Thank you, Jack. Thank you all very, very much for coming today, as Jack has just said, and welcome to our daytime studios. This is the GMB studio, and next door we have This Morning, Loose Women, and Lorraine. You won't be hearing much from me today because it's really, really important today that you get to know and to see the quality of our senior leadership team. We have many of them presenting here today. Kevin Lygo, our Director of TV, Steve Ford, our Director of Digital Product and Online Marketing, Faz Afzal, Director of Platform and Distribution, Kelly Williams, our Managing Director, Commercial, Rufus Radcliffe, our CMO, our Chief Marketing Officer, Julian Ashworth, Director of Strategy and Direct to Consumer, Mark Smith, just appointed as our Group Chief Technology Officer. Yay.
Julian Bellamy, Managing Director of ITV Studios, David McGranor, the Chief Finance and Operating Officer of ITV Studios, Dave George, our CEO of ITV America, and Maria Kyriacou, President of International, ITV Studios. Let's get what you all want to know out of the way first. We won't be saying anything today on current trading. We will be updating you as part of our normal trading statement in November. Nor will we be commenting or answering any questions on current speculation on Endemol. Before I hand over to the team, I just want to say a very few things. Just a reminder first of our strategy.
As you know from our half-year update, our vision for ITV is to be more than TV, to be a structurally sound, Integrated Producer Broadcaster, where our ambition is to maintain total viewing and increase total advertising revenue, to be a growing profitable content business, which drives returns, and to create value by developing a strong direct to consumer business, nurturing relationships where people spend money on a range of content and experiences with a really trusted brand. This strategy will continue to deliver a cash generative and profitably growing business, creating value for our shareholders. As you know, the strategy will focus on three key areas, strengthening the IPB, the Integrated Producer Broadcaster, growing U.K. and global production, and creating a scaled direct to consumer business. It is completely deliberate that ITV is at the center of this chart. These are not independent silos.
They work together, reinforcing each other, creating synergies, and augmenting value. Today, we will spend time talking about our key priorities and investments, how we will deliver content to people however they want to watch it, making the hub central to ITV and increasing users and dwell time. We will cover our commercial strategy, which will be more client-facing, and we are investing, as you know, in creative brand partnerships. We will go into more detail on how we will drive viewing, particularly amongst light viewers, and extend our reach for advertisers by doing that. You'll also hear more about how we will use the investment in data and tech across the business, leveraging this to drive new revenue streams from addressable advertising and from direct to consumer. I know some of you are very keen to understand our investment requirements in subscription video-on-demand.
We can't be specific today as we are working through a number of plans, but a base plan. It does depend on who we partner with, and how we partner. We will give you more details on that, and the latest we will do that is by February. What I can say is that investment here will not change our financial commitments already outlined in July, and we will be taking you through today the most up-to-date research that we have undertaken, which shows the market opportunity and how we are really well-placed and well-positioned to build an SVOD proposition. I'm also really pleased to tell you that we have now appointed a group director for SVOD, Reemah Sakaan, who is sitting here today. She's just come over from New York.
She has spent the last year very successfully driving subscriber acquisition and content at BritBox U.S. and Canada, of course. Prior to that, she was director of marketing and media at ITV, where she actually worked on all the initial plans for BritBox, worldwide. Reemah's major focus will be the U.K. launch, but she will retain her responsibilities for BritBox U.S. Our approach to SVOD will be phased using all of our learnings and experience. We've developed that through BritBox, as you know, through Hub+, but also through Cirkus, and we will work with the right partners, allowing us to balance risk and reward over time. We're going to be spending a big chunk of time today going into some depth on our studios business, an area we know from feedback that you are all very interested in hearing more about.
To deliver our strategy, we've already outlined and announced that we will be investing GBP 60 million across the business over 3 years. We think this level of investment to deliver what we have set out. Today, we will demonstrate how we are putting this investment to work. GBP 40 million in the IPB business across the hub, marketing, data, technology, and addressable advertising capabilities. GBP 10 million in studios to strengthen creative talent and monetization capabilities. We have already invested, actually, in a joint drama fund and an entertainment fund. GBP 10 million in direct consumer opportunities. That excludes any investment in SVOD. A significant part of the investment will be offset by cost savings, as you know. The net impact over the plan is GBP 20 million-GBP 25 million. That excludes any incremental revenue benefit that we will gain.
The revenue benefits we will deliver over the course of the plan are reflected in our targets. We have set that in online, we've set those in the hub, in studios, and D2C. They will more than cover the net impact, but will be back-end loaded. All of this is driven by our KPIs, which we presented to you already in July, and we will be discussing those KPIs in each of the presentations you will see today. In addition, we have a target which reflects our aim to continue to diversify the business by growing our non-advertising revenues by at least 5% CAGR to ensure ITV remains robust and resilient. It is essential that we maintain our financial discipline, as well as our cost savings, we will maintain our profit-to-cash conversion at around 85%. You all know we have a strong balance sheet.
We will be very disciplined about our use of capital. You will hear the word discipline quite a lot today. We're investing to drive organic growth in the business. We will look at selective value, creating M&A only in line with our strategic priorities, disciplined, targeted M&A, which has a compelling commercial rationale and is focused on value creation and delivering returns above our cost of capital. We have a clear framework of financial acquisition criteria by which we evaluate potential acquisitions, and we will ensure we are consistent with our dividend and capital allocation policies. The board, as you know, intends to pay at least an 8p dividend per year for the period of investment in 2018 and 2019, and that reflects the board's confidence in the business and in the strategy, as well as the continued strong cash generation.
Over the medium term, the board intends that the dividend will grow broadly in line with earnings. Our objective as we allocate capital to invest in the business and deliver returns to shareholders is to maintain investment-grade credit. Onto the IPB. As I said, we're strengthening our core U.K. integrated producer broadcast business to ensure that we can address the opportunities and challenges of structural change, actively managing shifts in viewer and advertiser behavior, and providing a strong, branded, data-rich relationship with our viewers and with our advertisers. The heart of the integrated producer broadcaster is fantastic content. To start with, Kevin is going to give you an insight into the broadcast market in the U.K. and how we will continue to succeed. We have had the most fantastic year for viewing.
Kevin needs no introduction, having been Director of TV at ITV since 2016, Managing Director of ITV Studios for six years before that, Director of TV at Channel 4, and Director of Programs at Channel 5. Kevin.
It's a beautiful day.
Yeah. No.
It's Becky's song.
Yeah, no, that's to stay at internal. You can turn it off now. Thank you. It is in fact my birthday today. Yeah. 61. Thank you very much. Yeah. I say that at every presentation, so. It is true. What I thought I would tell you briefly is the questions people ask me who know nothing about television, that's you lot, is how do you decide what goes on air? What are you trying to achieve? How on Earth do you make these decisions? Where do you get your programs from? I will give you the kind of bluffer's guide to that. As it's a company that makes television programs, I thought we would start by reminding you, because you don't look like enormous, heavy TV viewers to me, just what we've put out so far this year. Let's have a look at this tape.
A fallen star.
Hi.
Hi.
Fell from your heart and landed in my eye. Remember, accept nothing, believe nobody, challenge everything. It's real. We have quite a night in store for you tonight. We are going even deeper than I could ever imagine. No dawn, no day.
Here's what's coming up on today's show.
Here we go.
You have to answer for what you've done.
I haven't done anything. 27 years. That's a long time to carry a secret. He knows what he did. I want my wife's real killer found, and now I want justice. I can hear your heartbeat, I swear. Today doesn't seem that bad at all, really. It's there.
Shall we get this show on the road?
The darkness inside. 15 questions, four lifelines. Who Wants to Be a Millionaire? Yeah.
Dancing on Ice is one of the hardest challenges there is out there.
You have this to contend with.
On the gun issue, why has nothing been done?
No dawn, no day. Thank you. Gosh, this is going to be very good.
The winners of Love Island 2018 are
Welcome to Jurassic Park.
Are we ready to go?
Yes.
Oh.
It's something I'm pretty proud to be a part of.
Just enjoy it, mate.
Do you remember that day? Are we in trouble here?
It's freedom to be who you are, boy or girl. I still love him, that doesn't change.
We've got so today.
Time for something very, very special.
It is promising to be a spectacular day.
What a treat.
This was absolutely breathtakingly good.
Thank you. The winner is
We've got fireworks and everything tonight.
I knew it was going to be intense, not quite like this.
Bloody good telly, though.
Yeah, almost applause there. You can see, I think what you take away from that is, how much television we have to make all the time. The range you've got, from drama to sport, from factual to entertainment, across our six channels. Obviously, our biggest channel, the main channel, ITV, is the first priority. Here, I suppose the target really is the thing we call MSR, which sounds like a sort of disgusting disease, but in fact it is Mass Simultaneous Reach, and is about us hitting as many people as we can at any moment, all day, all night. This is something that we are incredibly good at now, that we've been working for for years, and it's to find vast millions of people to come and watch our programming, and therefore our advertising, every day.
This is achieved by, we start in this very studio in that, oh my God, Piers Morgan's arse has been on that chair. We start with Good Morning Britain, which has increased its reach and audience this year as it did Ever since, it's so annoying that it's Piers Morgan, is the reason that it seems to be working, as I have to put up with him every day. That increase in viewers, which is really difficult to achieve now, because certainly through the day, people's habits of viewing are most entrenched. If you think what you do yourselves, in the morning, you turn on Radio 4, I suspect, or you watch telly. It's very hard to get people to change.
They are coming undoubtedly in their substantial numbers to our shows from Good Morning Britain, which means that they stick around and they're for Lorraine and This Morning, and everything. All through the day, we are hitting primarily housewives with children. We are getting at people before they go out shopping. If you want the last get at them as an advertiser, it's now. This has been incredibly successful and is part of the bedrock of why we have such large audiences all the time. It flows through after the news hour into probably the most important part of what we do, which is our soap operas, Emmerdale and Corrie. These are a particularly peculiarly British phenomenon, that there's six episodes of each of them a week, all in the weekday before 9:00. Does anybody here watch Emmerdale? Yeah, you see.
No, not the front row. What's curious about that is that it's easy to forget how enormous these soaps are. In Yorkshire and Lancashire and Cumbria and up north generally, when Emmerdale's on at 7:00 every day, it has a 78% share of viewing. It's just if you go up north, it is a phenomenon. Both these soaps, I mean, they reach the whole country obviously, but to put it in perspective, you'll all think, oh, The Bake Off was a big thing, and it went to Channel 4, and that was a big thing. The soaps for us are the equivalent of having Bake Off every single day, all year round. We get 7 million-8 million people regularly for an hour and a half every day.
That's an extraordinary thought, that if somebody came in to see you today and said, "Look, I've got this great idea. I'm going to do this sort of soap opera thing, and 8 million people are going to come every single night," you'd think they were mad. We deliver that in, and that is the bedrock of everything that we do. It funnels viewers into the 9:00 peak hour, which for us is the big battleground that we often fight with, primarily BBC One, for mass viewers. Here is where we get into our dramas, many of which you will have seen, I suspect. We've been incredibly effective so far this year. As you said there, 4 of the top 5 dramas this year have been on ITV. BBC One's really annoying.
They've had the most catastrophic year of drama. "Bodyguard" comes along and everyone goes, "Oh, it's great, isn't it? The BBC drama." You think, no, it's only "Bodyguard," which happens to be made by ITV Studios. Darn it. That's all what we're trying for is these mass audiences. Of course, at the weekends, a terribly important part for us, and the thing that we're perhaps most famous for is our great big entertainment. Again, people will look back at this as a sort of golden age of entertainment across British television. There are seven shows, enormous, big shows that the whole family watch together in their millions and millions every Saturday night, and all but one of them is on ITV. It's only "Strictly Come Dancing" that's on the BBC.
If you're sitting at the BBC, trust me, they look at us with just green with envy as to "X Factor" and "Britain's Got Talent" and "I'm a Celebrity" and "The Voice" and "Dancing on Ice." These are enormous, big family shows that really define our brand. If you want to get at a lot of people, it's these shows you need to be in. Alongside that, we run concurrently with our other channels, and sometimes in specific areas on the main channel, we target specific audiences. On our digital channels, ITVBe 2, 3, 4, and children's, we're more targeted. If it's ITVBe 4, it's sports like the Tour de France or the TT or the French Open. This is aimed at men, Kelly just sells to men in these things, and it's incredibly effective and profitable for us.
The biggest one, I suppose, is ITVBe 2. ITVBe 2, we decided a few years ago to absolutely concentrate on younger audiences. There is a lot of hot air talked about young audiences, that they're not watching television, that they're running away, they're not doing this. Then, I mean, God bless it, along comes "Love Island," and practically everybody sort of from the age of about 13-25 is 9:00 P.M. every night, all through the summer, turning on ITV2, hooked, addicted, and dragging their parents with them, who then pretend that they're not that interested. In fact, yes, I'm talking about you.
The great thing about "Love Island" is, everybody, I suspect in their own presentations will mention it, because it is a phenomenon to find a show that just comes out of the blocks and does so well amongst the very group of people that you think aren't watching television. This for us is an example of why being an integrated producer broadcaster is such an an advantage. It's a show made by our own studios. What it means is that we can have total control of this program. We can decide exactly where to put it, who can be on it, how long we want it to run. We won't ever get shafted on what the cost of it is.
Think how the BBC must feel about losing The Great British Bake Off. It was the biggest show on British television, and because they didn't own it, they didn't control it went somewhere else. That can't happen to us when we make our own shows. Then, of course, the exploitation financially of that show through Kelly's division and D2C is within our own capabilities and has been incredibly effective. I would say that. The other thing people often say is have we got enough money? You hear these figures of Netflix is spending $8 billion a year, how can you possibly compete? We spend GBP 1.1 billion approximately each year on our content. I think actually this year is a demonstration that it is enough. It's about the prudent use of that money and us getting better at picking hits and things people want to watch.
This year we've increased our viewing by over 10%, 12% or something. When everybody else is losing viewers, when everyone said, "Oh, they're going to be leaving terrestrial television," well, they're not. They might be leaving the other channels. They're coming to us. This is because the combination of the shows that we're picking, of the way that we're promoting it, the way we spread it around on the digital channels, and a few hits like Love Island can make a substantial difference. I think that the FANGs, the Netflix and Amazons, are not quite yet on our turf, really.
They fight for some of the talent. To my knowledge, the only show that anybody would have taken that Netflix got was, The Crown, which is a wonderful show. I don't see anything else that they've taken from us, if you see what I mean. That. I think to keep them into perspective, look, it's a brilliant business. It's a brilliant way to watch television and all that. It's great. It's a place where studios can sell to. If they were a channel, they'd be 4% of people's viewing. They'd be somewhere between Channel 5 and Channel 4 in their size. That's good luck to them. That's not quite on our lawn. I think our continued approach is to find shows that reach mass audiences.
It's really difficult. It's the thing ITV have been sort of built to do and have been doing effectively for so long now. I don't see that diminishing in any way. I think it's all going to be rosy. I use the phrase, I see only growth. Don't know if I mean it. We'll try. I don't think that anybody a few years ago would say ITV would be in this strong position on air and in its program offering. It is, and I see it growing next year. That's me done, I think.
I've never heard you say that before. Thank you.
There we are.
