ITV plc (ITV) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to ITV's live Q&A. I hope you've seen our presentation, which is on our website. I'm here with Carolyn and Chris to answer your questions. [Operator Instructions]

And our first question is from Julien Roch.

Can you hear me? Can you hear me now?

Julien, I'm afraid we can't hear you at the moment.

We take another question coming from...

Can you hear me now? Sorry.

Sorry. Sorry, we just got a slight technical hitch. It's coming up now.

Are you still there? Can you hear me?

Yes, we can.

Now we can.

Okay. You can see me and you can hear me, maybe something screamingly. My first question is on BritBox. You said you hit 500,000 subscription during January. Could we have the exact sub number at the end of December? It's my first question. The second one is Channel 4 has a target of 90% ads and 10% other revenue in 2025, with ad being 60% linear and 30% digital to make 100%. So when do you think you can hit 30% of ad being nonlinear? And I know you're quite likely to say no, but could we have an idea, give or take, 5% of how much it was in the end full year '20? And the last question is, could we know how much of your Studios revenue comes from SVOD? I know, Carolyn, in the past, you said SVOD internal, SVOD linear and SVOD pay, but pay includes U.S. network, whose pay revenue have structural issue as well. So if we could have pure SVOD in 2020, if possible?

Okay. I'll just kick -- yes. Okay. Thanks, Julian. I'll just kick off on BritBox. We're very pleased with 500,000. It's bang on. It's actually ahead of plan slightly. It's very fluid. So it might have been over that at the end of December. I'm not going to be precise about that, but it is fluid, which is why we won't do it on a weekly or a monthly basis because it depends on the events that we're doing or what we're promoting or how we're promoting, which is why we will give you the subscription number now on a kind of regular basis, but with some time lapse, basically. For -- on linear versus digital, 60%, you said -- did you say there was 60% linear, 30% digital. Is that what you said?

No. So I said the 2025 --

It's supporting?

The 2025 target for Channel 4 is 60% linear advertising, 30% digital and 10% other. Now obviously, for you, the 10% will be much bigger than 10% because you have BritBox and Studios. So it's more on the 90% that is advertising where they have a 60-30. So it is when you can hit the 30%? Yes. Okay.

Julien, the 20 -- what we missed actually is the 2025 target because I didn't recognize those splits today. So I don't think we'd be very dissimilar to that to be honest with you by 2025. In fact, I think we might be even ahead of that. But I mean we don't disclose those targets interestingly. We don't actually talk about them. I don't think there's any reason why we shouldn't or couldn't in the future. I can't see why we wouldn't, would you? Have I just committed to something you don't want me to?

No, not at all. I mean VOD has grown really strongly over the last few years, as you know, Julien, and even last year, it grew 17% in a year when total advertising was down. So what we're seeing is that advertisers really like the VOD product and the ability to target on a big screen with the sound on.

I think a big shift, just to answer your question, give you some color on digital, which I think is useful is I think what Planet V has done is it's got quite a lot of advertisers to think about VOD-only campaigns to do them. So it doesn't mean they won't do mass campaigns, but it does mean that they are thinking very specifically about what they will do on VOD. So you are getting big brands like Heinz, P&G, Marriott hotels, quite big brands using VOD only for campaigns. And then you're getting niche brands like NET-A-PORTER and others. Porsche, for instance, also using VOD-only campaigns on ITV Hub. So that's been quite a big shift, actually, and I think it's Planet V that has really done that. SVOD was the next question, Studios revenue?

Yes. So we -- as you know, we disclose it as Pay and SVOD. We haven't given a separate SVOD number. What we have said is that we are going to double our revenue with OTT players this year and that 1/3 of U.S. scripted was OTT in 2020.

And sorry, when you said double revenue, you're talking about '21 or it doubled in '20?

Doubling in '21.

Next up is Sarah Simon.

Very nice to see everybody as opposed to just hear somebody. I had a few questions. First of all, can I just make a plea for the number that Julien was asking for earlier, which is a broad indication of within advertising, what the split is -- was in 2020 between linear and nonlinear? Second question was on BritBox. Can you give us an idea of the shape of the P&L in 2020? So we know the net venture loss, but it would be helpful to understand some of the line items there in terms of the revenues, the costs. And also, how much is intercompany? So we're seeing a net figure, but obviously, ITV Studios is benefiting from content sales and ITV is benefiting from sale of advertising. So any indication you can give us there? And then final question was on the transponder savings you're talking about as part of the cost restructuring. Can you give us an idea of how big they are and when those kick in?

