The commercial arm of the BBC is buying ITV out of its 50% stake in BritBox International for £255 million. It will give ITV shareholders a net return of £235 on what was originally a joint venture, with a continuing revenue stream from extended programme licensing agreements. So, is this a wise strategic investment by BBC Studios or is it simply throwing good money after bad?
BBC Studios will acquire full ownership of BritBox outside the United Kingdom. It has extended its licensing agreements with ITV to maintain its ‘best of British’ programming proposition.
Launched in the United States in March 2017, BritBox is available in the United States and Canada, Australia, South Africa, and the Nordic countries of Denmark, Finland, Norway, and Sweden. It has just 3.75 million subscribers.
The BBC claims that BritBox International has an enterprise value of around half a billion pounds, which is the basis of the £255 million cash consideration that will go to ITV shareholders.
That values the service at £136 per subscriber, each paying around $9.99 a month for the online service.
The book value of the assets in the transaction was recognised as just £113 million on 30 June 2023 in the last published accounts of ITV. They contributed just £5 million in profit before tax in the preceding year and required loans of over £18 million from ITV, which will be repaid as part of the transaction.
“This is an important acquisition for us,” said Tom Fussell, the chief executive of BBC Studios. “We are taking full ownership of a successful, growing service we know well and that fits with our stated ambition to double the size of our business. BritBox International has British content at its heart and it generates and satisfies demand for British shows outside the UK. We will continue to make significant investments in the future to deliver long term value to the BBC.”
Management of BritBox International will move from Reemah Sakaan to Rebecca Glashow, the chief executive of the BBC Studios Global Media and Streaming division, which includes the BBC.com web site.
BritBox in the United Kingdom will remain part of the ITVX offer and will continue to feature BBC programming as part of separate long-term licensing agreements. ITV will continue to receive an ongoing revenue stream from BBC Studios for the use of its programming in the international service, which also carries some programming from Channel 4 and Channel 5.
Carolyn McCall, the chief executive of ITV,said: “The sale of 50% of BritBox International means ITV is focused on its core strategic goals of continuing to build on ITVX’s success and growing ITV Studios.”
ITV says that the entire net proceeds of the sale, expected to be around £235 million, will be returned to shareholders through a share buyback.
The ITV share price, which had been drifting down from nearly 90 pence a year before to below 60 pence, recovered slightly on the news, but was still off its five-year high of over 150 pence. The market capitalisation of ITV is around £2.6 billion, or just over 10 times what it will have gained from the sale of its stake in BritBox.
In just under seven years since launch, BritBox has failed to make much of an impression as an international online video subscription service, despite the backing of the BBC, which has invested millions in the platform and is now paying nearly a quarter of a billion pounds to buy out its partner.
It may give the BBC the freedom to do more with BritBox under the BBC brand, although whether it would do better to licence its programmes to third parties remains to be seen.
BritBox now faces increasing competition from major multinationals that have invested billions of dollars in their own online video platforms.
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