ITV has confirmed that it is in preliminary discussions regarding a possible sale of its media and entertainment business to Sky for an enterprise value of £1.6bn. That would include the broadcast channels and the ITVX online service, but not the ITV Studios production business. Sky is owned by the American communications company Comcast, which also owns NBC, Universal, and the Peacock online service, among other brands, with combined revenues of over $123 billion in 2024. The discussions are at an early stage and would require regulatory approval.
It comes after ITV reported that it expected advertising revenue to be down 6% over the year. The share price rose by about 18% on the reports but was still below the high for the year, at less than a third of the value ten years ago.
In 2006, what was then BSkyB acquired a 17.9% stake in ITV plc for £940 million. The Competition Commission ruled that this could operate against the public interest and Sky was obliged to reduce its holding to less than 7.5%, which it did at a considerable loss. It disposed of part of its stake to Liberty Global, which recently reduced its holding in ITV.
Between them, Sky and ITV, the largest commercial broadcaster in Britain, control sales of about two thirds of television advertising time in the United Kingdom, with most of the rest sold by Channel 4. Any combination of the Sky and ITV advertising sales houses is likely to involve investigation by the Competition and Markets Authority, with input from the communications regulator Ofcom.
A key consideration will be whether the relevant market is wider than television, given the growth in online advertising, which is now much larger. Television advertising in the United Kingdom is worth about £5.2 billion a year. Online display advertising is worth about £17.5 billion.
Traditional broadcasters face greater competition from online, including online video subscription services but also from YouTube, which has overtaken ITV in terms of share of total video viewing in the home on television and other screens.
Sky would be expected to assume the obligations that come with the ITV public service broadcasting licence, which ITV renewed for another 10 years in 2024. They include the provision of national and local news, original programming and working with independent producers.
There are issues of plurality, given that Sky and ITV, through its part ownership of Independent Television News, both have newsgathering operations that could have synergies.
Some analysts have suggested that the move by Sky, now backed by the deep pockets of Comcast, could be seen as the best long-term survival strategy for ITV in a changing media climate.
It still leaves the production arm, ITV Studios, which could attract further bids from potential purchasers, some of which have previously expressed an interest in acquiring that business.
The board will be obliged to consider the bid on behalf of its shareholders, weighing the financial, strategic, and operational implications. In this case it is not a proposed takeover but a corporate transaction for a major business unit. Nevertheless, it would require shareholder approval and importantly regulatory clearance.