ITV plc (ITV) Earnings Call Transcript & Summary

Hello, and welcome to the ITV M&E investor update. I hope many of you were able to join Chris and I this morning for ITV's full year results presentation. We shared, as many of you will know, our strong financial and operating performance for 2021, and how we've successfully executed the first phase of our More than TV strategy. We are now the largest advertiser-funded premium streaming service in Europe. And this, together with the creation of a data and analytics center of excellence, the launch of successful digital products and the significant recruitment and retention of digital capabilities has created the foundations for the next phase of our strategy, which is digital acceleration. We have a strong track record for delivery. And with the success of the Hub, Hub+, BritBox and Planet V, we really see a clear opportunity to supercharge streaming and more than double digital revenue by 2026 to at least GBP 750 million. We have the experience and capability needed. We are confident that we are well placed to do this, and that now is the right time. We've seen growing demand, both from viewers for streaming content and from advertisers wanting premium addressable inventory. As I said this morning, the cornerstone of our strategy in M&E is ITVX. ITVX is the first integrated AVOD, SVOD streaming platform in the U.K. We will be making a significant investment in our digital first content strategy, and this is based on rigorous research and analysis. This will be funded by our strong balance sheet and cash flows, and we are confident that in 2026, incremental annual revenue of ITVX will cover annual incremental costs. We're already working in a more seamless way internally between content, product and marketing with data informing many more decisions. You're going to hear a lot more about this from the M&E team in a moment. So ITVX will deliver addressable audiences to advertisers at scale. You've heard already last year at the Commercial seminar about the progress we are making and we've made in our market-leading advertising technology, particularly Planet V. This will be accelerated by ITVX delivering targeted products for advertisers, which really fulfills an important marketing need. You've also heard about the significant growth and diversification in the Studios investor seminar when the team presented to you in December. It's important to highlight that ITV Studios will be pivotal in delivering our new streaming content. This is one of the advantages, of course, of being an integrated producer broadcaster, which continues to give a real competitive advantage to us in delivering our strategy and driving more value from our content and our platforms and channels. We are going to have loads of time for questions at the end. But now I'm going to hand you over to Kevin, who as many of you will know, is Managing Director of ITV Media and Entertainment, to take you through our plans in more detail.

Good morning, everyone, and welcome to the ITV Media and Entertainment seminar. Today, we're going to give you a deeper dive into our division, and in particular, our plans to accelerate our AVOD-led strategy and to supercharge our presence in streaming. We have a very strong management team in place to deliver our plans, and you'll hear from them shortly, but I'll kick things off. In a moment, I'll talk you through why we're perfectly poised to succeed, but let me briefly recap on M&E to give you a bit of context. The M&E division has 2 business units, streaming and broadcast, to better reflect and serve changes in the viewer habits. Our streaming unit was created to ensure that ITV builds best-in-class digital products, so our viewers can watch our great content however and whenever they want to access it. Our focus here is on growing digital viewing with ITV, particularly AVOD viewing as well as delivering valuable, addressable audiences. Our second unit comprises ITV's broadcast channels, which remain extremely important to both viewers and advertisers. Whether it's Ant & Dec's Saturday Night Takeaway and FA Cup match or the Six Nations, ITV is more than anyone, the home of live TV. People tune in to watch these programs live on a big screen, in the moment, in the millions. So live sport, news, big entertainment shows, live daytime shows, power our schedules and our channels and our unrivaled position as the home of mass simultaneous audiences. Our linear channels are hugely valuable and profitable, and they will continue to be central to what ITV means to viewers. Housing these 2 units in 1 division means we are already responding more strategically to changing viewing habits, working more seamlessly across both teams to deliver what we believe is the optimization of our channels whilst supercharging our streaming ambitions. At the most basic level, we're better able to deliver our programs to as many people as possible in the way they want to watch them. As you'll hear later, our viewer-led approach is now powered by a single content budget across all platforms and channels, which gives us the flexibility to optimize viewing and revenue across the division. Our content strategy will be digital first, with significant investment going into new content as we ramp up our ambitions for ITVX to be a destination for exclusive weekly content premiers. And we will have an additional content investment of GBP 20 million this year and GBP 160 million in 2023, going into our content budget, specifically for our streaming first commissions and acquisitions. Our total content budget will be GBP 1.23 billion in 2022, increasing to GBP 1.35 billion in 2023, and remain broadly at that level going forward. And here's why we can succeed, it's because we have such a strong set of competitive advantages. Firstly, we uniquely deliver huge commercial audiences and phenomenal mass simultaneous reach for advertisers through our channels. ITV family had a 33.1% share of commercial viewing in 2021 and 93% share of the top 1,000 commercial broadcast television programs in 2021, including the most watched program of the year, England's Euro 2020 semifinal. Of course, later this year, we have the FIFA World Cup, 32 Countries competing from the 21st of November to win the final on the 18th of December, with England as one of the favorites. We can expect huge audiences. We have half of the U.K. population registered with ITV Hub, and as our results demonstrate today, we've been delivering very strong growth in AVOD viewing and revenues over the past couple of years. With Planet V, after Google, we have the largest programmatic video advertising platform in the U.K. with over 10,000 data points for targeting. And we also have a track record in growing a subscription service from scratch through the success of BritBox. And the new approach we're talking to you about today, we're drawing on all these strengths. I mentioned earlier that we have a very strong management team with exactly the skills and experience we need to drive this strategy forward. We're going to share our story with you today in 2 sections. In the first half, we'll talk you through the changes viewers will see, as we launch a brand-new streaming product, share our new content strategy and deliver a completely new user experience. The second half is about work behind the scenes, the data strategy powering everything, the opportunities for advertisers and the KPIs we'll judge ourselves against. In the first half, you'll hear from Rufus Radcliffe, our Managing Director of Streaming, who will outline the new proposition and the audience opportunities. Many of you will have heard from Rufus before, he's been at the forefront of successfully launching new services for new audience for many years. Then you'll hear from Rosemary Newell, our Director of Content, who will take you through our content strategy. Rosemary is without question the most experienced scheduler in the business and the perfect person to lead the team devising our new windowing strategy across AVOD and SVOD, a team which includes streaming specialists who previously worked on BritBox. And then Rosemary will hand over to Deep Bagchee, who recently joined us as our new Chief Product Officer. Deep has a track record of creating world-class product teams, including at Economist and at CNBC. In our second section, Sanjeevan Bala, our Chief Data Officer, is going to give you a flavor of how we will drive much more value from our data by illustrating some of the key value propositions that we'll deliver by enhancing our data capabilities. Kelly Williams, our Managing Director of Commercial, who many of you will know from the Commercial session last year, is going to talk through how our investments in ITVX and our enhanced data strategy will deliver for our customers and support the commercial strategy we've outlined and are busy delivering. Kelly will also share insights into some of the cutting-edge innovation work he and his team are embarking on with advertisers and brands to find new, exciting and unique ways to engage and connect with our audiences. Sarah Clarke, our Chief Operating Officer; then walk through how we're going to deliver this, the KPIs and the targets we've set ourselves within M&E and our ambitions to 2026. But before we hear from the team, how about we take an exclusive look at ITVX in action. [Presentation]