Thank you. He usually is one of the most, as a fellow Virgoan, he's actually so pessimistic. He's like, "I'm not sure." Okay. Next up we're hearing from two incredibly positive people, Steve Ford and Faz Aftab. Steve is our Director of Digital Products and Marketing, having joined ITV in 2015 to launch and run the ITV Hub. He joined ITV from Channel 4, where he ran their viewer relationship data strategy. Faz is Director of Platform Distribution, having joined ITV in 2011 to spearhead the distribution of the ITV Hub. Before joining ITV, Faz was Commercial Director at Move Networks. She does talk a different language on occasion. You might have to bear with her. She was distributing at Move Networks, a generation IPTV platform. First over to Steve
Hi, everybody. Great to hear from Kevin and Carolyn about ITV's broadcast channels being in fine form. We also know that the U.K. VOD market is in great health as well. We've seen strong growth over the last few years, we're expecting that to continue over the next few years as well, which is why we're investing in the ITV Hub. As Carolyn said, we want to be a structurally sound, integrated producer-broadcaster, the Hub has a big role to play in that. The Hub is the IP version of ITV. It's built to capture the growth in online viewing. It provides the targeted ad platform for Kelly and team to be able to exploit, he'll be able to talk about that later. It's also the entry point for the ITV brand for light and younger viewers, something that Rufus will touch on later.
Also from the data that we know and the insight that we know from our registered user base, it's something we can use to be able to really cross and upsell our SVOD and D2C ambitions. Something that Julian will talk about later in the sessions. It's nearly 3 years since the ITV Hub launched, and in that time we've spent time growing engagement and really investing in our underlying technology platform to ensure we're ready for the future. We're on 28 platforms, and we've grown registered users to over 26 million. In that time, we've more than doubled requests. Since 2015, we've more than doubled requests, and our overall viewing time spent with the ITV Hub has grown threefold.
To give you a bit of a sense of scale of the amount of viewing that's now coming through the ITV Hub, 40% of all "Love Island" viewing came via the ITV Hub. It's not just about catch-up. During the summer, 950,000 people tuned in to watch England versus Colombia live on the ITV Hub. As I mentioned, we've invested a lot of time and effort in our underlying technology platform. The ITV Hub is one of U.K.'s biggest video platforms, and our engineering approach reflects this. It's built in the cloud, we've got scalable and resilient technology which can deliver large audiences. We have the agility of microservices, which means that we can create and change things centrally and deploy them to all of our platforms relatively quickly.
We've also built our database and video measurement platform, which means we can see everything that viewers have watched on the ITV Hub on owned and operated platforms, which is crucial for our personalization ambitions. We can take direct payments, and we also offer single sign-on across all owned and operated platforms. We can offer a targeted advertising solution and Hub simulcast ad replacement, which is something that Kelly will talk a little bit about later. We've invested time and energy into our engagement and grown our engagement, we've also invested in our underlying technology. What's next? Where do we want to go next? We want to invest in the ITV Hub to grow viewer engagement even further. We're investing in engineering expertise, and we're also investing in our user experience and product specialists to really drive that user experience.
We're also going to be pushing off rights and infrastructure costs associated with growing in that viewer engagement area. The reason why we want to grow viewer engagement is because that's what drives our targets and our KPIs. We want to have more registered users, more long-form video requests, more online consumption, and more monthly active users, which all drive our key targets. How are we going to do that? We're going to concentrate on three areas. Content, we want additional content to really enhance our catch-up. Experience, we want to showcase our programs in the best possible way and bridge the gap between ourselves and others in the market. Distribution, which Faz will talk about. We want to ensure that our programs remain at the fingertips of all viewers.
From a content perspective, we've done loads of trials and tests of different types of content, short-form, exclusives, all kinds of different things, and we'll continue to do that trialing and testing and really to try and understand what drives viewer engagement. What really resonates with viewers and really drives engagement is relevant archive and series stacking. Relevant archive is when we make box sets available on the ITV Hub just before it broadcasts on air, so we can get viewers into the narrative of shows. It tends to be the previous series of a program that's made available for people to watch before the new program comes on air. Series stacking is when we make the program available throughout the linear run and then as a box set at the end of it.
A really great example of that is earlier this year, we had Marcella Series 2 returning to the channel, we made box set of Series 1 available before the program came on air to get people into the narrative so that they could either watch it on catch-up or watch it on air. We also made the program available throughout so that people could catch up whenever they wanted. Viewers could catch up whenever they wanted throughout to be able to get into the narrative. At the end of the show, Series 1 and Series 2 were available for 30 days afterwards for people to be able to get into and watch the program. Relevant archive and series stacking allows us to take advantage of other viewing windows. Catch-up remains at the heart of what we do.
Catch-up really shows a strength of schedule, that people are seeking out the programs that we're putting out on air. That strength of schedule really drives excitement and awareness around shows. What we want to do with series stacking and relevant archive is really extend that excitement into the two viewing windows adjacent to catch-up. Pre-broadcast window and the post-broadcast window. Obviously, there's a fourth window in there, which is the SVOD window, which is something that Julian and Rufus will talk about later. From a viewer experience perspective, we want to build the best viewer experience we can to be able to really bridge the gap between ourselves and others in the market. It's going to be based around four themes. Consistency, we want consistent user experience across all devices.
We've also got 26 million registered users, as I said, we want to create 26 million individual personalized experiences on the ITV Hub. We want to develop the right features that really drive engagement, also deliver against our KPIs. We want to punctuate the experience with video promos. I can imagine that feels a little abstract. What we've done is created a conceptual demo of the user experience. You're one of the first people to see this. We're really excited about it. As with all conceptual demos, it's just concepts at the moment. It shows direction of travel, of where we want to take the ITV Hub and where we want to take the experience. This is not the end game. This is not exactly how it will look.
There's lots of work to do to be able to validate this with viewers over the next few months. Imagine a viewer called Heather has landed on the ITV Hub. The Strangers, the new drama, is presented to her as a featured item. The video promo plays, then she can scroll down into her latest top telly. She can scroll left and right to see all the different television that's available to her. Then she can go into her personalization features, like resume play. She notices that she can pause on one device and resume playing on another. Then she's into her recommendations. You can see again, she can scroll left and right. These are recommendations based on programs that she's watched before. A promo of Family Guy plays as well, really drawing her into the action.
Then there's four box sets available that are relevant to her. Again, these are data-driven. She clicks on Vera. She can see all the episodes and series that are available. A trailer's available so she can see what she wants to watch. Heather's just realized that she's missing the football. She clicks on the channel pages, that takes her through to the channels, the England game is available for her. She joins at a very opportune moment. She realizes that she wants to start again, that she wants to watch it from the beginning. That's all right, because Heather understands that we have a feature called Start Again, she can go back to the very beginning to be able to watch it. That's a really quick whistle-stop tour of where we think we're taking the ITV Hub user experience.
You can see in there are all of the four themes that we talked about. Personalization, features that really grab attention, punctuated with video promos, and also from a very D2C user experience perspective, that user experience allows us to take it across lots of different platforms, particularly connected TV, which is where we have a bit of a difference at the moment. I'm going to hand over to Faz now, who's going to talk about distribution and how we're going to keep the ITV Hub at the fingertips of all ITV viewers.
Thank you very much. I don't get to walk onto music. I'm quite disappointed about that. Might get you all to sing. I'm Faz. I'm going to talk about distribution. I'm going to start by setting the scene. The ITV Hub is on 28 platforms, another 14 if you count our Freeview Play, our joint venture with the BBC, Channel 4, and Arqiva. These platforms enable our viewers to watch what they want, when they want, on the screen that's most convenient to them. We've achieved this reach by developing great long-term relationships with our partners, from LG to Samsung to Sony, from Xbox to Google and Apple. Thanks to effective distribution, the success of our partners, content and a brilliant team of engineers, we're pretty ubiquitous. It's hard to buy a smart TV without the Hub app on it.
I'm going to focus in on three areas. I'm going to talk about our distribution ambition, I'm going to give you an insight into our principles, and then I'm going to finish with an insight into what's coming up next. Let me talk about our ambition. We want to make sure that ITV is prominently available to all U.K. connected users through their favorite devices and platforms, offering our viewers a seamless, consistent, and personalized ITV experience on the different devices they use to access our content. Our ambition is supported by a set of principles that allow us to maximize direct reach and help us grow viewer engagement. The first of these principles is that the ITV Hub should be easy to find and access on all platform UIs, and ITV programming needs to be prominent on these UIs. The next is attribution and branding.
When somebody watches Strangers, it should be clear that that is a program from ITV. The next is data. ITV will own consumer and usage data from our app on these platforms. This data will be used to deliver a consistent user experience and features like Heather's cross-platform resume. The next is the ubiquitous reach of our app. We can see today, no one platform dominates viewing, and we must maximize our direct reach. We're already progressed on this journey, and I'm going to give you two real examples of our principles at work. Let's look at prominence first. The ITV Hub is available on 93% of smart TVs in the U.K., and we've successfully secured prominent positions on the leading smart TV manufacturers, Samsung and LG. These are long-term relationships. Our relationship with Samsung started back in 2011, when consumers first started to connect their TVs.
The second example demonstrates our attribution and branding ambitions. Our viewer research shows that there's a limited awareness of our offering and a lack of brand association with our programming. Rufus will cover this in more detail later. Through our principles and marketing, we can ensure awareness, attribution, and prominence of our brand. The TV app from Apple is a brilliant example of a partnership following our distribution and branding principles. If you go to the TV app homepage now, you will see ITV on their homepage. Finally, let's have a look at what's coming up next. We are seeing an increasing trend towards platform-level discovery and aggregation. They are the IP versions of the EPG, and we are working with our partners to ensure that we are prominent and discoverable in these areas.
To do this, we are distributing enhanced metadata, and this is where I stop talking English, and I'll try and explain what I'm trying to say. This is to power search, discovery, and recommendations so viewers can find ITV on these platforms. In addition, we're working closely with Amazon and Google, with voice, to voice-enable access to our content, because we want prominence across all interaction paradigms to grow viewer engagement, whether you're typing, tapping, or talking. The next two look at reach. We're working closely with Virgin to seamlessly integrate the ITV Hub within the platform, allowing viewers the option to watch ITV Hub direct on that platform. It also keeps viewing on the set-top box. The next two devices are quite different, both powered by Android TV. The first is a Google soundbar, and the second is Android TV.
We're working closely with Google and Freeview Play to give our viewers the option to watch ITV Hub direct on these platforms. In summary, we want strategic long-term partnerships and more innovation in those partnerships to maximize our direct reach, allowing us to grow viewer engagement. Thank you. I'm going to hand over to Steve to sum up.
This is not all going to land in one go. That's not how digital product development works. We will use data and analytics and Oh, sorry. I've got to click onto that one. Data and analytics and user sense of design coupled with user testing and agile development to be able to really ensure that the experience that we create really drives that engagement that we want and delivers against our KPIs. In summary, the ITV Hub has grown engagement, and we want to continue to grow that engagement. We've invested in our underlying technology to make us ready for the next stage. On the next stage, we'll be focusing on content, experience, and distribution to make sure we deliver against those KPIs and that engagement that we need. Thank you.
Brilliant. Thank you, Steve. Thank you, Faz. I'm now going to introduce you to Kelly Williams. Kelly has been at ITV for seven years. He's been Managing Director of Commercial since 2014. He sits on the Thinkbox board, the Barb Strategy board, and is Vice Chairman of the Advertising Association. Before joining ITV, Kelly was Sales Director at Channel 5. Kelly, where are you?
Afternoon. Sorry if you were expecting a woman. I get that a lot. I'm glad most of you got the white shirt, blue jacket memo. Look, the first thing I'd like to say is that I think it's never been a better time to be a viewer. I'm sure lots of you watch television, but whatever channel you're watching, I think the quality of television production today has never been higher. As a result, I think it's never been a better time to be an advertiser. Look, I'm not going to talk about the power of television, about televisions and ITV's unique ability to be able to deliver mass simultaneous reach and frequency for advertisers in a regulated, brand safe, quality environment. Okay? Nor am I going to talk about TV's ability to create a real emotional connection between our viewers and our content.
Because it's this emotional connection that means that television advertising has the power to make millions of people across the country think and feel differently about brands. I'm not going to talk about the wealth of independent research about television advertising that prove that it's the most trusted, but most importantly, the most effective for driving sales, for driving profit, driving market share, and building brands. ITV is more than TV, and in the commercial team, we like to say ITV is more than TV advertising. What I am going to cover, I want to cover two areas. Firstly, I just want to talk about how we are evolving our sell, why we are scaling up our direct-to-advertiser capabilities, working with new kinds of advertisers, and working on new kind of deals. That's the first area.
Secondly, I want to kind of acknowledge and address changes in viewing behavior and talk to you about why we see this as an opportunity rather than a threat. Let's start with the first area. One of the key pillars of our commercial strategy is to become much more direct-to-advertiser focused. Media agencies will continue to be a very important part of how we trade, but we're determined to transition our client relationships from being a transactional media partnership into a strategic business partnership. Now, it's fair to say that since the Brexit referendum in July 2016, the market has been tough, particularly for many of our key advertisers, whether that's through kind of uncertainty, whether that's consumer confidence, whether that's as a result of currency shifts, or as a result of new and disruptive competitors.
Despite this, and arguably because of this, we're seeing a shift in the makeup of our client base. While many of our established advertisers are struggling, we're seeing a new generation of digital native challenger disruptive brands move into TV as they begin to understand the power of TV. It's across every category: finance, retail, travel, consumer goods. We're dealing with the likes of Purplebricks, Missguided, Trainline, Harry's Razors, Checkatrade, Airbnb. The list goes on. There's many more there. Why? Because these digital businesses, because they are digital business, they can see the immediate effect of their spot advertising. They can see the immediate short-term uplift, and they also understand that in the long term, they've got to build their brands, and TV is the only medium that can do both. It's not just spot advertising.
All of our key sponsorship deals have moved from being sponsored by established advertisers to these kind of digital disruptors. Whether it's Giffgaff on The Voice, Uswitch on Britain's Got Talent, WeBuyAnyCar on Dancing on Ice, or Just Eat on The X Factor. In the final of X Factor last year, Just Eat sold 500,000 takeaway meals. That is a business impact. Despite the challenging market, we're building new kinds of deals with advertisers across the board. I just want to just share with you a few examples. The first one is Matalan. Now with Matalan, we have created a fashion advice show that lives online and on the Matalan app, but it's promoted through regular 30-second advertising campaigns exclusively on ITV. It's presented by Denise van Outen. We produce the show ourselves. We use ITV talent in the show as guests.
It's now just starting its third year. They spend their entire TV advertising budget on it. For those of you who follow these things, Matalan has been one of the shining stars of the high street. Second example, I want to talk to you about Camelot. Some of you may know that The National Lottery show that used to be on the BBC came off the BBC last year. They came to us, asked us whether we would show it. Kevin didn't fancy it. It didn't fit really with our Saturday schedule. We created an advertising campaign now running every Saturday night fronted by ITV's Stephen Mulhern. They run two-minute ads made by us, often live as a mini lottery show. The initial run is for 12 months. It finishes next spring and is delivering on a very specific business need.
