ITV to make its first foray into pay TV

Steve Dinneen
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ITV BOUNCED back to first half profits after a “hugely successful” World Cup, announcing a raft of changes to its business model.

It reported a £97m profit after limping to a £105m loss in the first half of 2009.

New chief executive Adam Crozier says the beleaguered broadcaster – which saw its share price fall almost 85 per cent during the advertising drought between June 2007 and April 2009 – will now move away from its reliance on core television advertising.

It also unveiled its first foray into the lucrative pay TV market, selling its digital ITV2, ITV3 and ITV4 HD channels to Sky. Sky will pay ITV an undisclosed carriage fee in the deal, which Crozier says is not exclusive.

The move, described by the firm as “dipping our toe in the water” is likely to be followed up with deals with other pay TV broadcasters such as Virgin Media.

The firm says the move is part of an effort to reduce the percentage of revenue brought in by core advertising from 74 per cent now to 50 per cent.

ITV will invest an extra £75m in its online business and develop micropayment technology in a bid to catch up with its rivals.

It will use Project Canvas, the upcoming online-TV joint venture with firms including Orange and the BBC, to offer some content on a pay-per-view basis.

It will also plough £800m – more than expected – into new programming to bolster its export business.

Crozier accepted the firm must change the way it develops new programmes – adopting a US-style focus on branding for shows – admitting the last major hit ITV developed was Dancing on Ice back in 2006.

Advertising in the industry enjoyed a cyclical upturn, with the market up 15 per cent on last year. ITV beat the market with an 18 per cent spike.