Looking at that short film, you can see why we are so excited to be sharing our plans with you today and launching ITVX to our viewers later this year. To work alongside our powerful linear schedule, ITVX is a brand-new streaming service with a brand-new proposition. There will be something for everyone with more fresh free new content released every week than any other British streamer. Always changing, always adapting, every day will be different on ITVX. With ITVX, viewers will no longer be catching up with what they've missed. Instead, they'll be keeping up with the very best TV. It's Britain's freshest streaming service. It's been developed over the past 12 months with an understanding of consumer needs at its heart, and this is the reason for its new name, ITVX. Firstly, the ITV element. Our ongoing brand tracking with 4,000 new gov respondents consistently shows that ITV scores very strongly against measures such as familiarity, trust and quality. These are attributes that we've built up over many years, and it's why we continue to be one of the best loved brands in the U.K. And so ITV is a crucial part of the name. But as I'll be explaining, it will also have many things you would not expect from ITV, and this is where the X comes in. In testing, it's been clear that the X intrigues consumers and creates excitement and anticipation. And so we have the best of both worlds, all the content you would expect from ITV, trust and familiarity; and a huge amount of content you would not expect from ITV, surprise and delight, super serving our current user base and appealing to new users as well. ITVX is also going to be the most viewer led streaming service in town, giving viewers the choice they demand but can't get anywhere else, a free service with joined up viewing of a vast library of growing content, which is funded by brilliant targeted advertising, as you'll see later, or a subscription service for those looking for a premium offering with unlocked additional content. And we'll be building all of it on strong foundations. We have a proven track record in both AVOD and SVOD, and 2021 was a record year for both ITV Hub and BritBox. 25 million users came to ITV Hub in 2021, an increase of 17%. We had a 19% increase in monthly active users to over 9 million males and a 31% increase in consumption hours to over 600 million hours. And in our 2 subscription VOD services, we had over 1.2 million de-duped subscribers. In the U.K., BritBox ended 2021 with 733,000 subscribers, and Hub+ grew to 513,000 subscribers. But in the TV first for U.K. viewers, we are bringing together a merged AVOD, SVOD service all in one place, with a flexible business model that can change according to market dynamics. This scaled proposition is brilliant for viewers. It offers them the choice of AVOD or SVOD with an enhanced product experience and a ramp up of content. Our new Chief Product Officer, Deep, will soon give you a preview of the new product design in action. It's brilliant for advertisers, building on our position as Europe's biggest ad-funded streaming service, and Kelly will give you more detail on this a little later. And of course, it's brilliant for our distribution partners, too. There are 3 central pillars to our new proposition. Firstly, we have live channels. One thing that has become increasingly clear this year is that live channels are still incredibly important, whether you stream or watch in linear, live TV matters. VODyssey, an independent study run by Differentology with the IAB and Thinkbox, showed that 51% of over 35-year-olds always go first to live TV when it comes to the order of their TV tuning habits. During the Euros last summer, we had over 2 million viewers streaming matches live on the hub. Viewers increasingly choose to watch live TV in the online environment. It's already become normal behavior. As a result, you can expect an enhanced live experience to be a central part of what we do on ITVX, including better SEO, more prominent signposting of live programming on the service as well as producing clips and sharing highlights after big event TV moments. This is a significant differentiator versus U.S. streamers. Secondly, we'll have curated FAST channels. FAST channels, as you might know, stands for free ad-supported streaming TV services, FAST. They're dynamic channels of curated programming that could be based around pretty much any theme, talent, genre or interest you can imagine. They're very big in the U.S., and we know we can be really strong in this space. The same VODyssey research study shows that 40% of U.K. streaming subscribers feel that the sheer volume of content can often be overwhelming, leading to choice paralysis. FAST channels are one way we can help viewers more easily navigate through such choices. We believe there's an opportunity to constantly delight them with a combination of editorially and data-driven personalized ways of presenting our content. We know our viewers love live, they love our archive and they love our editorial voice. ITVX will launch 20 new FAST channels as an ever-evolving lineup, responding in real time to what our viewers are telling us. Curated channel ideas will include true crime, real life stories as well as dedicated program brand channels like Vera and The Only Way is Essex. And thirdly, of course, we have our on-demand proposition. We know that 34% of 16-34s go first to streaming services when deciding what to watch. So far, ITV Hub has been a highly effective catch-up destination, but ITVX will be a brand-new content destination with 15,000 hours of premium content at launch compared to just 4,000 hours today. It will be a premium experience where the viewers choose to subscribe or not, with huge benefits to both AVOD and SVOD viewing. Our ramped-up, free, ad-funded tier will be complemented with a subscription tier, which will have all of the free tiers content ad-free, plus it also opens up the world of BritBox, featuring additional content from the BBC and Channel 4 and the regular drop of exclusive content as well as being the home of other SVOD content partner brands. For the first time, we'll have the flexibility to move users across AVOD and SVOD in one seamless uninterrupted experience. If a viewer shares the same characteristics as a subscriber, but has not subscribed, we will present upsell opportunities. If a viewer is a heavy AVOD user, we will keep that viewer in the free tier according to their profile and data signals. At every development stage of ITVX, we've had a forensic analysis of the addressable market for our service. And using YouGov profiles, we match the viewing behaviors of the U.K. population, as you'll see here. Looking at engagement with ITV on the Y-axis and engagement with VOD on the X-axis, there's a sizable audience segment with whom ITV does have a relationship, but who are spending more and more of their time streaming. And they give ITVX the biggest opportunity to capture a far greater share of viewing. We called this group main streamers. They are increasingly streaming an on-demand first, but they like big mainstream content, which we are very good at. There are 23 million main streamers in the U.K., and we can't wait to introduce them to our new service. 23 million is a lot of people. So we've further broken this out into targetable subsegments based on age, VOD usage and attitudinal statements. The everyday [ renters ] prefer entertainment to drama. They have lower VOD usage and they're younger in age. They want plenty of choice in their content offering. They love the big tent-pole shows that ITV delivers. As you'll hear later from Roe, ITVX has plenty more in store for them. The socializers, they see VOD as their primary destination, seeking out reality and entertainment like The Only Way is Essex, Real Housewives, The Brits. It's all about social fuel and what's hot now. And then we have the armchair explorers, they're not necessarily old in age, just more traditional in their ideals and values, slower to adopt new media behaviors with lower tech literacy, but they're beginning to move into VOD. They have a preference for U.K. content over the U.S., whether it's the Six Nations or Racing from Goodwood, or dramas like Unforgotten, Des or Belgravia. And then we have the savvy streamers. Our final segment tends to be more open to trying new things and experimenting. They're more tech-savvy, with access to a wealth of choice and platforms already, but they're searching for quality rather than quantity. As we've built ITVX, our content product and marketing teams have worked hand in glove to deliver a service that will appeal to all of these segments. Before Roe and Deep take you through their areas, let me focus on the marketing part. Clearly, marketing will be critical to the success of ITVX to reach and reactivate these groups, and we're developing a full funnel approach. We'll have same making above-the-line activity focused on main streamers and those subsegments at the top end of the funnel. And this will be complemented by a highly targeted, data-led and more personalized approach for conversion and retention activity towards the bottom of the funnel. And once using the platform, we'll also model which viewers are most likely to upgrade to SVOD based on behavioral and demographic similarities with existing subscribers. And as a media owner, we happen to own a highly effective marketing platform, television. Our own promotional airtime can hit 55% of main streamers on a weekly basis, but you know how well all this works. But if you add in our new enhanced internal capabilities, the power of VOD airtime, the millions opted into marketing, CRM across e-mail and mobile, our 25 million social media followers and the PR reach of our content, we actually hit 74% of main streamers every week, supported by a digital content studio and a brand-new metadata or an image unit, ensuring that every consumer touch point is optimized. And we're also working with the very best external partners to help us effectively reach everyone else in the main streamers target. This includes Uncommon Creative Studio, the U.K.'s creative agency of the year, and Essence, our digital media agency. Ultimately, it means we have the ability to create an always-on machine to present the right content to the right viewers at the right time. Coincidentally, it also happens to be the right time for me to hand you over to Roe Newell, who will now unveil our plans for content on ITVX.