Yes. So hear you on the ad revenue split, and we'll take that one away, but we won't disclose that today. On BritBox, we said it was a GBP 59 million venture loss. So that is the gross loss of BritBox. So that is after they have paid for advertising on ITV and for ITV's content. We've committed to give the subscriber numbers for BritBox and that joint venture loss. And it's a very young business. It's just over a year old. We don't think giving yet more information is the right thing to do at this time. So you'll get guidance on the venture loss and subscribers going forward. And then on the transponder, we've cleared one transponder this year. We intend to clear another transponder next year. Those will be noncash savings to begin with, at least because they're subject to a long-term contract. But to the extent that we can sublease the space, then that will turn into a cash saving. And it will be -- broadly speaking, it kicks in, I think there's GBP 7 million in the year we're in, 2021, and it will be growing to GBP 10 million as part of the GBP 100 million target in 2022.

And sorry, so the exceptional is just basically, is that the cost associated with that you've closed it down, so you're taking the cost all aggregated up front. Is that the way to think about it?

Yes. That's right. Yes.

And so when does it become a cash saving?

When we can sublease that space, if we can.

Okay. Can you say when the contract runs until, because presumably at some point, the dish runs out?

Yes, it's 'til 2023.

Next up is Richard Eary.

Can you see and hear me or not?

Yes, we can.

Absolutely.

Good. Good. Three questions from myself. The first one is that if we look at the April rebound, can you just give us an indication of which sectors have come back strongly? Obviously, you gave us breakdowns last year, but it would be interesting to see exactly what's happened within the month of April by category to give us an indication going forward. So that's the first question. The second question, I think, Carolyn, in the release, you talked about the PSB review. Can you sort of expand or maybe add a little bit more color to the comments that you put in the press release, so we can maybe get a bit more color in terms of how you think that plays out? And then just lastly, Chris, just so we're all clear in terms of the cost numbers for 2021 within the broadcasting online, obviously, there's temporary cost savings for this year or last year. What's the base that we should be looking at for 2021 as we do our numbers, so we've got clarity on that?

Okay. So thanks, Richard, for your questions. I mean I would say that we've definitely seen a -- we've seen the advertising market really sense that there is pent-up demand amongst consumers, and they want to encourage consumers to be confident about coming out in line with government guidelines and eating, drinking, spending money as and when they can. So there's this pent-up demand that advertisers are taking -- wanting to take advantage of safely. And what we are definitely seeing is that those categories that were most severely affected, so categories like travel and kind of retail nonsupermarkets and cars have come back quite strongly in April and indeed a bit in March. So that has been the main shift that we have seen. And I would say in terms of just giving you some color around that is as the revenue came back in March because, as you know, January and February were very tough on the ad market side, it was significant what we were seeing, it came back very quickly in March. And it reminded us very much of the last lockdown and the rebound on that. So long may that continue. And just, again, another piece of just color on this is that we are working with a whole group of businesses, our advertisers and partners and others, particularly in the hospitality industry, where we're going to be running a campaign about welcoming British consumers back. And so we're going to play an important part, I think, in getting people's confidence back because actually, one of the big issues, I think, for advertisers is even if they -- they want people to feel comfortable, confident and secure when they come out, when they eat in restaurants, when they eat outside in pubs, when they kind of shop and then go for a coffee, they want then people not to feel fearful. And given what we've all been through and the government messages to date, that's quite an important part of what ITV is doing with our very big platform of reach to be able to get people to feel confident about coming back safely to enjoy themselves again. So that's on the advertising side.

Can I ask within the April numbers, how much of that is government? Obviously, we've had a lot of government advertising in?

No. Actually, government was down -- is down in April. So interestingly, the supermarkets and governments to date are down in April, and the other categories that I mentioned are up. So I think that's actually not -- that that's actually better than if government was up, yes. On the PSB review, as you know, we've been extremely active, and we've been talking to actually anyone who will listen, but particularly to Ofcom and to DCMS and indeed to Number 10 about the PSB review. And I think what Ofcom have come out with at the end of last year is the strongest statement I think we've ever seen from a regulator about what needs to be done on prominence, in particular. And they have come out, and they have said that government has legislated on this. So we think that's a massive step forward. And of course, now what we are doing is trying to ensure that government, particularly Number 10, understand the urgency of modernizing the 2003 broadcasting act. And that's what we've been doing. So whether it's at the end of this conference, whether it's -- wherever we are -- we have a platform, we're kind of using it to ensure people understand -- people in influence understand the urgency of legislating for this in a digital world.