Third example is, I guess it's "Coronation Street." Compare the Market, the meerkats have sponsored this show for the last seven years. They've got two years left, which in itself I think demonstrates the success this has had for the brand. "Corrie" is a great example of one of our first multi-partner collaborations. We normally just have one sponsor on a show. With "Coronation Street," we've worked with Visa, we've worked with Interflora. This year, we added two retail outlets to "The Street." We extended "The Street," Costa Coffee and Co-op have formed the biggest product place and partnership on TV. Incidentally, it might surprise you to know that all of the poster sites in the show are sold by ITV. I think these poster sites are the only national poster sites in the U.K.
The final example I want to share with you in this area is "Love Island." Commercially, I don't think in sheer numbers there has been a more successful TV show. We've worked with 11 commercial partners, 11, which is unprecedented. We've had a headline sponsor, we've had product placements, brand licenses, podcast sponsors, in-store branding, exclusive product lines and merchandise, bespoke creative executions, all made in-house. I could talk to you all day about this show, we tried to summarize it in a very short VT.
The search for romance is never easy in the "Love Island" villa. For 10 sexy partners in 2018, they were in paradise. Cue the music. Here's Superdrug, our headline partner, who got our summer ready by turning up the heat on their sponsorship. Exclusive products filled the villa bathroom, and their massive shop windows. Rimmel took a fancy to the windows too, with a specially made Love Island product line and a tattoo party in the villa. Jet2 also jumped into bed with Superdrug, providing flights for competition winners. Forget emotional baggage, Jet2 created a line of branded baggage and bespoke social posts featuring the Islanders as they left the villa, wearing clothing from another partner. Jeez, they're all cracking on. Missguided clothes adorned the hottest contestants, their website, along with our official app, helped viewers get the Love Island look.
Missguided then coupled up with Echo Falls, Love Island's official alcohol partner, for a shared party for bloggers and influencers. Echo Falls animated a special new ad featuring on-bottle branding. Ministry of Sound became a serial dater, providing the music for a villa pool party and the new Love Island Lakes at Thorpe Park. Another one? Unbelievable. Lucozade's ads were made by the Love Island producers with 100% official Love Island lingo, also featuring phones from Samsung, our official handset partner, who also enjoyed seamless product placements and the coolest slow-mo camera ever. Don't worry, Kellogg's, we haven't forgotten about your on-pack competition and that time you got into bed with The Morning After podcast.
Sponsored by Kellogg's Corn Flakes.
Ooh, you dirty stop-outs. Primark, here's to you and your brilliant Love Island beachwear. We've found some perfect partners, and it's been a hot summer of love.
I can tell you're all fans of Love Island. Look, these deals go way beyond TV. They are more than TV. They go in-store, they go on pack, they go online, they take licenses, they dial up product placement, and they engage ITV's on-screen talent. As an integrated producer broadcaster, we are uniquely positioned to deliver these ideas that are creating real business impact. The second area I want to touch on is changing viewing behavior and how we see this as a significant opportunity. We like to say TV isn't going anywhere, it's going everywhere. Viewers can now watch TV wherever and whenever they want. This year, I think, has been a defining year for the ITV Hub. You've already heard from Steve and Faz about how the platform has developed.
From an advertiser's perspective, we have seen very strong growth in revenues for the Hub. Why? I think there are three reasons. Firstly, the broadcast of VOD market is maturing. Advertisers are now understanding that it delivers incremental reach. Illustrated by these charts here, which looked at the kind of reach you could deliver with GBP 1 million 10 years ago. An advertiser could reach just over 70% of a particular audience. GBP 1 million today delivers a little bit less reach, but if you rather than spend 100% on linear, you split that 80/20 between linear and non-linear, you can hit the reach that you could 10 years ago. Second reason I think we've seen strong growth is that the ITV Hub is delivering genuine scale of audiences now. We have more targeted inventory and reach on the Hub than Sky AdSmart is delivering today.
Thirdly, most importantly, I think, over the last 12 months, we have launched a range of targeted addressable products using our first-party registered data. Year to date, over 50% of advertising on the Hub is now using these targeted products. We have built these products in 4 stages. Just take you through those stages. Stage 1, from our registration data, we know our user's age, gender, and postcode. We can create campaigns that use Barb-targeted audiences, and we can do that regionally. For example, earlier on this year, Specsavers were launching their new hearing centers. They just wanted to target over 50s, and they just wanted to target people in Cardiff, Birmingham, Glasgow, and Edinburgh. We were able to deliver a campaign just targeting that audience on the Hub. Stage 2, we can match this with third-party data sets, offering interest-based targeting.
Equally, we can create our own interest-based targeting using our own viewing data. For example, we could create audiences of people who really like cycling based on their viewing data and create those audiences and sell them to the likes of Wiggle, Evans Cycles, and Sigma Sports. We can do that in real time. Stage 3, we can also enhance these data sets with an advertiser's data set to create a more tailor-made addressable campaign. An example of this is East Coast Train. They wanted to target non-customers, so they shared their customer data with us. We then matched it and excluded those people from targeting. We then overlaid their target audience of 30-50-year-olds earning over GBP 50,000 a year and living along this railway line. We were able to create a bespoke campaign for them.
Finally, we can do all of this by device. We can target by big screen, by mobile device, or by desktop. For example, Uber wanted to just target mobile devices, iOS and Android devices in major U.K. cities. We've been able to deliver a campaign for them. We've built a suite of addressable products. That's all of them there. The top ones basically are there to complement our linear schedules. The bottom one, for example, is there to offer a more digital-like proposition, and the middle one is more around interest-based. For example, an example of the top one, the surge product, for example, we work with John Lewis. What we mean by surge is an advertiser can buy every single pre-roll for a short period of time, so they dominate the ITV Hub.
For their Christmas launch last year, John Lewis bought every pre-roll between 7 o'clock in the morning and 1 o'clock on the day they launched, delivering about 2.3 million ad impressions. An example of a more digital-like product is work we did with Intuit QuickBooks, software accounting firm who only wanted to target. They used a click product, so they just targeted clickable inventory because they were trying to get people to click from the ad to go and purchase. We created a campaign that saw sales increase by 28%. We are able to offer all of this to advertisers with the following guarantees: that their inventory will be brand safe, it will have broadcast-level compliance, premium curated programming, it will be 100% human audiences, no bots, no ad fraud, it will be non-skippable, full screen, and we even offer third-party verification on completion rates.
Combined with our linear sell, we think this puts us in a very unique position to be able to offer the best of both worlds. Mass marketing, mass simultaneous reach with integrated creative solutions built from our linear schedule, combined with more tailor-made, more addressable targeting at scale on the ITV Hub. What next? In summary, we prioritize the ITV Hub to deliver our advanced advertising capability. Our ambition is to accelerate these capabilities, developing a more automated, sophisticated ad tech and data analytics solution. We're going to be more advertiser-focused, building business partnerships with integrated commercial and creative collaborations. As a team and a business, we are now focused on total advertising revenue. Our commercial vision, I guess, is for ITV to be the place where ambitious brands create their greatest business impact, and we think this is more than TV.
Thank you very much.
Thank you, Kelly. Brilliant. Next up is Rufus Radcliffe, ITV's CMO, our Chief Marketing Officer. Rufus joined ITV in August 2011 as group marketing and research director. Prior to this, he spent 10 years at Channel 4. He sits on the Freeview board for ITV as well. Now, over to you.
Thank you very much. Good afternoon, everyone. Before talking about our marketing focus moving forward, I wanted to just set the scene with a broad observation about our viewers, and that is that they have never been happier. Our research shows that 23% of viewers are happy to describe themselves as TV addicts. 32% of viewers say that TV is their favorite pastime, and 64% agree with the statement that TV has a vital role to play in bringing different parts of society together. I suppose it's not really surprising because viewers have got more choice than ever before, and viewers are in complete control, and they like it. We're actually in the third period of modern television now.
The first era was obviously multi-channel, the second was when the PVR came along, as we've heard about earlier as well, we've got millions of TVs that are connected to the internet. This opens up a whole new world for our viewers. There is disruption happening, but as you've heard earlier with our plans for the Hub, ITV will also be a disruptor. In this connected world, viewers now have time to spend more time with ITV than ever before. Despite the amount of change going on, TV viewing levels are actually relatively stable. People are still spending almost three and a half hours a day watching TV. This is viewing that's taking place on the TV set within seven days of broadcast and doesn't show the growth beyond seven days or the viewing that's happening on mobile or on tablets or on computers.
ITV is doing very well in this space, with the ITV Hub being the fastest-growing PSB VOD player. Viewing levels actually remain quite similar to 10 and 20 years ago. A blip occurred between 2010 and 2013 when viewing went up, in part because of the credit crunch recession. We are guilty of thinking that everyone does what we do. This piece of research shows our bias in full effect and shows how often we don't understand what viewers are doing in the rest of the country outside of our London bubble. From left to right, you can see here that people in the advertising industry believe that they watch 38% of TV live. Viewers believe that 55% of their TV consumption is live. The ad industry believes that viewers only watch 49% of TV live. Wait for it, the actual figure is 86%.
We do know the world is changing very fast, and there's this great quote by a futurologist called Roy Amara, and it's as true today as when he wrote it in the 1960s, which is that we do tend to overestimate the effect of technology in the short run and underestimate it in the long run. This is known as Amara's Law. We know that we need to reposition ITV in viewers' minds as a future-facing digital proposition to continue to thrive. This is evident when we look at the current distribution of our viewing. Our research team ran all Barb panel member viewing to ITV for a 12-month period across 2017. They took out the right-hand side here, which were very super light viewers, and the remaining viewing was split into 20% chunks.
There is a huge segment in the middle here of light viewers, 32 million of them, who are only currently responsible for 20% of our viewing. From this group of 32 million viewers, we've created a brand target, and we've done this by removing kids viewing, removing the lightest TV viewing from it, who have a relatively high share to ITV. We've removed the heaviest TV viewers who have a relatively low share to ITV. What you end up with is a brand target of 15 million viewers. We believe these viewers are targetable and winnable. Our brand target don't look like this. These are the Hoxton hipsters. These are the super lights. These are not the people that we are targeting. In fact, our brand target looks like this. They watch almost 3 hours of linear TV a day.
They watch quality output on any genre. They come to ITV twice a week. They watch less ITV and a little bit more of everything else. For this group, there is an ITV brand perception challenge, and this is best illustrated by a piece of research we did last year. Before any marketing or PR had started, we tested our new drama, "Liar," with this audience and asked whether they would watch it. 29% said they'd watch it if it was on ITV, 50% said they would watch it if it was on Netflix. We believe this is driven by a lack of awareness of what our offer is. 44% of adults see at least 10 promos from ITV a week, but 27% don't see any. This lack of awareness of what we're offering is evident from this short film that I'm now going to show you.
I'm Eamonn Keane. I'm a structural engineer, 30 years old, soon to be 31.
I'm Elizabeth. I live in London, in Putney.
I am a doctor currently doing research.
My name is Carol. I have four children, all grown up, and one grandson.
Hi, I'm Ben. In my spare time, I like to make music.
I watch quite a few documentaries, quite a few dramas.
Mostly dramas, I would say. Mostly dramas.
Loved Love Island.
I'm guilty. I did watch Love Island.
X Factor.
Unforgotten.
Jonathan Ross talk shows. Obviously, during the World Cup, I used to watch lots of the World Cup on there.
This actually looks proper good.
This looks really good, man.
It actually looks like a film, doesn't it? You know what I mean? It looks like a film documentary, like it's going to be quite well produced.
I'd think this is more of a BBC One, so. It looks like they put a lot of money into it because it looks really polished.
Would you watch it?
Yeah.
Of course, yeah.
Oh, yeah.
Yes. Is it BBC?
Absolutely love it. This looks right up my street.
That definitely will be something I'd watch. Yeah.
BBC One, BBC Two.
Yeah. It could even be BBC Three.
This is right up my street. This looks like a Netflix classic documentary.
They're actually all ITV.
Are they?
Oh.
Okay. Wow.
Oh, really? I'm surprised they're all on ITV.
On ITV.
Come on, man. I knew. ITV.
The production was so similar to what Netflix would do, so it looks like a Netflix production.
That's the kind of thing I would watch without someone telling me it's good. I would just watch it, and I would expect it to be on Netflix just off the bat.
It would be like.
Like.
an immediate hit.
If you're permanently on Netflix, you're not going to see the trailers for ITV.
For ITV.
You're not going to be. They need to find another avenue to get that message out to them, whether they-
Billboards.
The video ones.
The video ones.
Just a poster.
Yeah, or a poster.
I'd definitely take note of those.
On the side of a bus, and then you see the ITV logo or whatever, then you'd be like, "Let me see. Let me check it out.
They are realizing there are other channels out there. There's a lot to compete with. There's a lot to watch.
yeah, it's good for them. I think it's good, bringing different audiences back in.
I'm buying them all dinner later. Our marketing focus now is about repositioning the ITV brand and about moving us from being a default broadcaster in people's minds to a linear and on-demand destination. You've already heard earlier about what more than TV means, this will be the basis of our marketing proposition moving forward. For viewers, our brand focus will be threefold. It will be dialing up the creativity of ITV, which we don't get the credit for at the moment. It will be talking about the emotional power and impact of our content, that we are not just a linear broadcaster, but we are a digital brand. We're working with a new creative advertising agency called Uncommon, alongside our internal agency, ITV Creative, to bring this to life over the next few months.
As part of the investment that we announced in July, we'll be spending an incremental GBP 10 million off ITV to win back light viewers. Historically, this is what an ITV marketing laydown would look like. You can see from January through to December, along the bottom, you'd have our on-air promotions, then you might have four big campaign spikes for our major priorities across the year. We will now be investing consistently off ITV to reach light viewers. On top of our on-air that you see there will be an always-on drumbeat of off-air activity, driving viewers to the next thing on ITV across press and social and outdoor and radio. There'll be a layer of brand activity reminding light viewers of our creativity, of the impact of what we do, and our digital credentials.
There'll be seven spikes across the year, which will be supporting our major launches both on linear and on-demand. You can see the impact of this work. In the marketing team, we look at three-plus reach. What we mean by that is we believe a campaign has to be seen at least three times by a viewer to be effective. With on-air alone, on the left-hand side, you can see that a typical new series launch would only reach 30% of light viewers at this level. With promos and this light viewer network we're going to create, this gets up to 53% at the three-plus optimum level. We'll also be building our own CRM capabilities and the overall value of our owned media. We have 7.9 million fully opted-in viewers across email and mobile at the moment.
As we build our campaigns, being able to target directly will be a huge part of our armory. This slide shows it in action for "Love Island" this summer. We were able to use email and mobile to build anticipation around key launch moments, including cast reveals, one week to go till launch, the launch night itself, and the opportunity to catch up afterwards. At ITV, we say that we don't just have viewers, we have fans. We have 50 million followers across Twitter, across Facebook, and across Instagram. We dominate the TV conversations online. With our marketing focus on light viewers, we believe we can turn even more people from viewers into fans, and also consumers that Julian Ashworth will be talking about in a bit. With this increased investment, the team are working full steam ahead on repositioning ITV.
Our KPIs are the ones shared across all of the IPB. They are share of viewing, monthly reach, monthly active users, and also spontaneous brand consideration. At its heart, all of our marketing will be bringing to life our new proposition for ITV, which is more than TV.
Thank you, Rufus. Will you stay up here? Stay on a seat there. Can I ask Faz, Steve, Kevin, whoever's been presenting to come up. Kelly.
Got it.
Right. This is your chance now to ask some questions of any of these fantastic presenters. Go ahead. Could I just ask each other's one here? Is Emma doing the other mic? Emma, there's another one there.