The launch of ITVX presents an unparalleled opportunity to not only supersize our content offer, but also to revolutionize our content strategy. Brilliant content is so important to the main streamers that Rufus has introduced us to, and it's absolutely at the heart of what we do, and that's why we are investing so significantly in additional content. Crucially, this additional investment will be exclusively spent on digital rather than linear programming. And whilst today's team as part of ITV's M&E division, it's worth adding that this will provide great opportunities for our ITV Studios business. It's one of the key benefits of being integrated producer broadcaster. And since ITVX unites all of ITV services under one platform, for the first time ever, we'll be combining all our program spend into one single content budget, which will be invested to attract and retain main streamers on the optimum platform at the optimum time. And in the way in which we present our content, we will be digital first. To quote Rufus just now, there will be something for everyone with more fresh new content released every week than any other British streamer. So let me start by taking you through the 6 foundation stones of ITVX, and the hours and hours of content, which we know both our current and new viewers will relish. To be clear, our live channels will remain at the core of our content offer. The strength of our linear schedules remains vital and we will continue to deliver mass simultaneous reach on ITV as well as key demographic audiences on our targeted channels like ITV2 for younger audiences and ITV4 for male viewers. We are doubling down on content, which drives live streaming. It's one of the things that will really set us apart, especially versus other streaming services. Many of our most famous and best watched shows, such as I'm a Celebrity... Get Me Out of Here! or Love Island have been key drivers in streaming, and we'll continue to laser focus our investment on those major events in the calendar. Across the year, we'll focus on delivering major events in sport, reality and entertainment, all events that generate huge streaming opportunities. Right now, we're streaming the FA Cup and the Six Nations Rugby. Last year's Rugby reached 28 million people and peaked with 9 million viewers. In the spring, we look forward to Britain's Got Talent, which delivered 11 million viewers last time. And in the summer, Love Island will return. Last year, it was the second biggest show amongst the coveted under 35s across all channels. We expect I'm a Celebrity to return in Australia in November, when it will generate audiences of over 11 million. And to crown the year, we have the World Cup in Qatar, which has the potential to bring over 20 million viewers to key games. It is these unmissable events with their crucial unique audience appeal, which will serve as a springboard for viewers to discover other content on ITVX and absorb themselves in everything else on offer. Whilst streaming major live events on our channels, we want to make it possible for viewers to lose themselves by offering thousands of hours of the most enticing box set titles. We already have 4,000 hours on the ITV Hub. But by the time we launch ITVX in November, we'll have an astonishing 15,000 hours we have been investing already. The first foundation stone then is made up of hundreds of multi-episodic binge-able acquired series. For example, we have just acquired all 300 episodes of Hell's Kitchen U.S. And I am delighted to announce that we have just concluded an exclusive deal with Warner Bros. for over 1,000 hours of much-loved American drama and comedy titles like The OC, One Tree Hill, Supernatural, Heart of Dixie, Veronica Mars, and Nikita. This means all of these titles will be available exclusively for free only on ITVX. We're also in active discussion with other U.S. distributors and have deals close to announcement with major Hollywood studios. And this quickly growing library of some of America's best loved franchises will sit on top of our current lineup of existing hits such as Family Guy and American Dad. The second foundation stone of ITVX, alongside acquired series, is feature films, which we have identified as a key genre for our main -- target main streamer audiences. We have already confirmed deals to buy many blockbusters for ITVX from major studio partners, including Warner Bros., Disney, NBC Universal, Sony, Pathe and StudioCanal. And we're talking to them all about hundreds more. In fact, we're planning to show 500 films for free in the first year alone, constantly refreshed with 150 on the service at any one time. We'll curate the titles into seasons and we plan to offer some extremely well-known franchises in their entirety for free in the same place for the very first time. I'm hopefully building up a picture of the content on ITVX. We have our live streaming channels and acquired box sets and feature films. So now on to our third foundation stone. Not only are we looking to the U.S. for box sets, but we're also ramping up the number of U.K. box sets available too. we have already reached 4,000 hours of exclusive content from amongst ITV's firm favorites, and we'll continue to expand this every month with iconic ITV brands like Broadchurch, A Confession, Agatha Christie's Poirot, and Victoria. It is all these box sets which will increase viewers frequency, lengthen the time they spend with us and drive the consumption, which is so vital for advertising revenue. It also increases choice for those who might want to upgrade. So for subscribers in our premium tier, their choice will expand by a further 6,000 hours. Not only will they have access to all of these hours without ads, but they will also have the richness of the thousands of hours already in the BritBox slate. This includes all of the BritBox originals such as The Beast Must Die, Crime, and Magpie Murders, as well as exclusive box sets like Dr. Foster, It's a Sin, Only Fools and Horses, The Inbetweeners, and Grange Hill. Not forgetting that BritBox remains the only place in the U.K., where you can watch classic Doctor Who exclusively with more than 600 episodes available. So far, I've talked about building up the foundations of ITVX to offer real breadth and depth. But we have promised that we will offer more fresh new content dropping every week, up than any other British streamer. We understand how viewers want to watch narrative series, whether drama, comedy or reality. They're impatient. They want to see the next episode and they want it immediately. Did the building blow up? Did they get married? Is he dead or alive? You may recognize your own viewing patterns here. So making up our fourth foundation stone, all the drama and comedy we run on ITV linear channels will be made available to viewers in one go on ITVX as soon as the first episode has aired. This is a unique digital first offer to viewers, and we have analyzed how effective this is in the drama drop experiments we have conducted to date. Last year, we made 5 dramas available in this pattern. Next year, it will be 20. You may have watched all of The Bay on the Hub after it launched in January, or the whole story of No Return with Sheridan Smith after it kicked off last month. As well as scripted series, we will drop all episodes of our popular reality series in one go as well. Series like The Real Housewives of Cheshire, and Love Island Australia. So that's many more hours of American series, feature films, U.K. box sets and brand-new drama, comedy and reality all being shown in digital first. But we also know that sometimes people want to lean back, find their favorite show or genre and let ITVX do the selecting and organizing of the content for them. Rufus has already mentioned our fifth foundation stone. We'll launch ITVX with 20 FAST channels, channels which are always on and are built dynamically around different content themes. By harnessing the power of data and analytics, you'll hear more from Sanjeevan later on how we'll use data to our full advantage. We will be able to constantly monitor what people are viewing, which channels are getting most traction amongst which viewers, and which are delivering most hours of consumption. Our promise is that we can offer viewers a new FAST channel every week of the year. Deep will be able to show you how these fast channels will fit into the new product to enrich the viewer experience after this section. Everything I've described so far built ITVX into a rich product, brimming with a wealth of brilliant titles. But I have been saving the best until last. Now we come to the main event for ITVX, the sixth and final foundation stone, the most innovative and a unique feature of this service and one which will really set us apart and allow us to deliver on our aim to release more fresh new content every week than any other British streamer. We will offer brand-new, exclusive content every week, programming which has not been seen anywhere else in the U.K., and content which can only be seen on ITVX. Shows from all the genres we know our main streamers relish most from drama to comedy, documentaries to feature films, animation to reality. Our 52 weekly specials will be a mix of commissioned and acquired titles. They will be aimed squarely at audiences we don't currently attract, super serving the 4 main streamer segments that Rufus outlined earlier. When commissioning and acquiring, we have held these segments constantly in our sites, seeking out content which will directly appeal to them. These programs will feel different in tone, in subject matter, in approach and in casting from what you might ordinarily expect to see on ITV. We have an amazing opportunity to add color to our pallet and to broaden our offer, unshackled from the linear schedules. So for example, in drama, we can now consider sci-fi and fantasy. We can work with movie stars, we can branch out into award-winning documentaries, and they will be exclusive to ITVX for 6 to 9 months before then going to air on one of our linear channels. So imagine a show like Trigger Point, which you may have watched and which ended on Sunday. Now imagine that we had launched it on to ITVX. It would remain exclusively available for 6 months. And then this coming summer, 6 months after its U.K. premier, we would air it on ITV linear, at which point it would surge again on ITVX when another range of viewers would become aware of it. This cycle for each show means we get the best value we can out of our content. We optimize our spend and we ensure each program works harder than ever before. We are determined to offer exclusive content on ITVX, but we also want to ensure that we invest our budget to maximum effect, and this brand new windowing plan does exactly that. And for subscribers in our premium tier alongside BritBox, we will also offer regular exclusive content specials and partnerships to secure, for example, Nordic drama and premium British films. I mentioned that we will be commissioning to super serve the main streamer segment. So let me give you a glimpse of some of the exciting new titles we have in store and how we may launch them to viewers. Let's start in November when we might premier Litvinenko, the extraordinary true story of the investigation into the poisoning of Russian spy and prominent critic of Vladimir Putin, Alexander Litvinenko, in 2006. He has portrayed brilliantly by the spell-binding David Tenant. The Sex Lives of College Girls, a raunching new American comedy from Warner Bros. following the lives of 4 18-year-old freshman college roommates at Essex College in Vermont. The Confessions of Frannie Langton, Sara Collins' award-winning debut gothic novel brought to the screen, a tale of mystery and murder, sex and slavery. And then in December, let's imagine we could launch [ Deep Fake Nightmare Neighbors ] using truly innovative and jaw-dropping techniques, a brilliant new comedy where you can see actors transform into real people, in this case, Barrack Obama, Miley Cyrus and Sir Ian McKellen as they head out to rob a bank. A Year on Planet Earth is a visually stunning natural history series 3 years in the making, documenting each season in the natural world, narrated by Stephen Fry and made by BAFTA award-winning filmmakers. Plebs, a single feature length film to bring to an end the wonderful story of our 3 friends in ancient Rome as they go off to war. The Case Against Cosby, a premium documentary exposing new truths about accusations against Bill Cosby with exclusive access to the survivors. And in the new year, we could showcase more dramas with truly, truly stellar casting, including Stonehouse, a treat to see real-life husband and wife, Matthew Mcfadyen and Keeley Hawse, play real life husband and wife, John and Barbara Stonehouse, the staggering story of the labor MP who attempted to fake his own death in 1974. Marlow, an epic revenge driller staring Claire Foy, and centered around the saga of 2 feuding gangland families; Three Little Birds, devised and written by Lenny Henry, and based on the experiences of his own mom, the story of 3 young friends making a new life in Birmingham after they journey over from Jamaica as part of the Windrush generation; and Nolly, written by Russell T. Davies as his love letter to the soaps. The story of actress Noele Gordon, who played the iconic Meg Mortimer in Crossroads, her reign as queen of the Midlands and her shock sacking at the height of her fame. Nolly is played by Helena Bonham Carter. And finally, demonstrating the range of audiences we are targeting, we will also premiere Bad Chefs with Chunkz, a brand-new reality competition, which challenges 10 takeaway addicts to delete their food delivery apps and learn how to cook from scratch. The challenges and chaos all overseen by YouTube sensation, Chunkz. I am so pleased to have shared with you our content plans for ITVX. How we're building our service to offer 15,000 hours whilst harnessing the power of our live streaming channels. I have taken you through the 6 foundation stones, growing our archive of acquired U.S. box sets, introducing feature films, scaling up our U.K. box sets premium tier exclusives and BritBox library, dropping more box sets of new narrative series, launching FAST channels, and finally, releasing brand new weekly exclusive premieres. In a moment, I'll hand over to Deep, our Chief Product Officer, to show you the product in action. But before I finish, I want to show you a clip of a key launch premier title for the end of the year. A Spy Among Friends, the true story of KGB double agent, Kim Philby, it's an epic tale of spying, lies and betrayal, an adaptation of Ben Macintyre's best-selling book, its 2 stellar leads are Damian Lewis and Guy Pearce. I hope it gives you an idea of our ambition and the treats in store. [Presentation]