Can you put any sort of financial numbers in terms of what it means in terms of prominence in terms of how it may play out positively or negatively?

Not really, no. It's way too early to do that. It's too early to do that.

And then on the cost side, Richard, the consensus, including the BritBox cost is around GBP 570 million for broadcast. That's probably a little low because pre the guidance today, I think BritBox consensus was low on the cost line. And then program budget, GBP 1.1 billion.

Consensus BritBox cost, I think, we're about GBP 40 million. So if we add in GBP 20 million to the GBP 570 million, GBP 590 million would be about right. Is that the way that we look at it?

I think you're pretty much there, Richard, yes.

Next up is Lisa Yang.

Hope you can hear me and see me. The first one is on programming. I'm just wondering [Technical Difficulty]

We've lost you, Lisa.

Lisa, we've lost you.

Sorry, can you hear me now? Can you hear me?

Yes.

Okay, good. Sorry about that. Not sure what happened. So yes, the first question is on programming. I'm just wondering what are sort of the advertising assumptions you're baking into these programming costs. I mean, clearly, you're expecting programming to go back to normalized levels of GBP 1.1 billion. That's quite a big increase versus 2020. So I'm just wondering, firstly, how much visibility do you have in that budget? And also, basically, what -- how much optimism in the advertising outlook is basically baked into that assumption? That's the first question. The second one is about the dividend. You ended up with a pretty strong sort of -- I mean better-than-expected net debt position at the end of 2020. And yet, the dividend has been reinstated. So I'm just wondering what are the signals you're waiting for to basically reinstate a dividend> Or has the thought about capital allocation changed because you want to do more M&A to, I guess, pursue a strategy to sort of boost your Ads presence or Studios presence? That's the third question. And the third one is on Studios. Obviously, I can understand there's still going to be some disruptions, which will impact your Studios performance this year. But can we still get a bit of a sense of an outlook for this year? When do you think we can go back to pre-COVID level as well as go back to the 14%, 16% margin that you were previously targeting?

So on programming, what we're doing is we're going back to the program budget, taking it to historical levels. So 2020 was unusually low. And that wasn't because we deliberately cut the program budget. We wanted to preserve the schedule as much as possible because in the end, everything we do, be it SVOD, AVOD or linear advertising is based on the viewing and therefore, on the quality of the content. So we believe it's really important to maintain the quality of that schedule and maintain the relevance of ITV. So that's why we're taking it back to the historic levels. And really, it's based on the fact that we do believe that TAR will come back strongly in 2021. And everything we're doing in the strategy revolves around that program budget because it's not only feeding the advertising; it's also feeding the subscription. On dividend, there's really no change. We will introduce it just as soon as we believe it's sensible to do so. We want to be in a position where we can sustain the dividend and grow it over time. And so for that, we need a bit more certainty than we see right now. At the moment, the advertising environment, whilst it's strong in the first 4 months, it has been quite volatile. So we'd need that to settle down. And then obviously, Studios, we are still working under severe COVID restrictions, which means it's not as easy to predict the timing of the delivery of the shows because if restrictions change, then that delivery date might change. So for that reason, we're not doing it. But in terms of our capital structure, it's exactly the same. We want investment-grade metrics over the medium term. We want cash returns to shareholders, and we want to invest in the transformation as well.

Yes. Lisa, there should be no doubt. And I think Chris has been very clear that we are totally committed to the dividend and that we will bring it back as soon as circumstances allow us to. But we are still in lockdown. And at the moment, the plan is still a plan. The government plan to come out is still only a plan. We need to see how that goes in the U.K. and bearing in mind, we are a global business as we're affected in Europe as well as America.

And then on Studios, again, difficult to say because we don't know whether the government relaxation in the U.K. will work and what's going to happen elsewhere in the world. But the way I broadly think about it is it will be a partial revenue recovery this year, moving to hopefully a complete revenue recovery in 2022 and then a margin restoration, probably a little later, probably 2023. That's broadly speaking how I'm thinking about it in my mind.

That's extremely helpful. If I can ask another question, it's a follow-up to Richard's question earlier. If I look at the comps last year, basically, April, May and June were down by the similar amount, and you're now basically talking about 60%, 70% recovery in April. Is there any reason not to think that May and June could be similar to what you're seeing in April? Just wondering whether there's any one-off effects?

Yes. I'm afraid it's just too early for us to be able to give that kind of guidance. It's just too early. We're very pleased with April for obvious reasons because the top end of April of that range would take us to the revenue we were making in 2019, so pre-COVID, but we don't have visibility into May and June.