Yeah. Thanks.
Introduce yourself.
Yeah. Matthew from Bloomberg. Just touching actually on that last point about social media. Given that we're moving towards a much more converged world, when I look at, say, the ITV Instagram feed or the ITV2, they're kind of only 200,000 people. Love Island's, I think 2 million. How do you actually kind of draw more people into those platforms? That seems a great way to connect your content to particularly, I guess, the younger audience, who's to kind of really drive that brand and change the positioning.
Yeah. Our focus isn't driving people to those platforms. Our focus is recognizing that those platforms are places where our fans congregate, and then driving them back to ITV. I think what we need to do in any marketing campaign we build is just make sure that we're creating enough digital assets that we can feed those fan bases. Ultimately, the KPI for us is then driving them back to ITV to make sure that they're spending time on our own platforms.
I think there's over there, and then we'll come to you.
Thanks. It's Laurie here from Deutsche Bank. Just two questions for Kelly. A lot of the metrics you were presenting were about share of viewing. We know that the total number of impacts across TV is falling. When we look at that in terms of pricing on a CPM basis, it means that ITV now is somewhere around about 15% more expensive than it was eight years ago. At what point do we start to hit tipping point on that pricing? Can you continue to inflate the pricing?
Well, I think the first thing to say is that both our share and our volume of impacts across every demographic are up this year. We haven't seen that for a little while, I know, but across every single one, they are 10%-12% growth. The tipping points are hard to predict, but I think, the cost of TV today is I don't know whether it's 15% more than eight years ago. I haven't tracked it that closely. But certainly from 20 years ago, TV is still very, very good value.
Within the TV market, the one thing that I think we're starting to see is. We'll see how it plays out, I think what we're seeing is because of, for example, the Sky platform, the way the Sky platform's built, Sky as a channel and the channels that sit on that are starting to feel the effects of the fact that that platform is built for VOD viewing. We think that could well put us in a very, very strong position going forward in terms of our position within TV. I'm not a big fan of kind of knocking the competition. I think it's a good thing to do. I think we as TV should sell ourselves.
There is, I think, the beginning of a trend that could see ITV, and arguably Channel Four as well, see a real benefit from the Sky platform spending so much of its time delivering for the subscribers as opposed to the advertiser, if that makes sense.
Okay. Second question is actually related to that. Why didn't you join AdSmart? Why build an ad tech platform now? Which frankly, if we had sat here in a Sky presentation.
Yeah
They were presenting a lot of this stuff five years ago.
Well, I wouldn't say we're not going to. We've been discussing potentially joining AdSmart for quite some time. There's been a number of factors that have got in the way. Initially, sales sovereignty, they wanted to sell it. That didn't feel the right thing for us to do. Then there was access to data. They didn't really want to share that. That's moved on. More latterly, it's around the commercials. What's happened across those five years is that I think the AdSmart technology is seven years old. It's built for satellite delivery, whereas the ITV Hub is IP-built. It's owned and operated by ourselves. It's our registered user data. The scale, I talked about defining year, the scale of the ITV Hub this year, we think puts us in a much stronger place than arguably AdSmart is in.
I think revenue wise, we're probably taking nearly three times as much revenue on ITV Hub as Sky AdSmart are taking.
Good. Thank you.
Thank you very much.
Question over here. Thanks, Emma. Then I think there's one in the back over there.
Hi, it's William Packer from Exane BNP Paribas. A couple of questions from me, please. Thanks for all the detail on the Hub. Just to take a bit of a step back in terms of the wider VOD and digital video market, could you give us a flavor for the growth in VOD and how ITV's market share is changing over time?
Then the likes of Facebook Video and YouTube are growing rapidly. Could you help us understand how VOD is performing versus those mediums and how you expect it to develop going forward? The second question is around potential cooperation with your PSB peers within VOD. There's lots of press reports suggesting that there was potential there.
Yeah.
Is that now dead? Is that the kind of message to take from the focus on the Hub? Thank you.
Okay. Kelly, do you want to take first the market for VOD?
Yeah
particularly AVOD? I'm assuming you mean advertising VOD.
Yeah.
AVOD.
Well, it's growing quickly. I think at the half year, we announced that we're 50-odd % growth we're seeing this year, which I think makes us arguably the fastest growing video platform this year. YouTube and Facebook, big players, although they are having issues themselves around brand safety, around viewability, around ad fraud, around transparency, which they're having to deal with. I think the advertising community are becoming much more au fait with the issues that they face. The things for me around particularly Facebook is, and when you talk to our advertising agencies, it's a very different proposition to broadcast of VOD. It's very much about direct response performance marketing as opposed to brand marketing. We did some numbers the other day, and we think in terms of Facebook's revenue, only about 30%-40% of it is being spent through the major agencies, through major advertisers.
The vast majority of it is this huge long tail of very small SMEs.
I guess one of the things we're trying to develop, we're testing it at the moment, we're doing a test in Central, is we've created a self-serve portal for ITV Hub to target these SMEs. Our view is we think that's a pond we want to go and fish in because it's clearly been very successful for Facebook. Because of the scale we now have around the ITV Hub, we think there's an opportunity there. We're only at testing phase. We're just testing it in the Central region. We've had an ad campaign running. We're just seeing if we can get these SMEs.
to start advertising. Again, over 50% of viewing to the ITV Hub is on a big screen.
That's addressable TV in itself. We think we can get these SMEs on ad creating very hyper-local campaigns.
I'd just add to that about Google for instance. We have a very strategic relationship with Google. They provide a lot of technology for us, and they do quite a lot of data analytics for us as well. Then, of course, we do compete with them on occasion. Actually, when we have our conversations with them, they really need ITV content. If you ask them that directly, they would say that to you. On the one hand, they want our content. The second thing is there was a Deloitte's report out just yesterday, which makes it very clear that the way you view is very different. Most of that viewing on YouTube is on mobile, and most of our viewing is on larger screens.
Of course, we have mobile viewing, the emotional engagement you feel through a larger screen, especially when you're watching certain kinds of programs, has much more emotional engagement. That means it's more effective for advertising. I think their advertising model is much different to ours, and I think they recognize that. I think they're trying to do something for a much smaller screen.
Do you have a flavor for relative size and growth of ITV VOD versus Facebook Video or YouTube within the U.K.?
It's hard to get those numbers because they don't publish it.
They don't disclose.
Certainly, the feedback I get from agencies is growth certainly in Facebook has declined to kind of single-digit growth through agencies. It's very difficult to get the numbers.
Yeah
The kind of long tail.
Morty over here is our absolute expert on all things to do with viewing, including on other channels and platforms. You might want to pick up with him afterwards. On the PSB, peers, I've been here since January, my approach has been, actually, there's quite a lot that we have in common, there are many areas we can collaborate. I think that is the attitude of the other PSBs, Channel 4 and the BBC. I think there will be partnerships of many descriptions. They will be in many different areas, we have open dialogue with them. I think that's very much supported by the regulator Ofcom and also by government. I think, more on that.
Thanks.
Okay. Was there another question in the back over there? There's one over there, then, Emma, if you could Yeah. Thank you. Jill, there's one over there.
Thank you. It's Adrian from Bank of America, Merrill Lynch.
Yeah.
Two questions, please. First of all, Kelly, I think you mentioned in your presentation that advertisers, the classic ones, have been on the back foot since 2016. Have we seen a comeback from these big FMCG guys? Are they still feeling jittery about the macro-Brexit and everything? That's the first question. Secondly, you mentioned about getting more direct to advertiser relationship. How much of your revenues are coming from these, and where do you see that going in the next 3 to 5 years? Thank you.
Just talking about the market in general, we're not seeing any changes, so nothing's accelerating or decelerating. The 2 big categories that have found it tough have been the FMCG category, particularly the global companies that have been hit by the shift in currency, and high street retailers. They're the 2 areas. As I said, we're seeing significant growth in other categories to kind of make good. Not just online advertisers, but across the board, we've got in the entertainment and leisure category, whether it's telecoms, technology, utilities, soft drinks, the government, confectionery, all categories that we're seeing growth this year. Look, I think it's fair to say that, I think until there's any kind of resolution around breakfast. Sorry, breakfast. Breakfast? Bacon and eggs. Around Brexit, it feels to me that those 2 categories, it's going to be tough for them.
On the client question.
Well, I kind of said that we'll still keep trading with our media. Look, our media agencies are going to continue to be very important to us. They do a very specialized job negotiating big TV deals. Look, most advertisers, in fact pretty much all advertisers, don't have the capabilities in-house to be able to do those kind of deals. Few of them used to be able to do back in the day, but very few of them do now. We'll still negotiate with media agencies. Broadly, about 15% of our revenue is done directly with advertisers at the moment. When we talk about having more direct relationships, it's not necessarily to trade those deals. It's about to create propositions that will drive their business and try and have a much more consultative sell as opposed to a transactional sell with them.
One of the things that we're seeing in the market that's kind of advertisers don't seem to be paying good money for is the planning process. They're cutting the amount of money they spend agencies, and therefore, the whole art of planning is kind of being-
Undermined
undermined. I guess what we want to do with our client sales team, we're going to invest in that team and try and fill that gap and just become a much more consultative sell.
Thanks, Kelly. There's two more questions. There's three, actually. If we take one, two, three. After that, you all might want a coffee. There'll be plenty of other sessions for questions, we'll break after that.
Thanks a lot. Matthew Walker from Credit Suisse. Two questions, please. The first one is, Kevin, I think you talked about GBP 1.1 billion, how you've managed to make that go a long way. You feel that's enough, the question is really, how long is that enough? Obviously, some of the other companies are going to be ramping, for the next 10 years massively. How long can that really be enough? Obviously, you've got expertise in sort of making that go a long way, but that's the first question. Second is, I don't know if you've got any thoughts on whoever wins Sky, not who wins, but what the impact of that might be for you guys in terms of the competitive environment after that deal.
Okay. Thank you. Kevin, do you want to take-
Yeah
the first, anyway.
Yes. Of course, I don't want any more money.
He's always asking for more money.
Yeah. No, I think-
Always
I think you've got to be realistic. I think that the schedule is rich enough in its offering. As I said at the beginning, the growth in our share of viewing and in actual numbers of people watching our programs has grown quite a lot this year. I think staying within the confines of this budget. I think it's incumbent on us actually to just make better choices and make programs that people want to watch. It's not always the most expensive programs that are the most watched. Part of my job is the balance of where you put a lot of money into something. Traditionally, obviously dramas cost the most. It doesn't always mean they get the highest rating. You need to balance your type of programming, your factual, against that which is traditionally cheaper, and keep going.
Also when you come across shows like "Love Island" that are hits, these aren't
These aren't cheap, but they're not expensive. One of the glories of "Love Island" to everybody to the left of me is really that it's on every night for 8 weeks. That you can do so much more than that than the traditional 6 episodes every Monday night at 9:00 P.M. or something. I think it's about us being ever more resourceful about what we do with that money. Look, it's GBP 1.1 billion, it's a lot of money. At the moment, I don't feel the pressure that we're underfunded. I genuinely don't think I've lost a single show because we haven't had the money to get it. The supply is more my concern, if you like. Where are all the great ideas? Where are all the new hits?
The endless search for that takes up more time than turning things down because I'm spoiled for choice.
I think that leads on actually quite well to the answer to the second question, which is, I think we don't really know. Sky is a strong business anyway. Whoever gets this, it's going to remain a strong business, and I think that the Sky model is very much pay TV. Advertising is a kind of sideline, whereas for us, you know what our model is, and you know its advertising, you know its content, you know we're trying to create direct to consumer. We have a multi-revenue, multi-profit business. I think if one of those partners get it's going to go much, much further down the streaming subscription. If it's Disney, it's going to be much, much more about D2C, which is what they have publicly stated. I think no one knows if it's the other.
I just don't think anyone really knows. That feels much more about a U.S.-driven strategy, for Comcast. It feels like it's going to help them diversify out of the U.S. and grow. No one really gets a sense of what that's going to do in the U.K., what impact they'll have on Sky other than keeping it going as a very successful business. I think it is important, and we've done a lot of work on this in the strategy, where Netflix's model is different, Sky's model is different, and our model is different. Recognizing the differences, including in terms of how you spend your money. Also, you have to iterate your strategy. It's got to evolve in terms of everything you look at, and we have to remain competitive. That's the most important thing.
We've got to be able to compete, I think we're showing today that we can compete. Another question there. Julian, I'll come to you, although I did say only three more questions, I'll come onto you. All right.
Hi, it's Richard Ewin from UBS. Just going back to sort of that collaboration story. For example, there is greater collaboration in the U.K., we get a new platform that's formed, we see a shift of viewers to a larger, more collaborative platform. What does that actually mean for the ITV Hub longer term?
That's a very hypothetical question because we don't know what the next step is. What I would say is that we see what happens free to air as being complementary to having a subscription VOD service. We don't necessarily see it as being cannibalistic. There are many, many people that will choose free to air every time and won't pay a subscription because they are very used to free to air in this country. I think particularly with the BBC, I know you pay for the BBC, consumers don't quite think of it like that. They still see it as somehow free to air, which is not right. I think that they will coexist just as we will coexist with Netflix. Netflix is a subscription model now. When we go into SVOD, we will price ourselves at a very specific level.
You will hear about this actually very shortly. Maybe pause and come back with a question if we don't answer, we've done a lot of research on what consumers feel about subscription services. Maybe wait and listen to that. Was there another question here? Yeah, great. Thank you.
Thank you. It was just about the ITV brand repositioning. Kevin, you talked about six episodes a week of both "Emmerdale" and "Coronation Street." ITV's well known for its shiny floor shows. I think you said six out of seven or five out of six of the top shows. How do you reposition ITV, given that is so much of your schedule in terms of attacking those light user viewers? I guess as a follow-up, too, as we head into potential new regulation around high fat, salt, and sugar advertising, will that mean a change of ITV's schedule in some way going forward?
Okay, do you want to do the first?
Yeah, I think one of the big things about repositioning the ITV brand, there's obviously a drama is one of the defining genres that viewers absolutely love. We do some unbelievable dramas, and that piece of research that we did around "Liar" proved that we don't get the credit for that at the moment. There is a big job to do there. I think the other big focus moving forward is also about how we position ITV as not just a place where you get unbelievable mass simultaneous reach, but we're a fantastic on-demand destination as well. One of the big parts of this repositioning exercise is dialing up our on-demand and our digital credentials as well as being a linear broadcaster. I think that complements the schedule that Kevin is coming up with. I think it is all aligned.
The video I showed you just also showed that the ITV story is not getting out there to these light viewers in a consistent way, that we think is the big opportunity. I've sat through so many research groups, and it just comes through loud and clear that they just don't, specifically this demo, do not know the great stuff that Kevin's commissioning.
I'd say, the soaps are one thing, and you're right about, it's rare to get new people coming to join the soaps that have been running for 30, 40 years. The other shows, which are "I'm a Celebrity" and "Britain's Got Talent," these do appeal to the core light viewers in enormous numbers. When you've got 10 million people watching a show, it's sort of everybody at some stage.
The more hits you have, the more you solve every problem that's in front of you. Really the challenge is to get more shows like that.
On the high fat, sugar, and salt, we don't know. We don't know the parameters. What we do know is there's going to be a consultation. We're doing a lot of work, as you would expect, in the background with anyone who will listen, right across the whole spectrum to make sure that anything is evidence-based and fair and proportionate.
