Berenberg: ‘uncompelling’ Britbox leaves ITV ‘between a rock and hard place’

The proposed Britbox streaming service between ITV and BBC in the UK looks “uncompelling” in the face of growing SVOD competition, including Apple’s announcement that its own streaming offering would be priced as low as US$4.99, according to analysts from Berenberg, which have ITV a ‘hold’ recommendation.

According to Berenberg’s analysts, Britbox will likely struggle against services from major providers that include Netflix, Amazon Prime and Now TV as well as Apple TV+.

“Against the backdrop of these well-funded services with aggressive pricing, we do not see a strong rationale for take-up of Britbox. The budget for original programming will inevitably be small – less than £100 million – against multi-billions for the US-backed services. The bulk of the content will thus be that which has been available on free-to-air. We struggle to see the USP for Britbox in this environment,” the analysts said.

Arguing that ITV, which with a 90% stake is Britbox’s majority investor, finds itself “between a rock and a hard place”, Berenberg drew comparisons with the commercial broadcaster’s ill-fated foray into pay TV over digital-terrestrial TV with ITV Digital 20 years ago. In that battle, ITV was ultimately unable to prevail in the “David-versus-Goliath” fight with Sky.

“ITV’s choices will thus be to either increase investment in Britbox, but that would imply further earnings downgrades, or to shelve the project in due course. That, however, would leave the company even more exposed to the decline in linear broadcasting, and a shift to advertising-funded VOD (ADVOD) would be a very late entry to that party. The risks for ITV are rising,” said Berenberg.

The analysts argue that ITV’s existing business model will continue to face structural pressure as advertisers move online, while a decline in advertising for its free-to-air offering will lead to “substantial earnings contraction”.