Now up next is Matti.

Are you able to hear me?

Yes.

Yes.

Just a couple of questions. First, on the content costs, you guided and discussed that. Could you give us any color on the pacing of that? So I'm assuming that H1 will still have some disruptions to scripted content deliveries, but H2 will have the Euros, and you have a really strong scripted slate ahead for the year. So should we assume that H2 is a bit ahead of, for example, 2019 content investment levels as a result? And then on the international subscribers, impressive number there. I was just wondering, could you give us a rough split of how many of those you have a direct billing relationship with as opposed to, for example, having the sub through Amazon channels where you don't get that? And then finally, on late booking fees. So last year, you gave advertisers flexibility on that. So this year, I haven't seen confirmation that that's still the case. But I did see reports that you are allowing advertisers flexibility in delaying campaigns of no additional costs. Is that the correct understanding of where we stand now?

Yes. So on the program budget, actually, quite a lot of the Euros is going to be in June. So it will be in H1. So we can follow up afterwards, but I suspect it's fairly evenly balanced between the 2 halves on program budget. On international subs, yes, endless debate about whether owned and operated versus getting distribution. I mean, certainly, in the U.K., it's very much owned and operated. In the U.S., as you say, we've got a channel with Amazon, but the majority is still owned and operated. And then on late booking fees, yes, I mean, Kelly and team, they have been brilliant working with the advertisers and really established very, very deep relationships. We don't have the late booking fees at the moment. And as you say, Kelly has been working with advertisers. It's very difficult if you're an advertiser now to book a campaign and not know whether it will be pulled or not. So I think they are being really flexible in working with advertisers.

Yes. I mean our attitude is very much we're trying to make it as easy as possible for people to make those decisions about budgets and advertising. And so with that in mind, we're being as flexible as we possibly can be with advertisers as that's been very much our approach throughout this period. So for the foreseeable future, that's how we will -- that's how it will remain.

Next up is Nizla. I think Nizla's dropped off. So if we go to Catherine O'Neill.

I just had a couple of questions. One is, I notice in the release, you talked about Media for Equity, starting to go down that route. I just wondered if you could talk about why you're deciding to go down the Media for Equity route, how you're going to approach it and how we should think about the inventory being utilized. The other question, just on Studios. In terms of sort of 2021, which of the major shows we should be aware of that either come in or drop out in terms of kind of phasing across the year?

Okay. On Media for Equity, it's a kind of tried-and-tested route. It's not something that ITV has done before, but we felt it was a really good opportunity for us to work more deeply with potential advertisers. So the -- one of the key criteria we use is they are entrepreneurial businesses that really need our platform to accelerate faster. That's one of our key criteria. And so that's one of the reasons we're doing it. And so it's GBP 15 million over, we think, 3 or 4 companies, and so far, so good. Actually, so far, that's going very well. We'll have more to say on that at the next time we report actually. So it's just a really good, I think, very low-risk actually way of us using our great assets, if you like, but getting quite a lot of return if we back the right companies. And it's about us backing some of the right companies. They're all start-ups, all very nascent businesses. That's Media for Equity. What was -- the question was about what's coming up on Studios in terms of programs? Is that -- do you mean on --

Yes. Just main shows that sort of come or drop out in that phasing for this year.

Do you mean on network? Or do you mean globally?

Globally within the Studios as a business. Yes.

Studios as a business. Okay. Well, there's a whole load of things. I mean there's things that I think are really worth noting is that something like The Pembrokeshire Murders, which was one of our biggest single dramas ever really on ITV, was made by World Productions, one of our companies, has been presold to 20 territories already. We've talked about I'm a Celebrity coming back. The Serpent did very, very well. That was a mammoth production. That has 31 million streams on the BBC, and it's launching globally on Netflix in April. Vigil is coming up. Line of Duty, Series 6 is coming up, both on the BBC. Paris Police 1900 is on StudioCanal, Gomorrah is on HBO MAX. ZeroZeroZero has been running on Sky Atlantic and will go on Amazon Prime. Physical is coming up for AppleTV, made by Studios. Cowboy Bebop, which I've seen some clips of which is really, really good, made by Marty Adelstein's company is coming up on Netflix. So those are just some of the shows that are coming up. And I can't think of any that are going out. Can you? I can't actually think of any of that are going out because most of those shows have been recommissioned. Well, all our shows that I can think of have been recommissioned. There's nothing major that hasn't been recommissioned, which is brilliant news. I'm really pleased with that.