We've spent a lot of time on that. I think it's being listened to. We don't know at the moment, we can't really talk anymore about that, really. There's just one last question here from Julian, I've got another hand up over there, I don't want to stop another question, after that, we're going to go for a coffee. Two last questions. Jill, there's one there. Julian there.
Julian, please. When I listen to you, audiences are, the ITV Hub will be amazing. You finally crack advertising, both linear and non-linear. It's best of both world. If you listen to media buyers, those awful people, your revenue will be 0-1% this year. The market is up 5%-6%, you are underperforming the total advertising market. Money is still going to Google and Facebook. Number 1, what is that advertisers don't get from your proposition? Number 2, how long will be the journey to grow in line with the total market? Can we hope that to happen next year, or is it a three-year or five-year journey?
Sorry, I missed the last-
Yeah, I missed that, too
missed the last-
The last sentence.
Sorry. How long will it take for you to convince advertisers of the strengths of your proposition, when will we see total advertising grow in line with the market? Will it take one year, three year, five year?
Okay.
Okay. Well, in terms of this year, I guess the thing that we feel more than anything, I don't think we feel on a day-to-day basis that money is moving or dramatically moving from TV to online. The thing we feel more than anything is the uncertainty around the economy. It feels to us much more of a cyclical issue. I'm not saying it's not I guess we're not burying our heads in the sand, it definitely feels when we're talking to our major advertisers, that that's the issue. They're not in huge numbers moving money from one to the other. I guess it's about the balance of what they spend on brand advertising versus performance. What has been happening is that percentage, which most commentators, most industry effectiveness experts would say it should be 60/40 in favor of branding.
It has moved slightly more closer to 50/50, which is what I think we've been experiencing the last couple of years because lots of advertisers have been coming a little bit more short-term.
Yeah
in their outlook. I think when can we see that shifting? I do think it's going to be when the economy starts picking up and people feel more confident about the future. Definitely it's sentiment that is the issue.
Just to say that, the last time you saw uncertainty or in fact much worse than uncertainty, you saw the direct correlation with ad revenue. There is a direct correlation between political and economic uncertainty and advertisers because it is a tap that they can turn on and off. We've heard some advertisers, like Charlie Mayfield at John Lewis Partnership, saying very, very clearly that he's not cutting back on marketing and that TV will be an absolutely core part of actually them fighting their way out of a very, very difficult time on the high street. You've got some advertisers will actually spend in order to be able to keep footfall and their revenues up.
Others will actually use it to retrench a bit.
I think Kelly is right. Until you get more certainty in the economic environment, the economy is fairly flatlining. You will see advertising flatlining. It is a direct correlation. What struck me about your second question, which is when are they going to see it, they do see the strengths of advertising on TV, which is why we have 2,800 advertisers. I think my observation would be that, despite Kelly and the team's best efforts, the TV industry has not come together until very recently and been much, much more forceful and assertive about why TV is so strong and so important. I think that we'll do a lot more of that, I think both ITV in the lead, but also working with Sky and with the BBC and Channel 4, just about the power of TV as a force.
I think that's necessary with advertisers because having been an advertiser, having been a client for 8 years, I did not wake up every morning as a CEO and think about my media plan. I probably only thought about that once a year. I think, we have to permeate consciousness of people both at CMO level and at CEO level, and indeed at CFO level, because they are often people that say yes or no to money, well, usually every day. They're the ones that we have to get to as well, and we've got plans to do that. There's one more question over there, then we're definitely having a coffee break.
Yeah. It's Sarah from Berenberg. It's really just a question following on from, you're talking about cooperation on the SVOD side, on the marketing side, but in the U.K. There's obviously been chat from some of the other European broadcasters about potential cooperation across borders. I'm just wondering, to what extent you can say if you see benefits from cooperating with broadcasters outside the U.K., whether it be on the content side or on the marketing side, or on the tech side?
Sure.
Yes. Certainly from a commercial point of view, we see that as a great opportunity. We've got quite a close relationship with RTL. They represent us outside of the U.K. They have an international sales team called RTL AdConnect. They've represented us for a few years now, but that relationship is getting stronger and we're talking to them about doing lots more stuff with them, particularly we think around ad tech. It seems clear to us that every TV station needs to invest in this, and we might as well do it together. That's not just, I guess, across Europe. We're talking to other U.K. broadcasters about ad tech, and about data, and about pooling our resources.
Mm. On content, you'll hear a lot more later on about how we sell to them, right across the world, actually, but Europe as well. On that note, coffee break. Could we take 15 minutes, please, for coffee. Follow Jack, and he will also then shout at you to come back in so we stay on time. Thanks very much.
Thank you very much.
Right. You've had the intermission, so now for the second bit of this. We are now going to hear about our plans for D2C. Julian Ashworth, our Director of Group Strategy and Direct to Consumer, is going to be talking to you, and so will Rufus. Rufus will come back up because he's been very involved in that area, too. Julian joined ITV earlier this year to lead the strategy refresh that you all know about, and also to start really helping develop the ITV direct-to-consumer business. Before joining ITV, Julian was Global Director of Policy Strategy at BT. Prior to that, he held various strategy, business development, and commercial roles at RELX, Centrica PLC, and Bain. First up, Julian.
Thank you.
Honestly.
I'd ask for Boy George, "Do you really want to hurt me?
Yeah.
we'll find out at the end. As you heard from Carolyn, ITV strategy refresh has resulted in the creation of a new business area of focus called Direct to Consumer, and it's really exciting. D2C, I think, really epitomizes the spirit of more than TV. It's not like advertising. That's Kelly's bit, and it's not about studios or production revenues. That's Julian B's bit, and he'll come on and tell you about that later. It's about capturing the increasing willingness to pay by consumers to engage with our fantastic brands, content, IP. We do this a little bit so far.
There are some great examples here where we have done some good things, admittedly, we believe we can do so much more by applying a little more investment, a lot more focus, some technology to drive analytics that will drive marketing to really accelerate all of this in a much more joined up fashion. Today, I wanted to just talk about a few things really quickly. I wanted to first give you a sense of what our approach is in this area and what our ambition is overall. Secondly, because it's ITV and everyone else is showing a video, I'm going to show a video bringing it to life from our consumer viewer perspectives.
Thirdly, I want to go into a bit of detail about the current portfolio of opportunities that we're excited about, you'll see in the video, and why we think we can grow them in the way I said. Fourthly, Mr. Rufus Radcliffe is going to come back up, and he's going to take you through the latest research that we have on our (effort proposition) and why we feel optimistic about our future in that area. Let's start off with our approach to D2C. I know I said this is more than TV and it's a new area, and it is, but we really make a virtue out of the fact that we are a free-to-air broadcaster. It is a huge advantage to start with 50 million U.K. viewers passionate about your content across the country.
What's even better is that these viewers are the ones who are coming to us for more than TV experiences. In fact, we've got over 28 million so far that have come to us for online hubs and portals and competitions, smartphone apps, games, and events. This is great because it allows us to create deeper, more engaged, and most importantly, more valuable relationships. This year, so far, we've had 5 million monetized customer relationships. When I say monetized, that means it's paid us for something. Sometimes it's one transaction, sometimes it's multiple transactions, and increasingly, we're seeing recurring revenues.
The main thing is that GBP 5 million, as a number at this stage, is big enough to give us confidence that this is a real thing, this is a real opportunity, but modest enough, I think, to give us optimism that there is much more to go for. Go for it we will, and that's why we've raised our ambitions. If you looked at this area last year, last full fiscal year, 2017, I think collectively, the areas that I'll talk about had about GBP 65 million in revenue. Our ambition, as I said, is to accelerate that, to drive double-digit growth over the near term to 2021, so we can surpass GBP 100 million of revenue, and that's profitable. We're first going to do this by growing relationships, bringing people onto those more than TV platforms that I talked about earlier.
Secondly, deepening engagement, then thirdly, converting them to purchase. The second side of it, or the other side of the coin, is really about growing the value of those relationships, so boosting ARPU, putting more of our IP to work so there's more opportunity, increasing frequency of purchase, then cross-selling and upselling. We're focused on a number of clear opportunities, 3 main categories. The first two really relate to accelerating and delivering the full potential of our existing portfolio. First in Hub+ and interactive competitions, where we think there's much more to go for in these established areas. The second is about developing what are today nascent areas, but we think we can develop into something much more meaningful. I'm going to tell you a little more detail about our plans in those areas.
As I promised earlier, first a quick video about what this will look like for our consumer viewers.
ITV is more than TV. ITV is a brand that directly offers our fans great ways to engage beyond the TV show through subscriptions, content, gaming, events, merchandise, and competitions. Each of these interactions brings our viewers closer to the ITV shows and experiences they love. This is just the beginning. With smart use of data, technology, and winning consumer propositions, there are so many more opportunities to build on this, deepen our relationship with viewers, and offer them great trusted ways to engage with ITV beyond their favorite TV shows. What does this actually mean for our audience? Meet Emma. She's a diehard "Coronation Street" fan.
With ITV Hub, she can keep up and catch up with "Corrie." She's also seen that with an update to Hub Plus, she can escape to Weatherfield even when she's escaping the U.K. weather, taking her favorite stories and characters with her. Emma also loves a bit of daytime TV and would love to win one of the (Big Brother competitions). She's happy to get a reminder to put her entry in. You've got to be in it to win it, after all. She's even happier when she gets to watch highlights from her favorite shows in return for doing it.
Where's the third lion though? Oh, my goodness.
There is Tony, a family man who enjoys quizzes and big entertainment shows with his two sons and wife. You'll find both him and his two boys cheering at the telly when "Ninja Warrior UK" is on. They're getting ready to put their competitive streak to the test at the Ninja Warrior UK aquapark, where they will prove who the real winner in the family is and also have a real winning family day out. It doesn't end there. Tony and his wife go head-to-head in The Chase: Ultimate Edition, which keeps the excitement going between shows and in their relationship. When he wants a bit of Tony time, he downloads and watches shows on his commute and binge-watches his favorite ITV box sets without any interruption. Carly is a student who can't get enough of reality TV.
She wants to be in the know when the chat gets started at the union bar. She gets immersed in the action by reading up on the latest gossip, getting involved in the buzz of voting, buying her personalized water bottle, and even playing the game in between lectures. Her dad was happy to buy her a Hub Plus subscription. At least Carly can watch "Love Island" ad-free, leaving her more time for actual studying. It's our goal to create happy ITV viewers and happy ITV customers, too. With over 28 million and growing verified consumer relationships, there are so many opportunities to grow new revenue whilst creating richer, trusted CTV experiences that our audiences will love. ITV, more than TV.
Before Rufus comes up to talk about SVOD and research, I just wanted to go through in a bit more detail some of the really exciting opportunities that were shown in that video. The first was Hub+. Each of the three had a different reason for purchasing it, and at GBP 3.99, it's a great feature-packed version of the Hub that Faz and Steve showed you this morning. It really gives more value ad-free anywhere, anytime, and has done well, but we think can do so much more, through enhanced features going forward, by looking at new ways to price in different packages for different segments, looking at stronger messaging and targeted marketing, lastly, just making it easier to acquire on more platforms, and also accessible directly through a connected TV. We're quite excited about that. The second area is something called interactive.
It's also known as competitions. A lot of people think of this as the phone number at the bottom of the screen when they're watching Holly and Phil. It is that, and that's great because millions of people engage with it and love it and continue to engage with it. It can be so much more, and that's what we're doing with it. We've launched an online competitions portal. It's had over 1 million visits. It continues to grow very quickly. It allows people to engage in other competitions that aren't even linked to the shows. This year, we've piloted a loyalty rewards program, which gives even more incentive to play along. In the last quarter, we're launching a number of show apps that will have embedded directly in them ways to enter competitions that are easier and more enjoyable.
The innovation's going to keep going next year when we launch rich content services to engage with our customer viewers in a more vivid fashion. The last area, the glam area, gaming, live, and merchandising. As I said before, these are nascent positions, but we think there's a lot we can do to develop them. In gaming, we're working with third parties today to take more of our titles and IP into gaming formats. We've had a great success this year with the "Love Island" game. It's gone number one in the U.K., top 10 in over 10 countries around the world, 3 million downloads. It's a fantastic adaption of the show. If you haven't tried it, you've got to get on there and try and get yourself a gold bikini.
We're really excited about what more we can do with that title, but it's also just the beginning of thinking about a gaming strategy for us because there's lots of other titles in our library that lend themselves to these experiences, number one, and there's lots of other formats, whether it's storyboarding, freemium, puzzle, or quizzing. We're quite excited about that opportunity. In Live, this is an area that actually, as a broadcaster, we've been doing for some time, but we think there's a lot of opportunities to bring fans closer to the talent and to the shows they love, whether it's fan events, exhibitions, experiences, set tours, you name it. This year, we've been very busy. We've launched a Coronation set tour, the new set tour experience at Media City. We've added Victoria Street and Community Gardens, and it's fantastic.
We've also launched an aqua park for Ninja Warrior up in Windsor. Looking forward, we see lots of other opportunities, whether it's building on our consumer events for This Morning, whether it's expanding Ninja Warrior to other formats and other locations, or thinking about options for a fan event like Love Island. Great opportunities there. Lastly, merchandising. This year we've had 400,000 products sold, but we're just starting. We want to bring more products from more shows to our consumer viewers more easily. As I mentioned before about the show apps that we're launching in the last quarter, not only will they have ways for consumer viewers to enter competitions, but we're also putting show shops into them to make accessing our products so much easier as well.
That's a really quick canter through the existing portfolio and what we're trying to do in D2C to sort of kick it off. Rufus is going to come and talk now about the research that we're doing around SVOD.
Thanks, Julian. This year we commissioned two major independent studies into opportunities for new SVOD services. The first one in March fed into our strategy refresh, clearly identifying an opportunity for an SVOD service with British content at its heart. In August, we commissioned our largest ever nationally representative piece of online research, surveying over 3,000 adults online. Let me just talk you through the headlines. The first thing you see on the left-hand side here is the market continues to grow very fast. There are about 11.6 million households now who've got SVOD. In the middle, our research shows that 23% of existing SVOD subscribers would take another service in the next three months. 10% of non-SVOD subscribers would, and 16% of all adults. That is being prepared to take another service just in the next three months.
In number terms, on the right-hand side, you can see that means 3.9 million households, 2.3 million of whom were interested in the range of propositions that we tested with them. If you look at the drivers of the uptake, you'll see quite clearly on the left-hand side, the importance of British content. 42% of respondents said it was a key driver for them. You can see the power of our British content in the middle section, where you can see that 47% of all adults and 30% of Netflix subscribers said that Britain has the best content, which is much higher than figures for the U.S. We had, as we always get with research, we had some great colorful verbatims here.
Good British drama is excellent, is easier to relate to, and generally of a higher quality than U.S. imports." Here's another one, "I know there's loads of brilliant British TV I've missed in the past, but have no easy legal way of watching it now." We were really encouraged by this piece of research. We've done it twice this year. The results show that there is a really fantastic opportunity for us in this space. Back to you, Julian.