Hello. I'm Deep, and I'm really excited to be here today as ITV's Chief Product Officer. And I'm thrilled to finally be able to share the world premier of ITVX in action. In just a moment, you'll see an early demo of the new service. And as you watch, I'd like you to keep a few things in mind. Firstly, the content, how we bring to life all that amazing programming that Roe just talked about, and how we'll present our shows, box sets, films and channels to our viewers. Secondly, the customer experience, how the design, product interface and view journey are 1 million miles ahead of where ITV has been before. This is a premium experience. And thirdly, the way we offer customers choice the choice to watch for free or to subscribe. Now remember that for ITVX, the majority of viewers will be entirely free, giving us a big base of users to monetize through advertising, but we will also build an incentive to subscribe, allowing us to build a great freemium experience. Let's now take a look at where the product is going and how we want our customers to feel. [Presentation]

What you're seeing today is just some of the work going on behind the scenes from our talented and growing product design and technology teams. Let me share some of our main design ambitions. The first thing we want to do is to make the new ITVX a destination for discovery, open up ITVX and you'll immediately notice a much richer visual experience. Viewers will be surprised and delighted by the fresh completely redesigned look and feel. It's very different from the ITV they know today, shows are now [ hero-ed ] and stunning full-bleed images, rails look slicker and load faster, we're showing off the content to the max. In one new modern interface, you'll find all our new shows and premium dramas sitting alongside content you wouldn't normally expect from ITV, like major movies and great partner content. We've designed ITVX to behave as a major multi-content platform. The next thing is connecting viewers on what matters. We've created more ways for viewers to discover exciting content. The more you watch, the more accurately ITVX gets to know you, which means we can personalize the product experience. But it's not just personalization. Our proposition is rooted in providing the best possible blend of both curated and personalized content aimed at reflecting and connecting with modern Britain, plus we've redesigned our search functionality to be more personalized and to give more relevant results, even when the odd typo gets in the way. Now as Rufus mentioned earlier, the amount of choice in online streaming can sometimes be just overwhelming. That might feel true for you, too. If so, ITVX will offer FAST channels. After a long day, you don't necessarily want to wait through a massive catalog of content to find something to watch. You can use a familiar EPG guide to find 20 curated channels of great content. Think of FAST channels as Spotify playlist for programs, grouping shows by common themes such as specific actors, genres, interest or even calendar events. FAST channels offer more linear TV like ad experience, which is great for our advertisers as well. Our FAST channels are always on, and you can even favorite the channels you like most, so they're easier to return to. ITVX will also reinforce what we do so well on broadcast television as we continue to be the home of live events, whether that's live sports, live news or a simulcasted reality show. For example, World Cup '22 arrives in November, and ITVX will be ready to play host to the world's biggest celebration of football. We'll make sure the latest games take center stage in ITVX in glorious HD. And with a dedicated World Cup zone, fans will know exactly where to go to catch up on related content like interviews, highlights and companion shows. Now we're also committed to building a fully inclusive product. This includes a more accessible product with more subtitles, but we also know that your kids need a safe space. ITVX makes it easier than ever to keep the kids entertained. With the launch of multiple profiles, you can create a kids profile just for them. They get a dedicated kids safe space with their own list separate from yours, or you can search for shows for them by their favorite characters, from Batman to Pingu. But that's not all. For those who want more, there's a premium subscription option where viewers can unlock even more value. By upgrading to ITVX premium, you can get all your content in one place, including subscriber exclusives, the full BritBox experience, including programming from the BBC, Channel 4 and Channel 5, plus an ad-free experience. It's easy to subscribe and there's no long-term contract as we offer free cancellation anytime viewers change their mind. What you are seeing is an illustrative price. Our goal is to finalize pricing in the coming months. So to recap the 6 things we offer customers, a destination for discovery with 15,000 hours of content, connecting you with what matters through a blend of personalization and curation targeted at a British audience, a new and easier way to find content via FAST channels, the home of live events from live sports to live news, an inclusive product with a safe space for kids, the ability to unlock more value by upgrading to premium and becoming a subscriber. As you'd expect throughout this process of creating this product, we have been user testing and getting feedback from our customers. So if you're wondering what viewers make of ITVX, let me now show you some real customer reactions to very early versions of the proposition I've just shared with you. [Presentation]

Over the summer, as we develop the product, there will be much more to share, but I hope that gives you a sense of what's to come when we launch later this year. Now let me hand things over to Sanjeevan, who will share how data is helping us accelerate these plans.