Next is from Nizla from Deutsche Bank. Can you hear us, Nizla?

Yes, I can. Could you hear me?

Yes, we can hear you, but we can't see. You'll come up in a minute, but keep going.

Yes. Sorry, I think there's something up with my video. So I think it'll just be audio in this instance.

Okay. That's fine.

Apologies for that. Great. I have a couple of questions from my end. Firstly, on BritBox. I'm not sure if you covered this, but could you remind us again what sort of your annual spending budget is on BritBox? And what's your content strategy here? Clearly, Spitting Image, you've sort of had a second season commissioned. Are you happy with the way audiences are responding to the original content that you're putting on BritBox? And would you sort of want to do more here as well? And you've sort of talked about the 500,000 subscribers in the U.K. for the first time. Is this a target that you're extremely happy with? And is there maybe a longer-term target that you could share with us at this point of time? That would be great. Secondly, on your Studios business, could you give us some color as to what your exposure is to the OTTs versus other linear TV networks that you also provide content to and, of course, your own channels, which we know is around 1/3? But how is the growth in sort of each of these elements? And what do you see going into 2021 in terms of the types of customers that you have in your Studios business? And lastly, on viewing, do you -- are you expecting a decline once things open up here in the U.K.? Or do you feel like the elevated gearing levels from 2020 could be sustained? And if there's a strategy in place to ensure that they remain sustained? Or is this just a natural evolution once things -- once people start going out and about? Some color there would be great.

Okay. Look, I'll take some -- I'll answer all those questions, and then Chris will come in and chip in. And so I'll try and do those. It's quite a lot there, Nizla. Okay, so on content strategy for BritBox, it's very clear that the content strategy is incredibly important but the windowing strategy is critical. So we are doing quite a lot of trialing with BritBox in terms of what works. We're doing quite a lot of event TV, for instance. The Doctor Who specials do very, very well. We do a whole kind of season of Doctor Who Classics, for instance. That always does really well. Britmas a really good campaign. It really did well on cost per acquisition. So we run a whole campaign through December where we celebrate Britmas. We really project all the kind of goodies that you can get on BritBox, and that works really well. And so we do that around talent, and we do that around certain classic shows. So that's one part of our content strategy. The other part is obviously having really original originals. I know that sounds like a weird way of putting it. But trying to be very distinctive in the kind of originals that we do, and Spitting Image is a great example of that, because it's kind of show that no one else would have commissioned. It's a uniquely British satire, did really, really well. It beat our projections on cost per acquisition and made a huge amount of noise. I mean you couldn't move for a day where everyone was covering Spitting Image. And so it did very, very well for us. I'm delighted to say we've got a series of 4 more originals coming up this year. Spitting Image is in September, but actually, the Beast Must Die is a big drama, starring Jared Harris and Cush Jumbo. So well-known talent in a drama. The Secrets of the Krays, which is like a factual documentary, which people are obsessed about crime documentaries, those are both in H1. We've got, as I said, series of Spitting Image coming up in September. And then we've got an Irvine Welsh adaptation coming up towards the end of the year called Crime. So that again is a gritty drama. Those are things that we think will work very well for BritBox because the whole aim there is to make sure that you're acquiring new subscribers and the cost per acquisition, we have a model that kind of says exactly what we have to hit to get that cost per acquisition. And that's separate really. Although I think the content strategy and the marketing strategy are completely indivisible actually on BritBox, in a way that, that doesn't exist in other models like AVOD or linear, so content strategy is absolutely critical. Yes, we are happy with 500,000 subscriptions or just over. Reason being, it's exactly on our plan, exactly what we kind of budgeted to get at this point. And just to give you a benchmark on that, if you look at Disney+ in the U.K., you had gazillions of amounts of money spent, and we benefited from the spend on linear, actually. They got to 3 million subscribers with all that marketing spend in the same period of time in the first year. So I think given what we're doing and how niche our product is rather than a global product, we're a national champion rather than Disney+ which has all these millions of pounds to spend globally, I think that's a good benchmark. And another fairly good benchmark, although it always depends on timing and circumstances and all of those other factors, but Now TV took about 3 years to get to 0.5 million subscribers when it launched a few years ago. Now I know that was a different time. I know streaming was not as prevalent. I know all of those things. But for us to have done that within a year, is, we think, a strong milestone for us. So that's on the subs.

And just to say the Spitting Image Series 1 worked really well for us as well. It was the first original, and it performed exactly as we thought it would.