We'll just close it off. The research is quite clear, I think, about the opportunity. I think there is a gap for a service focused on U.K. content. I think as ITV, we think about our pedigree and believe that we should have a right to play in this gap. We've got a fantastic commissioning pedigree in the U.K. We've got fantastic assets in the viewers and those that are coming onto our platforms as a sales funnel. We're investing in the data to really make this come alive. As Carolyn talked about at the start, there is an opportunity here. Our approach, of course, will be phased. It'll be pragmatic and focused on value creation, and it'll absolutely focus our right to play.
I would just emphasize, this is the same right to play, not just for SVOD, but the one that supports everything we want to do across D2C. Thank you.
Thanks, Julian. Julian, you're staying with us for the next section. You may want to sit down, but I'd also like to introduce now our Group CTO, Mark Smith. Mark joined ITV in 2011 as chief technology architect. He was promoted into his current role in 2015. Prior to joining ITV, Mark held senior technology positions at the BBC Worldwide, and Sky. He actually worked on the original iPlayer. Mark started his career as a software engineer at BT R&D. I'm really pleased to invite both. Are you both coming up, or are one of you sitting down, one of you is coming up?
Either sit or stand up.
Either way.
I'll come up. The strategy refresh that we did at the start of the year identified a number of opportunities for us to accelerate our more-than-TV strategy by doing more with data. To do this, we had to lay out a new vision to make data analytics a key competence across the organization, developing deeper, more joined up, more actionable insights about our customers, viewers, advertisers across all of our platforms and all of our relationships where possible. To do this, we identified a number of enablers that were really going to be critical. The first was just about getting more comprehensive data about those relationships, consumers, and viewers, and building bigger, deeper, richer data sets. The second is about making sure we had the fit-for-purpose technology platforms to collect, to process, to store, to analyze.
Thirdly, it was about having the right organization, leadership, and skills so we could turn data into insight. We're not just doing data for data's sake. It's not the flavor of the month. It's about really focusing on our strategy and the priorities that underpin it. First and foremost, maximizing total viewing across all of our platforms, as Carolyn said earlier. Secondly, it's about converting that viewing into the most value we can for advertisers in creative and advanced advertising solutions. Lastly, further to my previous presentations, about making sure that we can grow a successful D2C business.
Okay. I'm going to talk about the first enabler. Developing deeper, richer, and more actionable data sets is the starting point for our data strategy. We already have some real depth today, primarily the data that we collect around ITV Hub, where we now have unique ITV IDs for nearly 27 million viewers, and together with some really useful profile data about those viewers as well. Every day, we supplement this with real-time viewing data, about 1 billion real-time events, every play and pause by device. This is just the start, and we think there are real opportunities to collect more valuable data. First of all, we need to enhance our vast Hub data with stronger profile data so we can better serve both our users and our advertisers.
We need to build stronger data sets around linear TV viewing by developing relationships with partners, platforms, connected TVs, making data access a real priority in all our relationships where it's not been previously. We also need to bring together other siloed data sets that we collect from around the company. Interactive is a really good example. Together, we can be more insightful and actionable around that data. I'll talk a bit more about how we're going to do that in a minute. Last, and by no means least, all of this will require the right permissions to ensure that all our activity is consumer friendly and compliant with GDPR. Next, I'm going to talk about the second enabler, which is technology. This is the sexy bit, so hold onto your seats, guys, from my perspective, anyway.
Over the past couple of years, we've built and launched an audience data platform that we're really, really proud of, and we're proud of it for 2 key reasons. Firstly, it does everything that a really good data management platform should do. It captures, as I mentioned earlier, 1 billion real-time events from ITV Hub every day. It uses real-time algorithms to cleanse this data and then store this data. It stores all this data and then matches it to the unique ITV IDs that we mentioned earlier. We've also selected a number of tools to help our teams both analyze and gain insight from that data. Key off-the-shelf tools like Tableau, Alteryx, as well as lower-level access via languages such as Python. It can also interface with other data platforms, such as advertising DMPs, to help enable our advanced advertising ambitions, which I'll talk about later.
The other reason that we're really, really proud of this data platform is the way we've built it. It's been built using off-the-shelf cloud-based components from key partners, the kind of guys you'd expect, Google, Amazon, et cetera. As a result, it's secure, it's robust, it's cost-effective, and most crucially of all, it's extremely scalable. We're in good shape from a technology perspective, but we're not standing still. As I mentioned earlier, we will be scaling our data platform to collect linear TV data, as well as pooling data from other sources, such as our interactive services. We'll also be reassessing our technology suppliers and partners, ensuring that we stay in control of our own roadmap, but we continue to get the best out of the products and services provided by those partners.
We will continue to standardize the way that we interface with external data platforms, making it easier for us to partner with other data providers going forward. Back to you, Nick.
Thanks.
The third enabler, I think, is perhaps the most important because if we've invested in the data sets, we've invested in technology, but we haven't got the people to turn that data into insight gold, then it's all for naught. It's really critical that we address that. The first step, I think, is about changing the culture from a business that has always thought of data as a good way of supporting itself to one that is absolutely focused on using data to drive its strategy and decision making. Secondly, if data is going to be something that is a key organizational competence, then it's got to influence our organizational design.
That's why we've made the decision to set up a center of excellence focused on data analytics, pulling together all of the disparate analytical teams we've got across the business, looking at different data sets and different parts of the viewer customer journey into a single unit that's got the scale, the scope, and the skills to really drive our strategy forward. I'm really happy to announce, unfortunately, she can't be here today, that we have appointed Karine Serfaty to be the leader of this new team. She's going to be our Chief Data Officer. She's joined us this month. She's got a fantastic background. She was Chief Data Officer for The New York Times. Prior to that, she had a long career in the top tier of consulting, working with leading media companies on data and strategy around the world.
She's got a fantastic wealth of experience she brings, and I'm really looking forward to working with her. Of course, to support her and the rest of the business, we've already started building out the teams in the center of excellence. We're already recruiting the data scientists to get this going. Of course, we've got more to do, but we've started. I'd like to spend a bit of time now talking about the priorities for this team and actually what we'll focus them on. As I said earlier, the first and most important priority is about maximizing viewing across all of our platforms. You can really look at this in sort of two halves. The first half is about exploiting data to drive reach, engagement, and frequency of viewers coming to our platforms, primarily the Hub.
We'll do this first by using CRM to drive targeted marketing and targeted messaging to bring more visitors to the platform. The challenge, though, is actually converting a lot of these visitors into viewers. Therefore, data can also help us by optimizing and designing the estate so people actually engage in the content. That's the first half. The second half is then having got people to view, how do we keep them? How do we increase the dwell time, as we said earlier, the session time? That's about having the algorithmic recommendations for the next thing to watch, the personalization to keep them in it. Those two things together are really going to help us maximize viewing. Mark's going to talk to you about how we turn that viewing into more value for advertisers.
Our second priority is enabling advanced advertising. My technology teams and I have been working really closely with Kelly and the commercial teams on how to utilize data analytics to enable better advertising solutions.
Kelly mentioned earlier, from a VOD perspective, we already use our unique first-party data to provide a range of targeted products. Around 50% of our VOD inventory is already targeted. We continue to augment our data sets and enhance our data capabilities, we'll be able to create higher value addressable audiences, improve routes to buy, and we'll be able to launch new, exciting addressable products. A good example of this is reach extension, where we'll be able to extend the reach of our linear campaigns through addressable VOD audiences. All of this will be supported by a suite of data-driven and increasingly automated attribution products that our advertisers will be able to use to accurately measure advertising delivered across platforms, and also reinforce the value that they spend with ITV.
As our VOD capabilities mature and all TV devices become connected, we will start to enhance our capability to target our audiences on linear TV.
The last priority hopefully came through in our previous session around D2C, data is absolutely critical to driving the success of this area. There's really four aspects to it, and it's sort of a virtuous cycle. They work together. The first is about using data to really design and create the best products and experiences for consumer viewers. Today we're doing that already using multivariate analysis to help define the user experience, starting to experiment with AI to improve the graphics, et cetera. Overall, make more compelling products driven by data. The second aspect is in having created a great product, how do we bring relationships to it?
We're looking at ways to get deeper segmentation driven by data that, again, improve our targeting, marketing, our tailored messaging to drive higher response rates, importantly, lower the cost of acquisition to bring new relationships to us. Thirdly, having got that relationship, how do we grow the value? As I said before, that's a critical part of the D2C strategy, growing ARPU, cross-selling and upselling, et cetera. Using data like behavioral analytics will help us figure out how, for example, in interactive competitions, our top segment has a value of two and a half times the average customer in that base. How do we add more value to those average customers to migrate them into the top segment and create value overall for us and them?
Lastly, having done all that hard graft, how do we use data to maintain the relationship, to mitigate churn, to increase retention and loyalty? We're starting to think about predictive modeling and other ways to help us do that. Four things that really work together as part of D2C. Overall, as I said before, data is not about D2C, it's about the whole part of our more than TV strategy. I just summarize by saying it's absolutely critical. We know what we need to do in terms of priorities. We know what we need to do with enablers, we're getting on with it. Thank you very much.
Great. Thank you all very much. Could Mark, Julian, Rufus, could you come up and answer some questions? You don't get away with not answering some questions. Are there any questions on that session? Yep. Claire, we'll come to you.
Sorry. Let's say I got home tonight, and I talk to Mrs. Shelton and say, "I've just seen a teaser for 'Strangers.' It looks fantastic." We decide to watch it on our Samsung TV, and you talked about addressing advertising direct to the consumer. How far away are you currently standing in being able to target me and our family as a subscriber? At the moment, I can't see how you can get through Samsung's interface.
Great question. Who wants to take that, or do you want Faz to answer that?
I think Steve Ford would probably be best positioned-
Steve Ford
to answer that.
One of you.
Mr. Ford.
Come on, Steve. Stand up. Just have to shout a bit because remember, this is being streamed.
You touched on a really core issue for us to be able to make sure that we are able to recognize people in shared homes. I think when you see what Netflix have done in terms of kind of multiple accounts, that might be a direction that we will take. Again, we'll test that to be able to understand it, and then we'll be able to see who is actually using the device at that particular moment in time. That could be through a multiple of kind of either they are individually signing in, or there's other technology that can recognize that the person's in the room.
Just to add to that, sometimes the most important thing is not to know who you are as a person. For example, we were able to target Love Island fan events to people in certain areas who'd watched Love Island or Emmerdale. Your actual identity is less relevant, but actually what you're interested in is the key point.
Make sense?
Did you watch Strangers?
Not yet.
Watch it. It's really good. Right. Oh, Claire.
Claire Enders. Thank you. What I wanted to know, Julian, is really for those of us who have this extraordinary historical memory and lived through the real-time ITV Digital fiasco, how you can stop your ambition from taking over basically your limits. I mean, particularly because in the U.K. we're seeing with NOW and its acceleration, we're really seeing some about £150 million to £200 million of marketing spend behind that brand. It's not advancing particularly fast despite having "Game of Thrones" and everything else. I'm just wondering whether you have a specific budget, and you will not exceed that specific limits, specific targets to avoid obviously the terrifying situation we lived through in the late '90s.
Claire, can I just clarify something? Are you talking about our SVOD proposition?
Sorry.
I think we won't go into that in any detail. Reemah's over here. We can talk to you in the round about that, but I think we'll need to wait until we've actually done the planning and the budget for that, so that when we are ready to disclose that, we are absolutely going to be ready to answer that question. The only thing I would say is that we do have a huge amount of our own air time to promote our own SVOD service, and we have millions of people watching that where Sky don't. I mean, Sky are probably the biggest advertiser in the U.K., and the reason for that is their audiences on Sky are very, very small. They're a subscription-based service, and so it doesn't really matter that much that their audiences are very segmented and very small.
That's the only thing I'd say, that I think what they're doing on Sky's platform for now is very different to what we would be doing for SVOD. I think more on SVOD, when we can actually disclose some of the detail behind that. It's an obviously good question. Over there?
Thanks. Steven Whittaker from Liberum. Just on sort of the SVOD sort of research that you've done. What's sort of the evidence so far in terms of people taking multiple SVOD services, in terms of their willingness to do so, and also as well, whether you can sort of give an idea of how much, if there is any research on it, sort of how much they're willing to pay for sort of in total for multiple SVOD services?
I don't think we're going to get into the details of pricing and stuff. I think 23% of existing SVOD subscribers said that they were willing to take another subscription in the next three months. I think one of the big things coming through from all of this is this isn't substitution, or we're not asking people to stop doing one thing and start doing another thing. We believe that there is a marketplace for this to be an additional service for people, rather than asking people to swap out from something else. That's came through really loud and clear.
I think the Deloitte research, actually, that I commented on earlier, it only came out yesterday. We don't work with Deloitte. Okay? From a research or a consultancy point of view, we don't work with them. I think we might try and circulate to all of you, the Deloitte's work, because it touches on this, and it does quite a lot of analysis on how many an individual is willing to pay for. I think they said something like 8 to 10 smaller value subscriptions
Yeah
that families are quite willing to pay for. Their research also showed that kids are getting. They actually did the average pocket money for the average child, whatever that is, and they said it was actually GBP 16 a week, or something like that. Yeah, my kids don't get that. Don't worry, Matt. I'm in total agreement with you. However, this was the research that they did. What they said is many kids will subscribe in the same household as parents will subscribe, because if the price point is right, the parents won't even know the kids are subscribing. Actually, we will perhaps try and get to many of you, the Deloitte stuff, which I think reinforces a lot of the research that we've done on our own.
Just to add, you framed the question around existing subscribers' willingness to purchase a third, and we have seen the research that people have two or more, or have a propensity to purchase more still. We're also seeing interesting research that's telling us that people who haven't purchased one yet, one of the reasons is, the propositions out there just don't have the sort of content, particularly U.K. content, that's going to make them want to. The second thing I just observed is I'm paying my kids too much pocket money,
or too little for me, that's because I'm me. There's another question there. I think that's from Sarah, I think.
Yes, it was just a question on your DTC target of GBP 100 million. Given where you were for 2017 and the growth you've delivered in the first half, it strikes me that it's not a very ambitious target. If you were going to give us a sort of bull, bear, what kind of numbers would you be coming up? Because GBP 100 million doesn't require you to do I'm sure it's-
I'll let Julian-
hard internally, but it doesn't seem-
I know where you're going, yeah
like that hard a number to get to.
Well, all revenue is hard revenue, I think. We'll answer that question. There was GBP 100 million plus. It's a target, but it's not our internal target. I'll hand over to Julian. It's not what we're striving for internally.
Yeah. The financial target is important, as you say. I think the most important thing, though, is actually going to build a sustainable, long-term, scalable business that has the technology and is more joined up than the assets today. I think GBP 100 million is sort of the floor we're setting ourselves in terms of aspiration, which still is double-digit growth in what is not the most buoyant economic world. If we can go for more, we'll go for more, and absolutely, that's how we're thinking about it.
There's one more over there.
Hi, it's Jahson Selarcie from Macquarie. Just a couple of questions on advert. In terms of data, do you have enough data just internally, or do you need to buy outside? I remember when Sky started AdSmart, they made quite a sizable acquisition in terms of just getting the complementary data to be able to target appropriately.
Secondly, on pricing, when you sell targeted advertising for the same audience, so say an age bracket or whatever, what kind of price do you get relative to the same audience, non-targeted?
Did you hear the second question?
I'm not sure I heard the first, actually.
The first question is, can we just do the data internally? The answer is no. We have got a lot of data internally, Julian can talk about other data that we use.