Hello, I'm Sanjeevan. There's an amazing road ahead, and it's particularly exciting for me because so much of it will be driven by a wholly new approach to data. We've been preparing for this moment for over 3 years. We've built a data team of professionals and we'll have grown this to 115 in-house specialists by the end of the year. We've invested in cloud-based capabilities, and we've captured first-party data at scale and have already become one of the U.K.'s top 5 largest customer databases. Now it's all about accelerating our plan. We've recently built value cases across our entire business, so that we can efficiently unite under a single data strategy. And this unified view of ITV's data is fundamental to the success of ITVX. ITVX is where TV goes next. It's a revolution in tele, and we'll deliver it by using what we call creative artificial intelligence or creative AI. Put simply, this is viewing imagined by creatives, optimized and delivered by AI. Let's go back to the mainstream and segmentation slide we saw earlier. It's clear there's tremendous opportunity for growth. And when Rufus first told me about the main streamer socializer segment, the person who immediately came to mind was Steph in my team. And here she is. Our new data capability means we can now understand that Steph watches entertainment formats such as I'm a Celebrity, and TOWEI, that she enjoys American content such as Family Guy, that she has a sucker for modern crime thriller, and loves to binge multiple episodes on Wednesday nights. We'll learn that she mostly watches on her iPad Pro and occasionally on a shared Samsung TV. Plus like many other socializers in her late 20s, she spends time on Instagram and also uses Twitch to live stream games like Call of Duty on her PS5. Across our audience, we'll receive billions of signals like Steph's, and we can combine them all to create a TV first, something we call viewer DNA. Viewer DNA gives us a deep and unique understanding of viewer behavior. And thanks to our brilliant research team, we can start to combine this behavior with neuroscience to understand why viewers watch what they do. We can apply machine learning techniques to unearth a deeper understanding of our US segments, such as her headroom to watch more content; how receptive she is to our marketing promotions; what her content taste preferences are, including what she doesn't like; her propensity to subscribe and her likelihood to churn. And by securely partnering with carefully vetted data providers, we can anonymously map her income level, spend by category, changes in life stage and interest in travel brands and more. In fact, we now have over 10,000 data points that are of interest to advertisers. So yes, there are 2 key questions. As a target main streamer, how will our data strategy improve Steph's experience of ITVX and how do we start to deliver value for advertisers, partners and indeed, for you. Let's explore 3 creative AI scenarios around marketing, product and advertising. Let's look at marketing first. Rufus has mentioned that an ITVX every day will be different. So how can we help Steph discover the best of our vast library of ever-growing fresh new content. We've assembled and are currently testing our own next-generation platform. We've called it Flex, and it's an absolute game changer for how we market our content to viewers. Flex gives our marketing team the ability to tailor our comms with far greater precision so we deliver the right promotion to the right viewer on the right digital platform, at the right time, and in the right context. But the real kicker is what used to take us 3 months to segment and plan now takes us 3 minutes, less time than it takes to watch a TV ad break. If I know one thing about Steph, it's her love of social media, especially Instagram with the occasional Twitter chatter. We already know Steph is in the socializer segment, and by combining this with our viewer DNA, we also understand her content taste preferences. And for Steph and other socializers, our new Flex system could flag a brand-new thriller such as The Ipcress Files, our stylish retelling of the legendary spy movie as a 6-part drama landing later this month. Personally, I can't wait. And thanks to our machine-learning model, we know Steph will love it, too. And we'll probably want to binge the whole lot in one go. So we'll adjust our comms accordingly. We'll be out to Flex the creative, adapt the wording in the copy and even choose the best clips and images to Steph. And as we scale up and run hundreds of tests, we'll continue to learn, optimize and drive greater marketing efficiency. We'll start by enabling this across paid media, and then expand across our own CRM, own VOD owns TV, before extending further to digital outdoor. We can even optimize the promotion in flight. So of Steph misses it on Instagram, we can promote it on Twitter. And once she sees the [ PSVs ]promo, we can join this up with the product, my second data scenario. By improving her experience of ITVX, viewer DNA, will become the lifeblood of our whole digital ecosystem, way beyond just marketing. Under Deep's leadership his product team can now use precisely the same viewer DNA to tailor how content is presented to Steph and how she navigates the service. For example, our machine-learning models may suggest she is likely to become a paying subscriber. So we might decide to nurture to try the pay tier with a free trial. With all our learnings from BritBox we know exactly how to optimize this upgrade journey in the most cost-effective way. Plus, as with many of our socializers, Steph doesn't usually watch curry. So guess what? She won't see them promoting an ITVX. With creative AI, we retain the want of our editorial tone, personalized experiences drive deeper engagement and ultimately increase viewing. And this in turn feeds our commercial innovation in my third scenario, advertising. We can now combine all our first-party data with creative AI. Now I hope you like this innovation. We've built a machine-learning engine that uses computer vision to watch television shows. It also listens to the audio tracks and uses natural language processing to read subtitles. And as if by magic, we're able to bring all this data together to identify contextually relevant moments in scenes within programs that we believe may be of interest to advertisers. For example, our engine has identified a highly relevant food moment here. And since data tells us that socializes like Steph have a keen interest in food, when she watches the show, her first ad break is for a premium subscription food brand. It's relevant, data-driven and contextually placed. Commercially, we're increasingly able to create bespoke solutions that harness our entire viewer DNA, combined with creative AI, fused with a brand's own first-party data and accessible programmatically through Planet V. And Kelly will share more in a moment. There is so much more in the pipeline. Data will inform the programs we commission and acquire as we better understand what viewers love most, we'll also discover any unmet needs and commission accordingly. Data will optimize our show windowing and distribution strategy. It will help Row's team maximize the value of our content across its entire life, whether on AVOD, SVOD or linear. Data will help us run hundreds, actually thousands of different scheduled scenarios to better understand the most optimal mix of content to drive dealer advertiser and subscriber value. And data will improve, not only how we promote shows and ITVX, but also on third-party paid platforms. As we attract new viewers and subscribers, ITVX is where TV goes next. It's digital, immersive, experiential and completely powered by creative AI to combine the best creative minds in the industry with the science of the possible. And on that note, I'll hand over to Kelly Williams to tell our commercial story.

I hope you all saw our commercial investor seminar on the ninth of November. If you missed it, you can stream it on-demand at itbplc.com. It's possibly the one and only time the commercial team will ever be a streaming sensation. If you haven't seen it yet, we talked in detail about ITV's advertising business. An advertising business that is transitioning from being a very powerful mass reach marketing platform just a few years ago, but relatively one-dimensional into a multidimensional, digitally led, data-driven creative partner. Our commercial strategy brings together the best of all advertising propositions. First, our unique ability to deliver trusted brand safe, mass reach combined with; second, a more targeted addressable advertising proposition driven by the first-party data you've just heard about from Sanjeevan and a programmatic platform, Planet V; and third, at the same time, building multilayered creative partnerships using our unique position as an integrated producer broadcaster. In a nutshell, 3 simple strategic pillars: a mass reach cell, an addressable cell and a creative cell. We also highlighted the huge renaissance of TV advertising demonstrated by our full year results in 2021 and a very strong start to 2022. It's what we described as the 4 hours: the rediscovery of the effectiveness of TV advertising by the traditional major TV advertisers; the reevaluation by many advertisers on the back of the flexibility, value, trust and brand building capabilities, TV offered in particular, during the pandemic; the revitalization of TV due to the exponential growth in e-commerce brands and direct-to-consumer brands; and finally and arguably the most important one, the reinvention of TV advertising, which is the area I want to cover now. Driving growth through the digital transformation of our advertising capabilities. And ITVX will be, by far, the most significant milestone on our reinvention journey. In a moment, I'm going to introduce you to ITV AdLabs, the new home for all of our digital innovation that we launched in the market in November and has taken off massively this year. But let's start with ITVX. You just heard from Kevin, Rufus, [ Ro ]and Deep about how and why ITVX will deliver on viewer's needs. I want to share how our investments in ITVX and our enhanced data strategy will deliver for our customers. How it will deliver for advertiser and agency needs and support the commercial strategy we've outlined and are busy delivery. So here's the crucial question. What is it that advertisers and agencies need? Well, listen to what they tell us. They need transparent, privacy safe, data-driven advertising solutions that are easily planned, bought and measured at scale around high-quality brand-safe content. To put it simply to 5 things: data, ease of purchase, measurement, high-quality content and scale of audience. And crucially, only TV can deliver them more. So let's look at each in turn. We are investing in our data strategy. All of our digital targeting solutions are first-party data-driven with a select number of third-party partnerships such as Experian and Mastercard, matched directly to our 34 million registered users. And our advertising solutions are and will remain entirely cookieless. So data get a tick in the box. Our self-service programmatic platform, Planet V is now in the hands of the entire advertising market. And this has so much potential. Since we last presented, we have completed the onboarding of the remaining GroupM agencies and Unilever, we now have over 1,000 active users on the platform at ease of purchase, tick. We now have cross-media measurement. CFlight has launched. As a reminder, CFlight is a measurement methodology developed by NBCU in the States and brought over to the U.K. by Sky. All of the U.K. broadcasters have collaborated to develop and adapt CFlight for the U.K. market, and it is now operational and will enable advertisers for the first time to measure deduplicated reach and frequency across their linear TV and digital campaigns. So there's a tick in a box for measurement, too. We have high-quality brand safe, trusted content tick. And with ITVX, we will drive scale as we supercharge streaming audiences, the final tick in the box for a full house. ITVX, a scaled destination, AVOD-led streaming service will be critical in enabling our commercial team to deliver on all 5 of our customers' needs. Google and Facebook may have data scale and automated buying platforms, but they certainly don't have high-quality content and industry-recognized measurement. So that's the first area, advertiser and agency needs. Now on to more innovation. At our annual upfront event in November, we launched ITV AdLabs, which will house all of our digital innovation across product, partnerships and insight. It's one way we're changing our body language towards the industry, bringing our customers more upstream and right into the development pipeline. And we are over the moon about the reaction from the market so far. Our diaries rapidly filled with clients eager to part of our various pilots. Let me share some of the opportunities. We have mentioned before the launch of dynamic weather-based targeting, the InfoSum data match product dynamically served ad creatives and AI-powered contextual advertising. We have now started to test the integration of QR shoppable codes, which enable instant response or interactivity and can be served dynamically based on criteria such as post code, life stage or time of day. We are developing InfoSum data match 2.0 and where we build a 3-way match between ITV data, the advertisers' data and a third-party data source such as Dunnhumby. And finally, following more progressive platform partnerships, we will begin testing linear addressable advertising later this year. So in summary, I've covered the 3 strategic commercial pillars, the 4 Rs of TV Renaissance, how we're meeting the 5 customer needs and 6 key innovations from ITV AdLabs, and I think I've done it in 7 minutes. We are very excited about ITVX. I couldn't wait to tell you about it today because it means we can now start to tell our customers about it, and we know they'll be excited about it, too. Today, we are already the biggest streaming service in Europe as measured by advertising revenue. And with ITVX, our streaming proposition will reach a whole new level as it drives the volume of those highly valued addressable impressions. It will establish ITV as the market leader in ad-funded streaming. It will enable us to expand our customer base and compete for the long tail of advertisers. And that's why we will more than double our digital revenue by 2026. I'm now going to leave you in the very capable hands of Sarah Clarke, COO of the M&E division, who will take you through our KPIs and targets.

