres such as drama growing over 234 channels in 10 countries. ITV is delivery of a high volume of programmes more rapidly than others. To capitalise on this, becoming an increasingly scaled and from our stable portfolio of unscripted series, our strategy remains to develop, own and international business: we are the number including Pawn Stars, American Restoration, manage content rights in genres that return one commercial producer in the UK and a Alone, Rich Kids of Beverly Hills and First 48 and travel internationally – namely drama, leading producer in Europe and the US, with and new commissions, including American entertainment and factual entertainment. 50% of total Studios revenues coming from Grit, Killing Fields and Millionaire Matchmaker. outside the UK. As well as strong demand from broadcasters, Across ITV RoW, we have seen very significant we are seeing significant demand from a In 2016 ITV Studios total revenues grew 13% growth with revenues up 67% to £355 million variety of OTT platforms who want library to £1,395 million (2015: £1,237 million) and (2015: £213 million) driven by Talpa Media. and close-to-broadcast content rights as adjusted EBITA increased 18% to £243 million Our production bases in Australia, Germany, well as ‘digital first’ content. (2015: £206 million), driven by the acquisitions France, the Netherlands and the Nordics we have made. produce original content as well as local Studios revenue growth £m versions of ITV Studios formats. We now £1,395m ITV Studios has three production divisions produce 14 different formats in three or – ITV Studios UK, ITV America and ITV Rest more of our production territories, for of World (RoW) and across these businesses, example; Come Dine With Me, The Chase, ITV agreed 228 new commissions and 188 The Voice from Talpa Media and Love Island. 1,395 recommissions in 2016. 1,237 13% YoY Talpa Media is performing well and continues 933 857 The US and UK are the dominant creative to develop many new formats including 712 markets, with the US the largest exporter of Dance, Dance, Dance, CannonBall and 5 Gold 612 597 554 scripted content and the UK the world leader Rings which are all selling well. It has also had +134% for exported formats. Over the last few years the benefit of a four-year licensing Increase on 2009 we have built scale in these key markets, agreement for The Voice of China. 09 10 11 12 13 14 15 16 organically and through acquisitions, and we now have a significant portfolio of successful Across ITV RoW, we have delivered a number series and formats that travel. of new and returning commissions including £m Studios adjusted EBITA growth The Voice in the UK and USA, The Chase in £243m ITV Studios UK performed strongly with Australia, I’m A Celebrity… Get Me Out Of overall revenues up 14% at £626 million Here! in Australia and Germany, Come Dine (2015: £547 million) and with good growth With Me in Denmark, Sweden and Germany 243 in sales to ITV and to other UK Broadcasters. and The Price of Beauty in Denmark and 206 18% Our off-ITV revenues have grown by 20% as Sweden. In Norway ITV has delivered its first YoY we have continued to strengthen and grow drama, Aber Bergen, with the second series 162 133 the business. Our deliveries to other UK already commissioned. In Australia, ITV has 107 broadcasters included Poldark, NW and had a particularly successful year with a new 91 81 83 +167% Witness for the Prosecution for the BBC, management team in place and now Increase The Jump and Come Dine with Me for produces for all the major television channels. on 2009 09 10 11 12 13 14 15 16 Channel 4, Hotel Inspector for Channel 5 and Agatha Raisin for Sky. Investing in content with international appeal Overall, we have seen 13% growth in revenues To continue growing internationally we must to ITV with programmes such as Victoria, Cold keep expanding our portfolio of successful Feet, Tutankhamun, Saturday Night Take series and formats that return and can be Away, The Chase, The Next Great Magician distributed globally. We have a strong mix of and I’m A Celebrity… Get Me Out Of Here! all programmes across genres and also across delivered in 2016. We have again grown ITV their content life cycle, which balances our Studios UK’s share of original content risk and financial exposure. Since 2010 our commissions on ITV main channel to 63%. total hours produced has increased by 90%, our drama hours have increased by 370%, ITV America’s revenue was down year-on-year entertainment hours by 109% and factual by 27% to £235 million (2015: £320 million), hours by 189%. predominantly as a result of three shows we had in 2015 which have not returned in 2016. 26 42840AR_09XStrategicXPriorityX2_AW.indd 26 02/03/2017 20:41 ITV plc Annual Report and Accounts 2016 Strategic Report Pictured left to right: Poldark has been sold to around 90 countries; The Chase is an internationally popular gameshow. It is the biggest daytime programme in the UK and is produced by ITV Studios in five countries with 31 format sales since it launched in 2009. Demand for drama is growing strongly, as Investing in our digital and RocketJump, all of which helps to standout, original content becomes brand content capabilities improve ITV Studios content capability as well defining for both broadcasters and OTT Through building our digital assets and as provide new programming for the ITV Hub. players. To capitalise on this, we are looking content we are increasingly able to engage This is as well as our existing investments to expand our global scripted business and with younger audiences. in US digital content companies Believe develop a strong portfolio of international Entertainment Group and Indigenous Media. and returning drama, particularly in the US. While demand from traditional broadcasters We are strengthening our development and continues to be strong we are also seeing an 2017 and beyond creative capabilities internally and have increasing demand from OTT platforms for We have a strong international pipeline invested in a number of producer original long-form content, secondary rights of new and returning programmes and development relationships – we now have and short form digital content. brands. Our UK and US pipeline of scripted around 20 projects in development in the US programmes has never been stronger and we with broadcast networks, cable networks and We are distributing more content to OTT have a very good slate of new entertainment OTT platforms. players through Global Entertainment as well shows coming through this year. This gives us as co-producing and jointly commissioning a confidence that in 2017 we will deliver good Recent successes include a number of US number of programmes with OTT platforms. organic revenue growth and we have already drama commissions which will deliver in 2017 We currently have over 200 programme secured over £150 million more revenue than – a ten part drama Somewhere Between, for supply agreements in place with the major at this point last year. However, with increased ABC, Sun Records for TNT and a pilot for ABC, OTT platforms, including co-producing investment, particularly in US scripted and the Snowpiercer, through Tomorrow Studios. Robozuna, an original kids cartoon for Netflix reversal of the one-off benefit of the The and Harlots, which we are co-producing for Voice of China in 2016, ITV Studios profits in With the acquisition of Talpa Media we have Hulu in the US and ITV Encore in the UK. 2017 are likely to be broadly in line with 2016. significantly strengthened our capability in entertainment and formats. Across our To further expand our digital assets we are ITV is now a global business and going businesses we have grown a solid portfolio increasing our exposure to new types of forward we aim to use our scale to grow of high volume and high margin formats that content, particularly youth focused our market share and expand the number travel internationally and which we produce programming, and new types of distribution.