We do already acquire some data, sort of the same stuff a lot of people do. I think on all fronts, there's more we can do. We can do more on just actually collecting and processing our own internal data. We can do more, we are doing more with partners to make sure that the relationships we have with them are proper partnerships, not just about cash, actually include data, so we can improve the viewing experience for their customers. Do we need to buy in lots of other data? I don't think that's the highest priority for us.
Sorry, just on the second question, I realize it didn't come through very clearly. If you look at aggregated audience online, if you break that down, you reproduce the same on targeted advertising, what is the like-for-like comparison on pricing?
Probably a Kelly question.
On price? Sorry.
I get it.
If I understand the question, are you saying if you look at
A discount.
how much we make up a customer from an online subscription product versus an online ad, or have I missed the question entirely?
At VOD, if I re-aggregate the targeted audiences to recreate a mass audience, what is the like-for-like comparison in terms of pricing?
No, I think that's an advertising question, isn't it?
Yes, it is.
It is.
No, that's fine. That's absolutely fine. Kelly? That's a nice easy one.
Yeah.
We have talked about this, though, quite a lot.
Yeah. Well, look, the way we price our VOD advertising, we have a flat fixed-
Do you-
Kelly, just come up here and answer the question.
For non-targeted advertising, we sell a flat fixed CPM, and then depending on what people want to target, we build above that premiums, but it all depends on what they want to target. We do buy in both data sets to target to create some audiences, and we have to, as part of the deal we do with that advertiser, there's a small percentage pay-ways in order to pay for that target. I think your question is that Sky bought in acquired companies to create those data. You can just buy it in on a campaign-by-campaign basis these days. I don't know whether that answers your question or not.
Put another way, if you were to sell all of your audience as targeted rather than as.
Yeah
Would you price up or price down?
Price up.
Price up, even knowing.
Yes
That you have much more competition on targeted advertising that you'll ever have on mass audience?
Yeah.
Nobody else offers mass audience.
Yeah. We are pricing up now. If advertisers want to target, they pay a premium to the flat price.
Thank you.
Yep. Thank you. If there are no more questions, I'd like to get on with the next session, because we're running just slightly late. Now, every team thinks they're the sexiest content, right? I'll just stop them saying it.
Not us
because they're bound to say that when they get up. I'd like to introduce our studios team. First, Julian Bellamy, our Managing Director, ITV Studios. Julian joined ITV in 2014 as Managing Director of the studios business. In the U.K. initially, he was promoted to MD of ITV Studios globally in 2016. His previous roles included Creative Director, Head of Commissioning at Discovery Networks International, Head of Programming at Channel 4, and prior to that, he ran BBC Three and E4. David McGranor, Chief Finance and Operating Officer. David joined the business in 2011 from TUI Travel. He spent seven years there in a number of strategy, M&A, and commercial finance roles. He actually started his career at Close Brothers, where he was an investment banker. Dave George, CEO of ITV America. David became CEO of ITV America in January 2017.
Prior to that, he was CEO of Leftfield Entertainment, which ITV acquired in 2014. David joined Leftfield in 2010, having begun his career at MTV. Last, but by no means least, Maria Kyriacou, our President International ITV Studios. Maria runs ITV Studios production companies across Europe and Australia, and U.S. scripted business as well as Global Entertainment, which is our distribution business. Maria joined ITV in 2010 from The Walt Disney Company, where she was Senior VP Digital Media Distribution for EMEA. Welcome you all up to the stage.
For some reason, we don't get music.
Do you remember B? No music for studios.
We're not taking you personally.
There's Julian B.
Thank you. Oh.
Seamless.
Okay. Hello, everyone. I'm going to spend the next 45 minutes or so giving you, alongside with the team here, an insight into the Studios business, our business model, our culture. We're going to dive into a couple of specific areas for you in a little bit more detail. David George is going to give you a bit more detail on ITV America, and Maria is going to go into a little bit more detail on the international production and distribution business. To kick things off, I want to make one big contextual point right at the beginning. You're going to see a lot of charts, facts, and figures over the next 45 minutes. Throughout it all, it's very important for you to remember that the success of Studios, first and foremost, flows from its talent and its creativity.
Great talent, developing and producing great shows in the right culture is the first foundation stone on which everything else is built. We're very fortunate in Studios to have these qualities in spades, and this year is a great example of that. Take this entirely randomly selected selection of shows. If you see the top left there, drama. Let's talk about drama. "Bodyguard," a huge hit made by World Productions, one of our indies. The highest-rating drama launch in the U.K. for over 12 years. Bigger at launch than "Call the Midwife," "Downton Abbey," bigger than "Sherlock" at launch. In entertainment, you'll recognize those guys there in the second box. Of course, that's "Love Island," the breakout hit of the moment. Just sold to CBS in the U.S., rolling out to nine more territories with more to come.
The five snappily dressed gentlemen in the third box, you may recognize, that's "Queer Eye." Not a controversial thing to say that it's been the talked about show on Netflix, the talked about entertainment show on Netflix this year. Just scooped three Emmys, what, 10 days ago. In Europe, the guy with the gun, it's the launch of our critically acclaimed crime thriller, "Suburra," on Netflix. Made by the brilliant team, Cattleya, based in Rome, very much at the vanguard of the growth of Netflix's push into non-English language drama. On top of all of that, of course, this is the year where we've also produced some of the biggest returning series on TV, from "The Voice" to "I'm A Celebrity." Underpinning all of that, of course, are the big banker shows, the cornerstones of the U.K. business. Daytime, the soaps, stronger than ever.
Ratings up year-on-year. To give you a flavor of that strength and depth right across the group, take a look at this tape.
Pleasure to meet you, Mum. Right, let's do this. What do you think? Looking sharp. I'm a Celebrity Here I am. Your time starts now. Look, we're not after any trouble. You'll find it if you don't sling your hook. Have you got an earring? Good Morning Britain. It's nice to be back. I wish to be called Victoria. Pull yourself together, everyone. That's got us off to the worst possible start. We are more dangerous than ever. You be sure of it. I love it. Is it George Clooney again? Will you tell him to stop calling? What are the chances? Hi. Raise your hand if you want to break some stuff. Boys, you ready? Hey. What's going on? They're about to walk out. Was that a chest bump, Fergie? Cheers. Cheers. This is like the old times. The three amigos.
Can we all focus here? Are you falling in love with me? That was pretty intense. You got this. Sometimes you have to put all you are against all they've got. You guys killed it. I'll do as required. I love you. This is our message to the world.
I actually love that tape. I'm just going to pull out a few highlights for you as an overview of the Studio business. The first point at the top here, really the point here is that over the last few years, Studios has transformed into an international business of real scale. If you look back at 2011, the revenue outside of the U.K. was about 38% of our total revenue. Today, that's at 57%. With shows like The Voice, Hell's Kitchen, The Chase, and others, we're particularly strong in unscripted, and we're growing our international scripted business apace. Reflected by the fact that when I look at the three biggest dramas across the group next year, one's from the U.K., one's from Europe, and one's from the U.S., and that's reflective of how much the business has shifted.
That international scale is important partly because it means you've got more creative talent narrowing the odds of coming up with more great shows. It enables us to better monetize the value chain of the shows that we create. A really good example of that is international production. Today, with a show like Love Island, we're able to produce that show ourselves in all of our key markets and capture the full margin accordingly. If you rewound the clock back six, seven years, candidly, we didn't have, in some of these markets, the capabilities, the talent base, the credentials to do it on our own, which meant that we had to partner and work with local producers in market and share the profit accordingly. Our scale today means that we don't need to do that anymore.
If you look at the second point, the context for the second point is that the U.K. is an extraordinary and key creative market, punching well above its weight on the international stage. 35% of the world's top formats come from these shores, half of the top 20. In that market, we, the Studios group, have a big competitive advantage because we're part of an integrated producer broadcaster. The real value of that lies in a very special, very close relationship, an inside track into the needs, the wants, the mindset, the opportunities of the network. It's, frankly, access that any other producer would kill for. Its success is reflected by the fact that we win almost 66% of everything that network commission and that 7 of the 10 highest rated shows on the network are made by us.
That success only comes about by being part of an integrated producer broadcaster. The third point, I've talked about talent and the importance of it. Today, that talent is spread across over 50 different labels. I think the point here is that over the last few years, we've had a major focus on building our creative strength and depth, not just in the U.K., but in the U.S. and internationally too. You'll hear more about that from Dave and Maria in the next few minutes. As a result, our creative talent base is stronger and more diversified than ever. Again, that's important partly because it helps narrow the odds of developing and producing more world-beating shows, but also because it enables us to better sell and monetize our catalog and our IP library in the markets around the world.
The fourth point, really the context for this point is it's a very, where I'm sitting, from a very exciting time to be a producer. We are operating in a very profitable and attractive market. In 2017, for example, for approximately $53 billion original content spend in the top 25 markets alone, growing at around about 4% or 5% per annum. It feels like there's more appetite than ever for quality content. At a global level, what we're seeing is traditional linear players spend broadly stable and the real growth being driven by the FANGs and other new OTT players with deep pockets. You can see, look, I'm sure you'll be very familiar with this trend, we could have picked any one of a dozen different charts, but this shows the increase in spend by Netflix and Amazon.
We know if you look at 2019, that trajectory continues. Even bearing in mind those numbers that you're seeing on the screen they cover both originations and acquisitions. These are huge increases. That's before you factor in Facebook, Apple, Hulu, some of the new players like Jeffrey Katzenberg's NewTV, a new SVOD mobile service launching in a year and a half. The good news for us is that a lot of that spend is focused on the genres that we're strongest in, drama and entertainment. Interestingly, what we're also now seeing are other opportunities emerging, at least in part, in response to the rise of some of the new global players. A good example of that is the rise in the appetite for local drama in some key European markets amongst the linear players.
Maria will talk a little bit more about that in a few minutes. The other good news is that we are very well placed as a group to take advantage of these opportunities. We have production bases in 12 countries. You will be glad to know we are not there by accident. When we are looking at establishing production bases, we look for at least one of these two criteria. One, that we want to be in the world's most creative markets, the markets that are most likely to create IP that travels, particularly in entertainment and drama, because we know they are the high value genres. A good example of that would be the U.K., Holland, the Nordics. Second criteria is that we want to be in the biggest and most attractive production markets.
Markets that have a scale that means that we do not just produce our own versions of, or our own local versions of our ITV formats, but also big enough that we believe that we can make good money from purely local commissions. Good example of that would be France or Germany. One other point on this chart I think is worth mentioning is you can see from this chart alone the sheer scale and size of the U.S. market, and its importance accordingly. That will be something that Dave will talk a little bit more about when he talks about the American business. If you look at studios through the lens of its customer base, one of the other big changes over the last few years has been the increasing range and diversity of our buyers.
For example, in production, we have seen an almost 40% increase in our customer base, in the last four or five years. That spreads, that customer base spreads across both free to air and pay, across different geographies, across linear and OTT. Even in the U.K. you can see that diversity. This year, for example, in drama, we are making more drama off ITV, for Channel 4, for the BBC, for Sky, than we are on ITV. That is reflective of how diverse the group has now become. That diversity is important because it enables us to weather cycles, the ups and downs of individual buyers. It gives us stability. If you look at the group through the lens of our program portfolio, it is essentially the same story. A lot of range and diversity. No one single program capturing more than 5% of our revenue.
Again, that is important because it enables us to weather those cycles and the ups and downs of individual shows. It means we are not reliant on any one single program to drive the business. In terms of how we manage the group, this is a handy way to see it. It is not an org chart, but it gives you a sense of some of the big divisions. You have obviously got the U.K. group there with 24 different labels and indies. You will have Maria, who will talk a little bit later on about the International Production Group. Obviously, Talpa are an absolutely key part of that. Our monetization and distribution arm, Global Entertainment. In the U.S., we separate the U.S. into two parts. We have an unscripted business, ITV America, run by Dave George. We also have a U.S. scripted group.
At the half year, we made it very clear that we're not seeking a scale acquisition in U.S. scripted, instead we prefer to focus on building our fledgling, independent scripted studio group. The best way to think of that group is think of it as a vehicle to where we invest and back creative talent, great scripted talent in the U.S. People like Marty Adelstein, co-creator of "Prison Break," has Tomorrow Studios, part of our group. Jason Blum, probably one of Hollywood's hottest producers at the moment, the man behind films like "Get Out" and "Split." Circle of Confusion, the exec producers of "The Walking Dead," all part of our group.
They've joined a group that offers something very different, a different brand, a different culture to the U.S. majors, something that combines an independence of spirit and creative autonomy with the disciplined and careful use of capital. David McGranor will talk a little bit more about that in a few minutes. The point I want to make here about the U.S. is that we're feeling very encouraged by the creative pipeline. A good example of that is a show called "Snowpiercer" next year. Big. Probably our biggest and most ambitious drama to date. It's a dystopian thriller set in a post-apocalyptic ice age, launching on TNT. Yes, really. It's launching on TNT next year and is rolling out on Netflix as well internationally. I think shows like that are emblematic of the ambition that we have in the scripted group.
We are seeing the creative pipeline, and we're confident there's more to come. If you look at it through the lens of our individual labels, we have, as I mentioned earlier, about over 50 different production companies and labels. Make no mistake, these are not 50 separate businesses. Whether you're in London or Sydney or Stockholm or L.A., everyone in the group shares the same three-part culture, the same three-part philosophy that connects and binds and drives value across the group. It's this culture that's at the heart of why talent want to come to Studios and why they want to stay. I'm going to briefly give you a sense of what those pillars are, those three pillars. One, creative autonomy. We want to work with world-class creative talent who share the same ambitions as us to create and produce world-beating shows.
We also believe that to get the best out of that creative talent, they need to be empowered with a sense of creative freedom and independence. The best ideas, generally speaking, tend to come from smaller, dedicated teams of people who completely trust each other in what feels like their own creative and entrepreneurial culture. That's the story, broadly speaking, of an awful lot of hit shows on television. The key to managing that is mutual trust and respect. It's about relationships. It is a relationships business, relationships sometimes forged over five, 10, even 20 years of working with each other. Second one, second pillar, the global commercial mindset. Creative leaders in our group know that they have at their disposal a machine to take their show and sell it around the world and monetize it to the max.
That's where ITV Studios, ITV America, Global Entertainment, they all play such an important role. This way, creative leaders in the group get the best of a sense of independence and creative autonomy, a sense that they feel local, but they also get the best of being part of a big global organization. The third and final pillar is a strong role for the center. To be clear, we are not absent landlords. It's actually, generally speaking, not what creative talent wants. Actually, they want to be challenged. They want to be supported. They want to be connected by us. We do that in two broad ways. First, we have a culture of risk and performance management from the center embedded in a variety of formal and informal processes.
Second, we have a culture of collaboration, where we use the group, its reach, its scale to drive additional value throughout the group from a central formats team, pushing ideas and shows around different territories, all the way through to joint development deals between different drama companies in different countries. These three pillars are the cornerstone of our culture and one of the big reasons why we've had so much success in attracting talent and retaining it. That gives you an overview of Studios. I'm now going to hand over to David McGranor, who's going to talk through the business model in a bit more detail. Thank you.