Yes, it was a huge success.

Very powerful at attracting new subscribers.

Yes. Good for brand, great for the positioning of the brand, great for the awareness, really good for churn. Churn started coming off. So just very strong. And then I'll just comment lastly on viewing. I think given that the amount of choice there is right across the market, including what we're offering in SVOD and Hub, where we're doing some original content on hub, never mind everything else that exists out there, I think I would expect linear viewing across the board to continue to erode gradually over time. So I wouldn't expect us to be able to necessarily maintain because I think that would just be unrealistic. The most important thing for us is that we're capturing viewing wherever, however and whenever viewers want to view our programs and that we market those programs to various demographics very effectively and that those programs are strong content. That's what we can do. What we can't do is halt trends that are already existing in the market.

Yes. And then on the Studios customers, it was really the question that Julien asked before. We don't break out the OTTs separately. And you know that's 1/3, 1/3, 1/3 free-to-air, ITV and Pay.

Yes. We put it under Pay didn't we?

Yes.

Next is Joe Barnet-Lamb. Joe, you're on mute, I think.

Trying to unmute myself. Are you guys able to hear me now?

Yes, we can. Thanks, Joe.

Yes.

Excellent. Just one more from me. So Chris has managed to pull yet further rabbits out of hats with regards cost savings. This is becoming a recurring theme. And there's a very helpful slide in the deck with regards to where those savings are coming from. So both in regards potential to convert any further temporary savings from FY '20, but also just generally, how are you feeling about the potential for further permanent savings ahead?

So before Chris comes in and gives you the detail, I am going to say something, Joe, which is you cannot imagine how hard it has been to get those cost savings. You cannot begin to imagine how hard we worked at the beginning of this year when we knew there was a lockdown and everybody at ITV has worked and it has involved restructuring the company. So the operating model for M&E, for Media and Entertainment, has changed significantly in order to deliver some of those savings. So I just want to -- I really want to emphasize that there is no magic trick going on here. I promise you, it has been very, very difficult to do this.

And yes, and Joe, it's not Chris, it is the entire organization. I think what I'd say is that probably 18 months ago, we really organized ourselves and put together a multiyear cost-saving plan, and that will continue to roll. So we're always looking at what can we deliver over the next 3 to 4 years. And as you'd imagine, we've sort of got a -- it's kind of the church spire thermometer. We've got a target and aspirational target. We then work on building up plans to deliver that. So in any given year, we know we've got certain savings that we have a plan to deliver. We've got some fairly well-developed ideas, and then there's some aspiration on top of that. So as that has matured, I think it's got -- it's just gotten better at identifying opportunities. And I think that COVID has -- it's helped because things change so much, and there's always -- in any organization, there's a resistance to change. And just the way and the speed with which we could react to COVID, I think has really galvanized people in terms of what more is possible. So we will always strive to take out waste and inefficiency and do things differently and use digital and the digital transformation to drive efficiency.

So next is Conor O'Shea from Kepler. I think, Conor, you're on mute.

And I'm on mute. Can you hear me now?

Yes, we can.

Yes. Two questions for me, please. Firstly, the first question, I think there's been a view among some of the broadcasters in Europe that COVID has lowered the costs. You have found cheaper ways of doing some kinds of programming during COVID and maybe that might be permanent. Is that something you would subscribe to? I mean you're going back to the GBP 1.1 billion budget, which suggests maybe not, but are there some sort of permanent learnings there? And then secondly, on the fourth quarter, I know this may be difficult to ascertain. What's your view in terms of the stronger end to Q4 than expected? Do you think that came from budget flushing from advertisers or just return to some sort of more of a normality ahead of more lockdowns at the start of the year? What's your view on that? Which sectors were more prominent towards the end of the year?

Yes. Okay. Just on -- Chris will definitely come in on the COVID lowering cost. I mean, look, there are lots of learnings. So you're absolutely right that what we have done is, for instance, we've been forced to learn how to remote edit, which is not something we would have done as a matter of course in the past. Now that we are remote editing, we will continue to do that, but we will also be trialing cloud-based editing, which is a further advanced step to remote editing. So there's definitely learnings to be had from having to work in a different way in COVID, but the costs currently that we are having to spend on COVID-secure workplaces on production are quite onerous actually. So actually, I don't see that diminishing for a period of time because we are still in COVID. We're still distancing. We're still having to -- we're still producing shows where you don't have all of the crew in the same place at the same time. We're having to stagger how we do things. So I don't see that changing in the short term. I do see in the medium term what we are definitely going to be able to do is get more efficiencies into production. Even though we are -- actually, if you look at it, one of the reasons our margins have always been high on Studios is because we are very, very efficient about how we do things. So we will be building efficiency on an already efficient system. And we benchmark very, very well on our margins compared to other production companies around the world. So that's what I'd say.

