Brits on the Box

This week brought the news that the UK’s two leading broadcasters plan to launch a joint domestic SVOD product later this year, having agreed a joint vision for the service.

The BBC and ITV plan to produce a formal legal agreement for the service, which they say will be open to other partners.

The pair said the new service – which will leverage the expertise they have built up with their North American niche SVOD offering of the same name – will house the biggest collection of British content available on any streaming service and will provide new commissions for British production companies.

The service will have to pass muster with regulators, but the concept gives a kind of shape to the vision promoted by Ofcom CEO Sharon White last November when she called for the UK’s PSBs to bring their on-demand services together to create a ‘Brit Player’.

Assuming regulators are favourable – and it is worth noting that White’s call was short on specifics and on the kind of business model that would be acceptable – will BritBox work?

The vision outlined so far leaves much still to be pinned down. Speaking after ITV’s results were announced, CEO Carolyn McCall said that BritBox is “our exciting new SVOD proposition”, but did not give details on the pricing or very much on the content mix, although she did emphasise that original content will be part of that mix alongside older content that is no longer available via BBC iPlayer or ITV Hub.

McCall said that ITV’s net investment in BritBox will be up to £25 million in 2019, rising to around £40 million in 2020 and declining thereafter.

If this seems somewhat light in view of the financial black hole that other SVOD investors are willing to tumble down in search of scale, ITV’s CFO Chris Kennedy clarified, during the company’s earnings call, that these numbers referred to the net impact on ITV’s own bottom line, with revenue from the service offsetting that over time. However, that would seem to imply either some pretty big revenue expectations or some pretty modest expenditure expectations.

McCall said that ITV would be “disciplined” in its approach to investing in the platform and made the point that the project hopes to attract other partners who will also be expected to pony up some additional cash. Nevertheless, the service that seems to be envisaged is clearly not going to compete head on with Netflix.

McCall also made it clear that ITV – and any additional commercial partners – would be responsible for the original content element of the service, rather than the BBC, which cannot produce licence-fee funded content specifically for a pay platform. (Much of the press and public reaction to news of the plan shows the challenges the BBC faced in making the case for any of its licence-fee funded content being on a pay platform at any time, despite the point that BritBox will have to pay for content produced by the pubcaster down the line in the same way as other commercial providers – with the money in this case reinvested in BBC free-to-view content.)

How this will play in the relationship between the pair and the appeal of the service to its target audience remains to be seen. It is not clear, given the modest investment commitment, how much or what kind of original content will find its way to BritBox. Originals are the key selling point for any SVOD service with ambitions to more than a very niche offering aimed primarily at squeezing some more money out of underutilised assets. How far the BBC and ITV share the same vision of the service, and the way to realise that vision, is not yet clear.

In the earnings call, McCall cited ITV research that showed 43% of all online homes are interested in subscribing to a new SVOD service which features British content, rising to over 50% of homes with an existing Netflix subscription (who would be willing to add something like BritBox on top).

That figure of 43% coincidently is exactly the proportion of UK homes that have access to an existing SVOD service in the UK, according to data published recently by BARB.

According to BARB, the number of homes with at least one of Netflix, Amazon or Now TV grew by 5.7% on Q3 to reach 12.3 million at the end of last year, with 660,000 additional homes taking at least one SVOD service compared to the previous quarter. Netflix and Amazon made gains of 6.2% and 7.6% respectively compared to Q3, while Now TV dropped 3%. While every Q4 has shown growth, Q4 2018 was the lowest since 2014.

Four and three apparently having some kind of occult significance for UK SVOD, BARB also reported that the number of homes with two or more services stood at 4.3 million at the end of the period.

Will BritBox’s appeal expand that 4.3 million to the full 43% of homes with a current SVOD offering (in other words, 100% of the current SVOD universe) or are there other homes out there that have remained immune to the appeal of Netflix, Amazon Prime and Now TV in the hope that a service offering archive content that has been previously aired on free TV will turn up?

Of course BritBox does not need to win over 43% of UK online homes to be labelled a success. But a service that will most likely be priced at a significant discount to Netflix will have to win over a pretty significant number of adherents if it’s going to top up ITV’s £65 million for this year and next and feed back into the kind of original production that would give it momentum.

If elements of the BritBox announcement feel rushed and lacking in specifics, with only two of the UK’s PSBs currently on board, that is probably because the pair know that time is not on their side. BARB’s figures already indicate a flattening out in SVOD growth, with consumers perhaps beginning to baulk at spending ever greater sums on services they have a limited amount of time to use.  That is not to say BritBox is doomed, but it is going to have its work cut out.