Take a look at ITV's recent financial results for the year
ending 31 December 2011 and you'll find that things are going
pretty well - at least from a video-on-demand (VOD) perspective.
Online revenues are up 21% from 2010, monthly unique users are up
15% year-on-year and, headline figure, 376 million long form videos
were viewed across ITV.com and its catch-up services on BT Vision
and Virgin Media. This is healthy growth and Robin Pembrooke, the
MD of Online and On Demand who joined ITV at the end of 2010, and
his team have done a good job in:
- Getting ITV Player on to iOS, Android, PS3 and Freesat;
- Signing archive VOD deals with Lovefilm and Netflix and a
catch-up agreement with Sky;
- Growing mobile usage to 9% of VOD viewing in December
2011;
- Engaging with their audience on social networks like Facebook
(15.4m fans for all ITV shows and pages - up from 7.4m in
2010).
As the statement says, these are encouraging trends and the
report is worth reading, particularly if you want to get a handle
on ITV's focus for 2012.
Longer-term Challenges
But what does the bigger picture for ITV look like? What longer
term challenges does it face and how much growth capacity does it
really have in terms of online viewers and revenues? I've been
crunching the company's numbers over the past few days and have
jotted down some thoughts below.
I've also prepared a spreadsheet which
you're welcome to download for your own use (in return for
registering with VOD Professional). It contains figures for
ITV's:
- Online video views since 2008;
- Online monthly unique users since 2007;
- Online revenues since 2007;
- Net advertising revenue for broadcast channels since 2006;
- BARB data from 2006;
- Other data, including the number of Facebook fans and email
database subscribers.
#1. Growth vs. Capacity
First, let's take a look at the raw stats. ITV's online unique
user numbers have risen from 6 million a month in 2007 to 11.7m a
month last year. That's an impressive growth rate of 95% in just
over four years. But how many people can ITV really expect to
regularly use its online services?
Notionally, the absolute upper limit is the entire population of
the UK - or 62.22m people at the end of 2010 - according to the
World Bank.
The second upper limit is the number of overall television
viewers in the UK or 54.78m people using BARB's weekly reach
figures for the week ending 26 Feb 2012.
But the most realistic calculation I've come to factors in ITV's
own reported share of TV viewing in 2011 (23.1%). Multiply this by
either the BARB or population figures above and you get a number
for ITV's regular television audience - somewhere between 12.7m and
14.4m. And assuming it's mainly the TV audience that would use ITV
online you can say that the company already serves between 81 and
92% of capacity.
ITV then has to appeal to more users outside of its core
constituency or…
#2. Increase the Amount of Content that People Want to
See
ITV has changed analytics suppliers over the past year but the
most up to date figures show that 376 million long form videos were
viewed on ITV.com and its catch-up services on BT Vision and Virgin
Media in 2011 (an ITV spokesperson confirmed to me that these
numbers do not include views on ITV Player on tablets, games
consoles or Freesat). That's up 44% from 2010.
If the same core 11.7m users are responsible for all of these
video views then that works out to 32 videos per person per year.
That's not bad but could be better - consider, for example, that
4oD, with just 4.2m
unique viewers in December 2011 served 40 million video
views.
It's probable that most of these video views come from large
groups of dedicated users who are devotees of specific shows like
'The X Factor', 'The Only Way is Essex' and 'Coronation Street'.
So, how can ITV get people watching more content? The most obvious
answer is to give customers what they want - access to an archive
of brilliant programmes. ITV has already started doing this through
deals with Lovefilm and Netflix. With further digitisation we'll
soon - we hope - see it opening up a greater range of its past
catalogue for online viewing.
#3. Pay Models
So how will consumers pay for access to ITV services? The
company is known to be conducting closed trials with the
multi-screen payment platform, PayWizard, and although the
introduction of paid access has been delayed ITV's final results
says simply "We plan to launch our Pay Player later in the year...
". It's going to happen.
The challenge for ITV here is six-fold:
a) What content does it make
available?
b) On what platforms e.g. PC,
tablet, Connected TV etc.?
c) And on which existing
services e.g. Lovefilm, Netflix?
d) How does it clearly communicate
the different offerings to consumers?
e) How does it charge for access
e.g. transactional (for one-off purchases), via subscription or via
a part-free, part-paid model (e.g. a free app with an in-app
payment mechanism)?
f) Can it hit its internal
revenue targets i.e. will customers buy as much as ITV hopes?
#4. Higher Online Revenues
Whilst ITV's user numbers rose by almost 15% between 2010 and
2011 its online revenues increased more, by 21%. In comparison,
ITV's television advertising revenue rose by only 0.94% during the
same period so this is a job well done by the company's online
sales team.
As a slight aside, Thinkbox, the marketing body for commercial
TV in the UK,
has just issued a press release which says
that total TV advertising revenue in the UK increased by 2.2% in
2011 to reach a new record high of £4.36 billion. ITV, with net
advertising revenues (NAR) of £1.5bn in 2011, therefore accounted
for almost a third of that figure.
ITV's online revenue as a percentage of its NAR is only 2.25% so
it will be interesting to see how these numbers vary over the next
few years as ITV's viewing share changes and more television
advertisers move to online.
ITV's immediate challenge will be how to maintain (if not
increase) online revenues.
What do you think? How's ITV really doing and
are there other challenges that we should be looking at? Add your
comments below.
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