And I think just the -- in terms of the broadcast team, they do an amazing job on the schedule. They're incredibly thoughtful. Every show, they know why it's there and the job it's serving in the overall schedule. So I think they have optimized already, I would say. So just in terms of a blanket reduction in the program budget, I wouldn't expect to see that. I think where you'll see more is just being really thoughtful about how each piece of content plays out on linear, on catch-up, on simulcast and on subscription, which is -- that's probably where you'll see more changes in the content spend.

On Q4 last year, I would say, actually, what happened is that the vaccine news was the thing that really drove Q4. So the fact that Britain was doing so well on buying the vaccine, supplying the vaccine and had a very clear plan for rollout. And remember, in October and November, no one knew about the lockdown in January. And so advertisers were seeing through that lockdown. The previous lockdown, they felt that there was no -- no one felt -- no one expected a national lockdown, bear in mind, most of the advertisers we spoke to were thinking it would be regionally based because of the tier system, not nationally based. No one expected to go back into a national lockdown. So I think that quarter reflected positive news about January onwards and the vaccine programs coming -- doing well in Britain.

Next it's Patrick Wellington. Patrick, I think you may be on mute.

Okay. I was going to try the phone. So when we get to the half year figures, Carolyn, will we be celebrating the first recorded more than 100% month of ITV TAR? You're going to be over 100% in June. It's the Euros. It's Love Island if you've got a timing start for that. I mean are we going to be talking about an extraordinary advertiser response? That's my first question. Secondly, what about 2022? I know it's hard, but can you talk to us about the programming that you'll have in 2022 that you won't have had in 2021. I, of course, was devastated that Dancing on Ice had to be curtailed. You haven't got BGT. You haven't had Winter Love Island. You're going to get the World Cup. So what are your kind of early thoughts, if you like, for 2022? And then just on BritBox, I noticed that Netflix international subscribers are valued at $1,600 each. You've got 2.1 million U.S. BritBox subscribers, I suppose only half of them are yours. But when you think about BritBox, everybody sort of capitalizes the losses at, say, 8x EBITDA that ITV sits on. But surely, you must feel you're building up a store of value in BritBox. So tell us a bit about that.

Okay. I'm going to let Chris come in. On the half year, if we do manage that, I will buy you a drink, I promise you. As you know, we can't look that far forward. But you are right in that we have a fantastic schedule. I mean we really do have a fantastic schedule. It's Euros, Love Island. Then after that, we've got strong dramas, we've got the Masked Dancer. Just let's not forget the Masked Singer did about GBP 8 million, which was double what it did the year before as it established itself as this very weird surreal show. So although we didn't have BGT, we did have another entertainment show that really kind of wiped the floor in terms of entertainment. So look, we remain cautiously optimistic, Patrick, but that's all we can say really about the advertising market. I suppose BritBox now. Should we go to BritBox? We are definitely building value. I mean, it's one of the -- the reasons we've launched BritBox is to optimize our content to make sure that we're optimizing the rights of our content and that's one of the ways to do it. It's also to learn about subscription businesses, which are going to become increasingly important over the years. It is incredibly important for us to have the skills and the business to do that, to have the business model. And the third thing, of course, is to create value, is to build value. And that's what we're doing. Just on the U.S. subscriber number, I just want to correct that figure because it's currently at 1.6 million in the U.S., I'm pretty sure. But it is doing very, very well, and it has the potential to grow. You're absolutely right. And it's fantastic that Netflix subscribers are valued at, whatever you said, $1,600 each. Fantastic, because I think that bodes very well for BritBox as a business globally. It's a very different business to Netflix. I want to really stress that. Every market it goes into, it's a British niche product that is going to appeal to certain kinds of people who love British content. It is not ever going to compete with Netflix and others. And that distinctiveness actually is one of its greatest strengths and it doesn't try to be like any other streaming service. And I think that's one of the reasons it's been so successful in the U.S. and why it's launched so well in Australia and why the rollout internationally is in markets that we feel confident those characteristics exist.

2022 -- any thoughts on 2022?

2022, your question was about -- was that about programs or was that --

Yes.