Thanks, Kelly. Before I take you through our KPIs and associated targets, let me share how we are set up to deliver ITVX as the most important part of our accelerated streaming strategy. Last May, we appointed a launch Director, Ross Appleton, to work alongside the team as we set the strategy for ITVX. We quickly established a governance structure with clear reporting and decision-making processes from the top of ITV through to the teams on the ground. As a result, we have 11 work streams, each with clear delivery road maps and KPIs. We spent the second half of last year, mobilizing many of our internal teams around these work streams, harnessing experiences and expertise from across ITV Hub, Hub+ and BritBox and bolstering them with a combination of new ITV hires. Today, we've heard how deep is building out the product function to match the value proposition and how Sanjeevan is building out our data teams. In content, we brought on board a managing editor for ITVX and a content partnership director, focused on expanding our consumer offering through strategic partnership arrangements. We're working with best-in-class third parties, including the likes of Accenture, Candyspace, OData and [ EXEEduTech, ]Google and Amazon in data, DixonBaxi and W12 on brand and design. We've almost doubled our tech and product resource, moving from 130 to 249 heads across the various teams through a combination of permanent ITV hires, contractors and third parties. In terms of road map, we're building on the existing ITV Hub tech stack and we'll soon have completed our minimum viable product phase, which consists of all the key user journeys, core features and a significantly expanded content proposition. The next stage is building it into a minimum marketable product, which, when complete, will be a significantly improved consumer proposition from where ITV Hub is today. As we develop ITVX throughout the year, we'll release some of the improved functionality and features into Hub as we go, mitigating the risks of a big bang release at launch. This will include continual increase in content towers. In fact, we're already well advanced with more than 3x more content on Hub today than this time last year. ITVX is planned to launch in Q4 this year. This will be the biggest visible change for viewers when we roll out the new ITVX brand on and off product, bringing our AVOD and SVOD services into one place for the first time. It will be widely available across multiple platforms in much the same way that ITV Hub is today. And we'll be working closely with all of our distribution partners to ensure the transition between our existing streaming products and ITVX as seamless as possible for viewers. And while ITVX will be a brilliant viewer experience from launch, it's just the beginning. There'll be a launch year of continuous development and improvements throughout 2023. Everything that you've heard today can be distilled down to our intent to supercharge streaming and optimize broadcast, those strategic pillars Kevin shared earlier. Our ambition is to transform and scale M&E by bringing more viewers to and deepening digital engagement with our streaming service through an expansive content offering and a best-in-class product, continuing to innovate and provide advertisers with new ways to connect with audiences, including more targeted advertising, capitalizing on the flexibility that an integrated AVOD, SVOD service provides to diversify our digital revenue streams, and all while maintaining our position as an unrivaled provider of mass simultaneous reach for advertisers and the home for the majority of the U.K.'s biggest commercial live audiences. And we're going to measure success through 6 clear and meaningful KPIs. Our leading KPI will be digital revenue, which sits across both strategic pillars and is complemented by 3 streaming-specific KPIs and 2 broadcast-specific KPIs. We've clearly defined and set stretching targets for each of these across a 5-year horizon. Let's go through each of them one by one. Digital sits at the heart of a transformed M&E to supercharge streaming and optimize broadcast. Digital is the essential enabler of our ability to offer viewers what they want to stay relevant and to continue to provide a compelling commercial proposition for advertisers. In line with this, we've set an ambitious target to more than double digital revenue to at least GBP 750 million by 2026, that's from a 2021 base of GBP 347 million. And when we talk about digital revenue, this encompasses VOD-related advertising, digital sponsorship and partnership revenue, linear addressable digital innovations across M&E and U.K. subscription revenue. A key principle to supercharging streaming is to inspire more people to watch more content more often. Tracking monthly active users helps us to measure viewer engagement and our success in scaling audience reach. Repeat viewers are a critical enabler to VOD revenue as reliable audiences drive advertising. And so in line with doubling digital revenue, our target is to double our monthly active users to 20 million by 2026. To effectively track engagement, we also need to know how much of our content people are watching. We want to maximize the engagement and relationship with each and every viewer. We plan to double viewed streaming hours from 1 billion to 2 billion by 2026. This will fuel our ultimate target of doubling digital revenue. And remember that we're measuring quality of viewing here, the total hours audiences actually spend watching across all of our platforms, not inflated figures such as shows accessed or server requests. While our streaming proposition is AVOD-led, our integrated SVOD upsell path creates diversity in our revenue streams and means that we can respond swiftly to changing viewer and market dynamics. Therefore, as part of ITV's overall ambition to grow global subscribers, we aim to double U.K. subscribers to 2.5 million by 2026 from a base today of 1.2 million. Although we're doubling down on streaming, broadcast continues to be a cornerstone and we plan to remain the unrivaled provider of scaled simultaneous reach for our advertisers. Share of commercial viewing is a key barometer for this. And so we intend to maintain our current position through to 2026, holding a 33% share of all ad-supported commercial viewing in the U.K. across our ITV family. We'll also ensure that ITV programs continue to make up at least 80% of the top 1,000 biggest shows in U.K. commercial television by audience size. We'll remain the biggest game in town for mass audiences. So let's recap. We have a single media and entertainment division with a unified streaming and broadcast focus to double digital revenues by 2026. We have 3 streaming-specific KPIs and 2 broadcast-specific KPIs. Each are clearly defined and aligned to our digital growth ambition. They drive our decision-making and behaviors and give us the control we need to flex and adapt across AVOD and SVOD. Across a 5-year horizon, our targets are ambitious, but we have full confidence that they're realistic whilst being sufficiently stretching. This is unquestionably the right way forward for ITV for our viewers, for our advertisers and for you, our shareholders. Now I'll hand back to Carolyn for her final thoughts.

I shared with you the first thing this morning that we have now successfully executed on the first phase of our strategy. As I've said, we've laid the foundations for the next phase, our digital acceleration. All our strategic priorities aligned with that ambition. You've seen today from the media and entertainment leadership team, our plans for ITVX, a unique streaming service in the cornerstone of our digital first content strategy. It is brilliant for viewers, and it is great for advertisers. You also heard about how data will be at the heart of many of the decisions we make as a business, bringing together content, marketing and product. When we saw you last year, you heard about fantastic progress we're making in our market-leading advertising technology, which will be accelerated by ITVX. You've also heard in the studios investor seminar about how we plan to build on the success we have had in growing our scripted revenues and revenues from global streamers. Studios, as I said, are pivotal in delivering our new streaming content. So I hope you've been able to see and feel across our senior leadership team that we're not just excited to deliver this strategy, but we are completely committed to achieving the ambition and goals behind it. The reason for this is that we all believe this will create a successful leader in U.K. streaming and an expanding global force in production, which will drive shareholder value.

[Operator Instructions] Our first question comes from the line of Sarah Simon from Berenberg.

The main thing really is, you've obviously got very big ambitions in terms of streaming, but what do you think this does to your linear business? You haven't, I don't think, set out targets for kind of total consumption hours. So the question is, do you think this can change your total consumption into positive territory? Do you think you'll capture -- going to capture consumption share across linear and digital from other people? And how will this affect the linear advertising part of the business?

Okay. Well, look, I'll get Chris to answer that in the first instance, and then, Kelly, if you want to come in on that, that would be good.

And just in terms of total viewing, if you think back to what Rufus was saying about the people that were trying to target them at those main streamers, what we are absolutely aiming at doing is reaching people who already come to ITV, and we want them to come more often and spend more time with us. So this is not about cannibalizing linear viewing. This is about targeting people who have moved away from linear viewing but love ITV content. So -- and this is a net benefit to the trends in total viewing for ITV. On the other... .

Yes. Well, look, I think we see this from an advertising perspective as it's really important to lean into what viewers are doing. And viewers, as you know, want to watch television wherever and whenever they want. So we are seeing and we have been seeing for the last few years, these viewing changes, and that has meant that all linear TV channels have seen some decline. And we suspect that will continue. And I guess the reason for this strategy is to make sure that we grow our overall viewers, but also capture some of that decline. So in terms of advertising, we think we now have a much stronger proposition because we not only have the linear mass reach sell. And look, although linear viewing is declining, it's still very, very, very significant and will be over the next few years. So we remain the #1 place for mass audiences, which has always been really good for ITV, but we'll now have a scaled addressable proposition. And our traditional TV advertisers will use the streaming service to supplement their linear campaigns. And then the digital advertisers, that long tail of digital advertisers that Google and Facebook have successfully nurtured, we will be able to fish in that pond, and therefore, extend the number of advertisers using television. So I think, as I said in the piece, it's giving us the best of both worlds, mass reach and addressable.

