Sky, which is currently part of Comcast Corporation, has announced an agreement to acquire the ITV Media and Entertainment business from ITV plc for £1.6 billion. The deal will comprise £1.2 billion in cash, the transfer of the Love Productions business to ITV, and up to £0.2 billion in earn outs. The deal is subject to regulatory approval.
Sky has also agreed to enter into a £2.1 billion content supply agreement with ITV Studios over five years on completion of the deal. This will not count towards independent production quotas for ITV.
The ITV channels and ITVX will remain free to view, with all public service broadcasting commitments continuing in full, including regional news, under the terms of the Channel 3 licences until 2034, which Sky is acquiring as part of the transaction. ITV News and Sky News will remain distinct editorial voices.
Sky says it expects to save up to £200 million a year in cost savings by the end of the third year, largely through efficiencies in marketing, technology, and non-UK content.
Together, Sky and ITV Media & Entertainment will combine free-to-air broadcasting, advertising-funded streaming and subscription television together with the wider portfolio of Sky broadband, mobile and business services.
Sky says that the combined business will deliver more sport free-to-air on ITV services than ever before, while enhancing streaming through improved technology, better discovery and a more seamless viewing experience.
Combined with Sky, the business would account for around 20% of all in-home viewing in the UK, second to the BBC and ahead of YouTube.
Dana Strong, the chief executive of Sky Group, described it as “a defining moment for British media and an opportunity to build a stronger future for two of the UK’s most loved and trusted brands.”
Carolyn McCall, the chief executive of ITV, said she is “confident that Sky will be a strong and responsible custodian of ITV M&E, building on its heritage while investing in its future and safeguarding the qualities that make ITV so valued by viewers, advertisers and the UK’s creative industries.”
It effectively ends the vertical integration of ITV as a programme provider and broadcaster. The separation of the ITV broadcasting and online video business from the programme production business makes a future acquisition of ITV Studios cleaner, whether by Sky as part of NBCUniversal or by another organisation.
The ITV channels will give Sky a shop window in which to show free-to-view sport and other premium programming to promote its subscription business. ITVX will give Sky a mass market free online video proposition alongside existing Sky and NOW subscription products.
While the public service commitment is retained until at least 2034, the remaining question is what happens after that. ITV has been among those suggesting traditional terrestrial television transmissions should be switched off around that date.
There is also a question about the continuing commitment of ITV to the Freely platform. It would give Sky a seat at the table at Everyone TV, which is currently jointly owned by the BBC, ITV, Channel 4, and Channel 5. Sky already has competing online platforms in Sky Glass and Sky Stream, as well as its existing satellite service.
The commitments may preserve public service broadcasting obligations for Channel 3 until 2034, but they do not preserve the previous structure of public service broadcasting. ITV would become part of the wider Sky platform, changing the balance of power in British television long before the licence obligations expire.
The second-order effects fall on Channel 4 and Channel 5, both of which may face stronger competition for viewers and advertising. Regulators will almost certainly examine whether advertisers still have sufficient choice and bargaining power.