Yes, it was. Yes. So I mean look, we didn't have BGT this year because of COVID. It was -- it's a multi -- all the talent on BGT comes from everywhere in the world. It doesn't just come from Britain. And Simon Cowell, as you know, is predominantly based in the States. So that created quite a lot of issues, I think, for BGT. BGT will be back next year. We've got The Masked Dancer in place of BGT this year, in the week that we would have been doing BGT Live. And we expect The Masked Dancer actually to capture the British public's imagination in the way The Masked Singer has done. It's got a very -- it's the same judging panel plus Oti. And so actually, we've still got a very strong schedule. And we -- yes, so I mean we can't -- the problem is once Love Island has gone for 1 year, it's gone. It's not like we'll do 3 Love Islands next year. Does that make sense? We will just do the Love Island that is in the schedule for next year. That's not really answering your question, I don't think. But I think the schedule is strong and we've tried to replace what we haven't got in the schedule this year because we've had more warning than we had last year.

Yes. I suppose my point was you still have any incremental schedule next year because you'll be having stuff coming back?

Yes. Yes, yes, that's true. And that's why the costs have gone up on the NPV. That's absolutely right.

Yes. It'll be strong.

And finally, Karen, can you say something about HFSS, where are we in terms of '23? What's the latest, the growth rate? I think there was an idea that there will be a total ban on some advertisers, no McDonald's before 9:00 p.m. that sort of thing. Where are we?

Well, I don't know yet, Patrick. So we -- there's no more news on that because as you -- as the government has been preoccupied on COVID, in particular, I think that we are talking to DCMS in particular, about what, when, how online and TV -- it would be very unfair if they did something on TV, that doesn't happen in online. It would not be a level playing field. And the government says repeatedly, it wants a level playing field. So it does recognize what media companies are saying about the level playing field. And so it's too early, I'm afraid, to give you any more information on that, except to say, we're working very hard, obviously, to understand what the definition of HFSS is. And Chris and his team have been working on various scenarios, so that we are as prepared as we possibly can be for 2023.

Okay. That's great. And mine's a Chelsea sidecar for the 100% advertising growth in June.

Okay. We'll see what we can do, Patrick, without any bribery or corruption allegations coming our way.

So if we take our final question no. I think Richard Eary has got one more question.

Just a couple of follow-ups, actually. Just -- Patrick stole a bit of my thunder, but just since --

He always does. He always does.

Yes. But on Love Island and the Euros, can you talk about sponsorship in terms of -- because I'd imagine the sponsorship money should be in or at least indications and just try to get an indication as -- go ahead?

No, lots and lots -- yes. No, look, we're confident about the sponsorship for Euros and Love Island, but we haven't pronounced our partners yet, so I won't be able to go into the detail of those today. But rest assured, both shows, I mean, the Euros is a massive kind of world event in a way. But both of those will attract strong sponsorship. And remember, on Love Island, we do a lot more than sponsorship, yes? So we -- there would be lots of appetizing deals and all sorts of other things, yes.

And just going back to the SVOD side, just 2 related questions. One is that there was 2.6 million SVOD subs in total. Is there a revenue number that you can give and attach to that 2.6 million? I know it's broken down between Hub+, U.S. BritBox and U.K. BritBox. But is there a total number that you can give us a sense of?

Yes, we're not disclosing the revenue numbers, Richard.

And then just lastly, given that I would imagine you're expecting higher U.K. BritBox revenues this year because the sub numbers are higher, and you're expecting basically the same level of associate losses, presumably cost is up. And is that cost mainly due to the 4 new originals coming through? Or is it elevated levels of marketing cost?

So the originals for next year for 2021. Are you talking '21 here?

Yes. I'm talking 2021.

Yes, this year. Yes.

Yes. So yes, I think content spend is going to be slightly higher because of those originals.

And also because just remember, we've had to defer, so we couldn't -- so The Beast Must Die, for instance, would have been in last year that we had to move because of production because we couldn't produce it. So there will have been a shift into this year from last year of some of that content.

And in terms of subscriber acquisition costs, actually, the marketing is proving very efficient. So we're not having to throw a lot of marketing money to acquire these subscribers. It's very efficient.

And the improvement in '22, Chris, is that primarily driven by revenues with lower costs or similar levels of cost expecting?

Yes. I mean, the content spend is going to be the biggest number in the P&L, so the more subscribers you've got to spread that across, the more profitable it becomes.

We've got no more questions.

Brilliant. No more questions. Thank you all very much for joining us. It was very good to be able to do this in this way, at least to see many of you asking questions. Thanks very much indeed. See you all soon. Bye for now.