And just picking up on Kelly's last point, I mean in 2021, we had 400 advertisers doing VOD-only campaigns, and that's all because of Planet V and the increase in inventory on the Hub.

I would add that fundamentally, we're Viewer-led, and the viewers are clearly telling us that they want to watch programs of high quality when they want, how they want. And this increasingly means moving into digital, which is what this -- what ITVX is really all about.

I mean, I think, yes, exactly that. And just as a principle to close this point off, Sarah, is we can't fear this move. I mean, the whole strategy is about ensuring that we get our viewers and other viewers, so viewers that are familiar with ITV, because actually 99% of the British population is, we want them to come in more frequently, as Chris said, and spend more time with us. And we need discoverability. They need to discover what we do now, which is going to be quite different from what we've done in the past. But there is a principle here, which is, we have to monitor and evaluate and track what's going on in linear versus streaming, and we will do that. We can't fear that great big thing of cannibalization because that has prevented many people from making bold decisions and being very clear cited about the strategic goals. And I think we're very clear-sighted about the future.

Our next question comes from the line of Richard Eary from UBS.

Yes. Just a number of questions. Firstly is that, I think, Chris, on the first call, you mentioned that the revenues from digital was GBP 347 million in 2021. I'm just wondering whether the -- within that, you can give us a breakdown of the revenues? Obviously, we've got the SVOD numbers of GBP 42 million. I'm just interested to know what the other revenues are and how they are accounted in the accounts today. And then in addition, when we step forward to GBP 750 million, whether you can give us a bridge of where you think those revenues are going to come from, either through SVOD, AVOD? And particularly, in AVOD, that addressable side, and whether there is any cannibalization built in similar to what Sarah was asking first. the second question is just so I get the cost right. As I understand it, we've got GBP 55 million of additional other costs coming into the system, GBP 30 million on launch costs in '22 and '23, GBP 25 million in basically data, but we've also got GBP 50 million of cost savings coming out. So I'm just trying to understand where the phasing of those savings comes from? So if you can just answer those 2 questions first, that would be great.

Okay. I think this both yours.

Yes. So Richard, on total digital revenue, we're not providing a breakdown. But as I said and Sarah said, it includes the AVOD revenue, it includes sponsorship and partnership revenue that relates to ITVX, and it includes the subscription revenue. And I think earlier -- on the earlier Q&A, I think I had a similar question as to how it's going to evolve. And it was just the proof points were that today, sub revenue is somewhere between 10% and 15% of the overall digital revenue. We're going to double subs, and we're going to double viewing hours, streaming out. So VOD and subs we're assuming we'll grow roughly at the same rate. On cost -- yes...

Can I just jump in there? If I look at the guidance you've given for subs and look at the pricing that you've announced, assuming that's the correct pricing in the presentation that you've just given, obviously, 2.5 million subs counts 5.99, you get 180 million in 2026, so it's a 140 million increase relative to what you did last year.

We haven't confirmed pricing for the new service. What we've said is that BritBox subscribers will continue to pay GBP 5. 99. Hub+ subscribers will continue to pay GBP 3.99 whilst we migrate them. So we will have extended terms to them, so we will protect them for an extended period of time. But we haven't disclosed or announced pricing for ITVX premium tier.

Okay. Where will that come out, Carolyn? .

Just probably closer to the launch date. .

I think just given the market reaction, everyone is trying to understand is that where the revenue offset is the additional costs and visibility on that. And therefore trying to understand the bridge that you put in your numbers that we can either work out whether that's doable or not doable?

Well, look, we wouldn't put it out there -- we're quite -- I mean we've done this -- we're seasoned. We wouldn't be putting out a number that we haven't forensically looked at and built up from the bottom up. We -- absolutely, this whole team believes we can achieve that number. Otherwise, we wouldn't have put it out there.

Yes. And Richard, primarily the growth will come from subs and AVOD and because we're managing both within ITVX, that's why we've set that total target number. And to Carolyn's point, we've done it bottom up. We've done it based on the data we've had from BritBox viewing and from hub viewing in terms of the impact of content on males on dwell time and on subs. We've built some very detailed models to model, what we would have without the additional content spend and what we're getting with the additional content spend, and that's what's driving the GBP 750 million target plus the doubling of subs and view numbers. .

Chris, can I just ask a follow-up, sorry, is that, when you said that the obviously doubling there is to offset the cost increases, does that mean that when we get back to FY '26, do you still think the media and entertainment EBIT is going to be broadly similar to what it was in FY '21, which was GBP 600 million? Or am I missing something?

It's going to be similar or higher. And then on the cost side, what we're saying is you've got GBP 25 million of investment in 2022 and 2023, which is the variable cost of the streaming service additional investment in tech and the platform. Thereafter, the variable costs will increase because it's bandwidth and it's related to the number of hours we got on the service. All of those variable costs will be covered by the -- more than covered by the permanent cost savings. And there are additional one-off launch costs. So they don't persist, there's GBP 20 million in 2022 and GBP 10 million in 2023. And then the revenue is going to cover the content and that initial step-up in investment in tech and digital.

Our next question comes from the line of [ Matthew Littman ]from AllianceBernstein.

The first question on distribution agreement. Are you hoping to have the same level of distribution and availability for ITVX on launch that you currently have for ITV Hub? Or will it perhaps be -- is there any uncertainty on that? The second question on that growth guidance. You said that all the component parts are growing at roughly the same rate and you use the doubling of the viewing hours online as a proxy for AVOD growth. Should we take that to mean that the guidance you've given on revenue doesn't assume any kind of CPM increases or ad load increases for the AVOD business?

So on distribution agreements, I think the answer is yes. That is our intention. That is our ambition. That's what we're working towards. Growth guidance.

Yes. So on the growth guidance, we're actually assuming that there is some small CPM inflation, but that's offset by a reduction in the ad load because we want to give a better viewer experience.

Our next question comes from [ Aamir Shaikh ]from Morgan Stanley.

Yes, I've got 3 as well. I also wanted to start with the question about impact on linear. So I guess the way to think about this, I totally get the point you made about having access to the long tail of advertisers, you perhaps wouldn't advertise on linear, and that means some upside -- bringing them outside of the AVOD story. But could you maybe talk about what the impact is on revenue from viewers switching from the linear service on one of your large properties like the World Cup, I am A Celebrity or Love or whatever? And what happens if those viewers switch to viewing on ITVX? Maybe you could walk us through that, that would be helpful to think about the impact of cannibalization, potentially? That's the first question. Well, if you want to take one by one, I've got another couple.

Okay.

Okay. So what we're seeing at the moment, as linear audience have -- are declining. Effectively, we've seen kind of 2 battlegrounds, I think, for viewers of AV, shall we say. You've got kind of the broadcasters competing with the big global SVODs for viewers. And that's why over the last few years you've seen a decline in linear viewing. And then you've got kind of the video sharing platform you've got YouTube and Tik-Tok kind of another battle for AV viewing and AV advertisers. But that's mainly on devices, whereas as linear and SVOD is mainly on the big screen. And so what you're seeing is because of the big global SVODs don't carry advertising, you're seeing the value -- the really valuable linear advertising being constrained. And as a result, the price of that is going up. The effectiveness of linear advertising is still absolutely up there. It's as effective as it's ever been. All of the things that -- we all know that TV delivers, whether that's a fantastic environment, brand safe, sand on, full screen, no box, perfectly measured, whether it's the multiplier effect TV has on all of your digital, whether it's -- all of those brilliant things. That's still absolutely key for advertisers. But as I said, supply has been constrained. And as a result, we're seeing the price go up. So I think what you're going to see over the next few years is inflation will continue for a number of years. As it become -- effectively linear, is going to become more valuable because it's harder, harder and scarcer to find. So that's what we think will happen over the next few years. And at the same time, you've got -- we trade VOD at a fixed price. Again, we have a -- there's -- it's a dynamic price on linear that moves with supply and demand. We sell a fixed price on VOD. And as Chris said, we have modeled in some inflation, and that will mainly be delivered as a result of more sophisticated targeting. But we got -- we're on a fixed price. So actually, -- if you -- if there's an advertiser using both, you can manage the price across the 2. So that, I think, hopefully explains what will happen as a result of linear cannibalization.

I think the key thing is that the viewer, wherever they are, is being monetized. So wherever we find that's through linear whether that's through AVOD, whether that's through SVOD, we are optimizing our ability to monetize the view because we understand that viewers so much better now because we have so much more data on those viewers. Is that -- you had a couple more questions, I think.

Yes, I did. So just a couple of just questions about the, I guess, related. So the first one is on the marketing budget. So obviously, the streaming market in U.K. is pretty crowded, is very competitive. So the question is, do you think GBP 30 million for launch costs over 2 years is enough? And will you be focusing the marketing effort on ITVX or BritBox or a bit of both? And then related to that, churn rates for streaming services in the U.K. are also very high. So I just wonder maybe if you could talk about your thoughts on how you expect churn and to -- how you -- what you expect for churn for ITVX and how you plan to manage it?

Okay. Rufus, do you want to take both of those?

Yes. On the marketing point, we are going to be singularly focused on ITVX as our priority streaming destination, so all of our firepower is aimed at that. And we've got an amazing toolkit. We -- I mean our ITV is an amazing marketing platform anyway, but we've also got some fantastic new data and digital capabilities. So we're really, really confident that, that target audience that I talked about, we can get. But the point is ITVX is the single destination that we're bringing everything into and that is the marketing focus there. And in terms of churn, I mean I think we've said this earlier today, this is unequivocally good news for subscribers. So if you are a BritBox subscriber, not only if you get BritBox now, but you get all of the AVOD tier ad-free as well plus other content partners. So it's a really, really good news story for them. And similarly, for Hub+ subscribers, you're suddenly in a bigger subscription tier with a whole world of more content there. So we're really confident that we have a compelling SVOD proposition and a compelling AVOD proposition. But just really, really wanted to reiterate that what we're not doing is managing a portfolio of brands here. We are really single-mindedly launching ITVX.

And I think it's just important to clarify that the GBP 20 million and the GBP 10 million are launch costs for ITVX. We still have a marketing budget behind that as well, which is part of what we would normally do, we will be focusing that on ITVX, as Rufus says. And on churn rates, we've learned an awful lot through with BritBox. BritBox's churn rates have halved in the last year. and that's through quite a sinuous work on what works and what doesn't work, and we'll be using that on ITVX premium. So that's quite important.

Our next question comes from the line of Julien Roch from Barclays.

Three questions. The first one, I'm sorry, I'm still a bit unclear on tiering. So ITV Hub and ITV Hub+ disappears brand, you get ITVX as free, then you get ITVX premium, which includes BritBox. So will you still be able to get BritBox separately, which would indicate that ITVX premium is more expensive? Or will BritBox be available only within ITVX premium? So do you have 2 tiers, ITVX and ITVX Premium or 3 tiers, ITVX, BritBox and ITV premium? That's my first question. The second one for Kelly, I suppose is, could you tell us how much linear advertising was up in 2021? And then I'm still a bit confused on numbers. So you're saying digital will double from GBP 350 million to GBP 700 million, which is GBP 350 million of extra revenue. And you said the extra revenue will cover the cost. But I don't get GBP 350 million of cost. I get digital first content investment of GBP 20 million in '22 and GBP 60 million in '23. So that's GBP 160 million. Plus GBP 25 million as of ITVX in data, plus GBP 10 million in digital innovation. So I'm getting about GBP 200 million of extra costs, not GBP 350 million. So can you come back again on the revenue and cost? These are my 3 questions.

Great. We'll start on the tiering because that should be very straightforward. I'm going to hand to Kevin.

Yes, so here we go again. ITVX is the hero brand here, right? You come into ITVX, which is free, and it's ad-supported, and it's thousands of hours of programming. If you want to upgrade and pay for -- to ITVX Premium, this will be everything that's in the free tier, but without ads, plus BritBox, which you already get presumably, and other partners as we find them and bring them in.

So it's really straightforward. So 2-tier systems, and ITV Hub goes away as a brand, ITVX is the brand. ITV HUB+ goes away as the brand, ITVX is the brand. BritBox remains a sub-brand. It is within the ITVX premium tier. Is that clearer Julien?

To be 100% clear, you will no longer be able to subscribe to BritBox as a stand-alone, you will only have 2 tiers, free and pay?

That is right. The only place you will get BritBox is on Amazon because we have an established long-term partnership with Amazon for BritBox being on there. So that's the only place you will be able to get BritBox. When you come into BritBox through Amazon, you will be a part of the ITVX Premium tier.

And so I suppose that once that deal with Amazon expires, then that is no longer going to be the case, and you will have only 2 tiers?

Quite possibly.

Possibly. We would take a view on that.

And then Julian, I think the revenue cost equation, what we're saying is the incremental revenue. We would have grown digital revenue anyway. We have been growing digital revenue over time. We have modeled how far the existing content strategy, we think would have got us. The incremental that we're talking about is on top of that as a result of the incremental spend, the creation of the one content budget and the different way we're looking -- been doing on linear versus VOD.

Okay. That is clear. But you're doubling revenue over the next 5 years, it's 15% growth. And if I look at the last 4 years of AVOD, it's been 36%, 21%, 17% and 41%; so are you telling us that you were modeling like almost no growth in AVOD and subscription and the extra is the 15%...

We have said at least GBP 750 million.

And Julian, I think there's plenty of market commentary out of there. There's a really good paper by Anders, I think from November of last year on evolution of BVOD. So we've taken what consensus has been, what analysts are saying, what the market data says that was our best guess of how the VOD growth would go from here on out where we could do nothing on content. And as Carolyn said, we're not limiting ourselves to GBP 750 million. And we're not limiting ourselves to revenue covering costs. We will push it as hard as we can. And it would be great if the underlying growth rate continues in 20%, and we're layering on top. But what we're saying is we're absolutely confident that the incremental investment will pay back regardless of the underlying market trend.

Okay. So just to keep it simple, you have about GBP 200 million of extra cost. You have about GBP 350 million of extra revenue. And so therefore, you were expecting only an extra GBP 150 million of revenue over the next 5 years for your digital, and that extra GBP 200 million, of course, brings you an extra GBP 200 million of revenue?

I think we're talking in very round numbers here, Julian. I think probably the best thing is if we take this off-line, I'll walk you through the thinking about the individual cost elements.

We've got time for one question if it's one question or a couple of -- actually, one question if it's a 3-parter. Two questions, if it's not a 2-parter. So I leave that to you. Any other questions?

We will take our final question from Ms. Nizla Naizer from Deutsche Bank.

Have you done some studies on average, how many streaming platforms does the viewer typically have in the U.K.? And would they have the appetite for another SVOD platform? That's some color there would be great. And secondly, just on the advertiser perspective, would it be now more expensive for an advertiser to keep advertising on linear TV versus the digital avenue going forward? Any color that you can give us there would be great.

Okay. I'll just take the streaming platforms very quickly on -- and when we are talking about streaming, we talk about streaming as a generic. We mean ad-funded and subscription-funded, right? So we've got both. Just on the subscription funded, which I think your question obviously relates to. About 66% of U.K. households have got a streaming service currently. In the states, it's about 86%. And so we actually think the U.K. has room to grow despite the cost of living increases and various other pressures on households. Our research says and other research says that people see streaming services as a relatively low-cost way of having a great night in. And actually, COVID has really amplified that. People have got used to it and they've actually quite enjoy it, and it's a lot less expensive than, say, going to cinema or doing other things. So that -- so we think there's headroom on that. And then actually, the growth of 2-plus subscriptions in the U.K. has gone from about 58% last -- in 2020 to about 68%. So 10 percentage point increase on that, just in the space of a year. So I think there is definitely demand for subscription services. And we don't see that kind of stopping at all despite people feeling the pinch financially.

And just adding to that, again, coming back to it, ITVX is ad-funded, which means you get it for free as a viewer and it's a subscription service. So the experience in the states is some elements of the population are getting subscription fatigue. And what they do is switch to a fast channel to an ad-funded free to-the-viewer experience. So with ITVX, you've got both. If you want another subscription and a very distinct subscription to add to your existing set, you can have it. If you don't want to pay for another subscription, you're getting 9,000 hours of TV for free.

Yes. Kelly, on the point about the advertising perspective, yes.

Yes. So basically, it depends on which audiences you're targeting. But as a rule of thumb at the moment, if you're targeting broad audience as our upmarket audiences, linear TV is much more cost effective than AVOD. But if you're targeting younger audiences, then it's much better value targeting AVOD as opposed to linear. Again, it's all about scarcity of audience. Younger people are much already adopters, and they are much more likely to use streaming service. So therefore, there's more of them on the streaming service, so it's better value on the streaming service.

Okay. I hope that answers all your questions. If you've got any questions, you know you can contact us through Pippa. And thank you very much for your time. I know it's been a very, very chunky morning this morning in terms of your time. Thank you very much for joining us, and see you all soon. Bye for now.