Thank you, Julian. Good afternoon, everyone. As Carolyn McCall said in the introduction, I joined ITV just over 7 years ago, I guess right at the beginning of our international growth strategy within Studios. I've been very fortunate to see firsthand how much the business has changed in that period from what was very much a U.K.-centric production business to the international content business of scale that Julian has just described. In that context, there are three things I'd like to cover this afternoon. Firstly, have a look at how the financial shape and scale of our business has changed in that period.
Secondly, dive into our operating model in a little bit more detail, give you some insight into how and where we make money, how that can differ across different genres and different activities, where we take risk in our business model and how we manage that risk. Last but not least, use two very simple examples to illustrate how we can make more money from the great content that we produce by having a scaled ITV model in the U.K., and a scaled international content and distribution business internationally. The scale and shape of our business has changed dramatically over the last six or seven years, and you can see that on the chart behind me. Revenue's increased two and a half times to just under GBP 1.6 billion last year.
Our profits have tripled to GBP 243 million in 2017, there's been growth right across the business, U.K., international, production, and our commercial and distribution activities. The changing international nature of our business is reflected, I guess, in two key facts, I think Julian mentioned it earlier. In H1 of this year, 57% of our business came from non-U.K. sources. If you wind the clock back six years ago, back to 2011, that percentage was about 38%, really representing, I guess, that we're in 11 international countries now as opposed to five back then. Acquisitions have clearly been an important part of that growth story. Even if you back out all of the revenue associated with all of those acquisitions since 2011, our underlying business has grown at about just under 7% on average per annum over that time period.
As you can see from the blue part on the bar chart, that growth hasn't always been linear, there have been lumpy years, that really reflects the fact that the delivery schedule of some key shows can move between financial years. As we recognize revenue on a delivery basis rather than as we produce the show, when a show moves between financial years, it can actually distort the underlying growth elsewhere in the business. When that happens, that can be incredibly frustrating for us as a management team at the headline revenue level. We judge the underlying health of our business really on the kind of health and visibility we have on our secured revenue, and we have good visibility in this business on secured revenue.
On the health of our pipeline of new and returning shows, rather than worry too much about whether a show or a couple of shows' delivery schedule slips between financial years. Before I finish on this chart, just returning to acquisitions for a moment. They've been absolutely key to our growth story. They've been fundamental to repositioning and growing our market share and market position in some key international markets. They've been fundamental to bringing in some fantastic new talent into the group, scripted and unscripted, and bringing some fantastic new shows, many of whom have been showcased in the various show reels you've seen earlier. Financially, they've also delivered a return on investment in excess of our cost of capital, very importantly, 13% ROI in 2017, and over a three-year period, just over 12%.
That's a very quick counter to how our business has changed financially. I want to now talk a little bit about our business model. Our business model starts with the creation of new ideas. Everything flows from that. Those ideas are hatched in each of the 50 plus labels that Julian talked about earlier. It's those development teams, it's their responsibility to come up with the next pipeline of new ideas. While there is some central coordination, we really rely on their creative capabilities to come up with the next new ideas. Just to give you a sense of the scale of activity in this area, I looked across the last two years. We created 230 new shows and sold 230 new shows on average each year over the past two years.
Our labels spend between 1% and 3% of their revenues reinvesting back into development activities. You'll have seen from previous financial presentations, a key feature of our business is that not every show we create will come back every year. If you look kind of at the last years, between 20% and 25% of our business doesn't return the following year. It's really important to have a strong creative pipeline of new shows and returning shows to not only replace those shows that naturally don't come back, but also grow the business. The labels are also responsible, once they've created their ideas, to sell those ideas to the local broadcasters. At the end of the day, they are the ones with the best relationships with the commissioning broadcasters. They are the ones with the passion for the show that they have developed and created.
When they sell that show, ultimately to produce that show and make a healthy gross margin for doing so, I'll talk a little bit about how that margin can vary, and some of the drivers behind that in a moment. As shows are being developed and produced, we have a creative networks team that's looking right across the development and production pipeline, really trying to identify those shows that it believes have the most potential for international exploitation. They will work then with Maria and her team in global distribution and with the local production entities to figure out the best strategy to take those shows to market. We can sell a show internationally in two broad ways. Firstly, as a finished tape sale. A good example of this would be "Victoria," U.K. drama we sold into 191 countries internationally.
Secondly, this tends to happen more in entertainment and factual formats. We can sell the format right to produce a local foreign version of that show internationally. Where we do that, we as the IP owner, would expect to get paid between 5% and 7% the cost of producing that show as a format fee. Better still, if it's in a country where we have a production base, we'll produce that show earning a healthy production margin on top. Throughout the production process, our commercial teams are constantly looking at ways to monetize and build extra value around our shows, whether that's in sponsorship or product placement, you've heard Kelly talk about that earlier on. Whether it's in merchandising and licensing activities, everything from water bottles on "Love Island" through to licensing the "Hell's Kitchen" brand for restaurants in the U.S. Gaming, digital apps, YouTube channels, competitions.
If there is a meaningful way to make money around our IP, our commercial teams will find it. To bring some of this alive, I just want to finish this slide by talking about a show called "The Chase." I think this week the Prime Minister said it was her favorite show. Quite nice timing for her to mention that. This is a show. It was first developed and shown on ITV in 2009. It was produced by one of our labels here in the U.K. It's still on air in the U.K. It's doing very well. It took three years before that format sold internationally, and that's not unusual in this space. It's now been sold in 12 territories worldwide. We've produced it in four.
The U.K. and Australian version of the show has been sold internationally, and we have a growing stream of income coming from everything from gaming, digital apps, books, et cetera. Where we make money and how we make money can broadly be boiled down and put into two big buckets. Firstly, creation and production of our shows from which we earn a gross production margin, and secondly, the subsequent monetization of those shows where we own the underlying IP. Production represents about 80% of our business. We're the largest producer of unscripted shows in the world, we make a lot of shows. Over 640 shows produced last year, new and returning, produced last year. Each of those shows is unique.
The gross margin we make on every show is different and can vary depending on the market, the buyer, the genre, whether it's a new or returning show, whether it's a five ep order or a 20 ep order. All of those factors play into the mix of how much we make on any particular show. As a general rule, new shows tend to be lower margin in the early years than returning shows. That's because on returning shows, the production teams have figured out more efficient ways of working. You don't have the setup costs of a first-run show. Longer running shows, because of the scale efficiencies of having a longer order, tend to be higher margin than shorter order shows.
Given the large range of shows we produce across the group, it won't surprise you to know that we have quite a wide range of gross margins on our shows. Looking at the portfolio from last year, the typical range of production gross margin is between 10%-30%. There are some outliers on either side of that, but that's broadly the range we work within. The second bucket, monetization, really relies on our ability to create and own underlying IP. I talked about some of the activities that fall within monetization activities earlier. While this is only 20% of our business, it's very high margin, and can range from anything from 25%-80%. 25% on a straight distribution, no risk distribution commission through to 80% on a format sale, or back catalog.
It's really important to have a number of big shows within your portfolio around which you can build meaningful monetization opportunities. Because we have a scaled international production and distribution business, we can maximize the value we make. We can get from the IP we create, and I'll explain with some examples how in a moment. First, I just want to touch on risk and how we manage risk within our business model. If you look at the split of our business in terms of genre split, 80% is in unscripted. That includes entertainment, factual, fact ent. It includes the soaps in this definition, our daytime shows, and 20% is one-hour scripted drama. The distinction from a risk perspective is important because they both differ in terms of financing and the risk profile across those different genres.
Unscripted, which is 80% of our business, is easy. We don't take any financial risk. When a broadcaster commissions a scripted show, they fully pay for the show, including the built-in production fee for the producer. Development cycles in unscripted tend to be shorter, it's quite possible to create a show in a given year, sell it, produce it, and have it on air within the year. In scripted, the development cycle is longer. Again, it's not unusual to have it take two to three years for a show's original kind of idea through to a script being commissioned, through to it being sold to a network, through to it being cast, produced, and ultimately transmitted on air.
It's important, I think just maybe to understand that's a long time. Actually, the financial risk that we're taking in that period is pretty small in the context of a studio of our size. It's mainly people's time, and possibly some scripts, but nothing material in that period. Where we really take risk in scripted is in deficit financing. This is increasingly so. The reason for this is that very often now, the cost of scripted content is not fully covered by the commissioning broadcaster. That gap, the difference between what the commissioning broadcaster can pay and what the cost of production is, the deficit finance needs to be filled before we can actually go into production and green-light the show. This is where our distribution business--
This is where our distribution business at GE, and Maria will talk a little bit more about this later, comes into play. They are the ones who will decide whether they want to invest in that deficit finance. Of course, they'll only do that if they believe that the sales potential from international sales is going to far exceed the deficit required to fund the show. Given the investment required in scripted, we also have a very clear green light process, whereby any scripted deficit in excess of GBP 1 million requires studio's board sign-off. As Julian and I sit on the board, and Carolyn McCall sits on the board, we have full visibility therefore, around the risk that we're taking as a group in scripted.
In assessing each project, we'll do a full 360 evaluation of the value of that show to ITV, and pay particular attention to the confidence of the sales team's estimates in international sales under different performance scenarios. This is something we do. Over the last four years, on average, we've deficit funded between 20 and 25 series, or scripted dramas a year. There are a number of sales strategies once a show is green-lit that GE can use to manage the kind of risk/reward profile of those deficit financing. I will explain how they do that in a moment. Before I do that, I'd just like to spend a little bit of time on being clear about the actual risk we were taking, in terms of the overall cost of a show. I'll do that by way of two fairly simple examples.
The first is a U.K. show, U.K. drama costing GBP 1.5 million an hour. The local broadcaster can pay GBP 800,000 of that cost. We get tax credits of GBP 300,000. That leaves a gap of GBP 400,000 per hour to be filled before that show can be made. That is normally the deficit finance that GE will have to make a decision about whether it wants to invest in or not. When we're producing a show, we're never committed as a studio to the full GBP 1.5 million. We would never go into production on a scripted show without an order from a broadcaster, and we'd never go into production on a show without having a clear view about how we're going to fill the deficit funding. Second is a U.S. example. Very similar principles, just bigger numbers. Here it costs $5 million an hour to produce the show.
U.S. broadcasters tend to pay a bigger proportion of the overall cost. In this case, 60%, or $3 million an hour. There are tax credits also available in the U.S., we end up with about $1 million an hour as the funding requirement. Julian talked about our U.S. scripted business. We very much have a kind of sweet spot in terms of where we're targeting our investment, and we try and keep our deficits within, stick to projects where the deficit is between $1 million and $1.5 million an hour within U.S. scripted. As I mentioned earlier, there are a number of ways of sales strategies for GE to sell the show, both before, during, or after the show has aired. Firstly, it can try and find a co-production partner.
This is increasingly used where the deficits are big on bigger international shows. That co-production partner can either be another international broadcaster or in the new world, an OTT. A good example of how this works is a show, "Victoria," which is a co-pro between ITV 1 and PBS in America. PBS came in on that show on the back of some scripts, so before the show was made. For them, there are two big advantages in doing that. One, it gave them certainty that they would get the show for the market. They loved the creative idea. Coming in early guaranteed them the rights for the U.S. market. Secondly, it gives them creative input into the production as the production is evolving.
Of course, for us, what it does is, it means we've recouped a big part of our deficit before we go into production. That can often give you much more confidence then to go out and sell into other territories, or to hold back and wait until after the show has aired, and then sell on the back of a very successful show in the local market. The flip is, if it doesn't perform as well and you've held back sales, your sales leverage is obviously not helped. In the end, it's a risk/reward trade-off on each individual show, which we're very used to taking. As I say, we do this 20 to 25 times a year. Our success rate is pretty good. This is a portfolio play. Scripted is not a guaranteed success. Not everything works.
Looking back at our average success rate over the last four years, four out of five of our investments have made money, which is not a bad return from a portfolio point of view. We are very experienced in the area of co-production. I mentioned "Victoria," co-pro between ITV and PBS. We also have "Vanity Fair" as a co-pro between ITV and Amazon in the U.S. "Snowpiercer," co-pro between TNT and Netflix on international. This is a world we play in more and more regularly. Just to finish, I just want to give two very simple examples of how our operating model or business model enables us to make more money from our IP than just being a U.K. producer alone. The first example is a U.K. drama. It is a little bit more expensive than the previous example, GBP 1.8 million an hour.
The funding structure is GBP 830 paid by the commissioning broadcaster. There is GBP 370K of tax credits, leaving a GBP 600K an hour deficit requirement to be filled. In this example, GE take on the deficit risk and do very well. We sell the show for net international sales of GBP 1.2 million an hour, making GBP 600K an hour profit. Across a single series of a show with this kind of success, across the life of that series, as sales come in, we would expect to make GBP 6.1 million of profit. GBP 1.3 million for the production company, for its fees, and then GBP 4.8 million internationally as a result of having a successful show.
If we were just a U.K. producer without the capability of investing in the show as a studio, or without having the distribution reach to distribute that show, we would expect to make about half that amount. We would still make the GBP 1.3 million as the production company, but we would only get a slice of the international sales. We would probably get about a third of that international sales. I guess just a very simple example of how having scale, having presence in all the different parts of the value chain means you can drive more value from your content. The second example is an unscripted show. This is a series that costs GBP 13 million per series to produce. It includes a 15% inbuilt production fee for the U.K. label. It is an unscripted show, there is no deficit funding required here. It is very straightforward.
The show is sold as a format internationally by GE, it is produced by ITV in two territories. U.K. finished tape sale of this show is sold in 12 territories. Again, across the full value chain of a show like this, we would expect to make GBP 7 million per series. Most of that money is made actually outside of the U.K. You can see the kind of production margin is GBP 1.7 million. Producing it in two other countries yields another GBP 3.1 million, and then GE tape sales and format sales, GBP 2.1 million. Again, if we were just the U.K. producer in this example, we would still make a U.K. production fee. We would get a share of international, but that would really just be the 5%-7% format fee rather than full production margin and format fee.
In GE, as the IP owner, we'd get a share of the international tape sales and international format sales. We would not be capturing the full value of the IP that we have created. I appreciate there's a lot to probably take in there, but that's my time's up. I'm now going to hand over to David George, who is the CEO of ITV America.
Thank you very much. David, this is the American portion of the presentation, so expect it to go long.
We haven't got the time.
I'm kidding. I'm here today to really highlight three things for everybody. The first is ITV's place in the U.S. market. The second are the key opportunities that we have there. Lastly, the priorities for the future. Again, the U.S. content market is the largest in the world, with 119 million TV households. The original content spend is roughly four times the size of the U.K. market. Again, that's why I'm going long. With OTTs like Netflix and Amazon coming on, the content spend is only going to increase. Ultimately, we think that competition is great for us in the production business. Let's go to our story so far. Who doesn't like a good history lesson? ITV began in America by coming in and strictly selling formats. We were not the hands-on producer of the content.
Largely through acquisition through the years, as you can see in the timeline, we were able to acquire production companies that really were the hands-on producers and allowed us to take that revenue into our systems. What that did was it created an unprecedented scale in the marketplace. As you can see, in January 2016, we had our first wave of integration. That was when Leftfield Entertainment and ITV Entertainment merged, and we basically combined real estate, back of house infrastructure, those types of things. Right now, we are in the middle of the second wave of consolidation with High Noon and Think Factory completing their earn-outs. That will give all six core U.S. labels will now be fully owned come 2019. What that does is it makes us the largest unscripted group in the U.S. with over 600 hours produced.
Moving on to the good stuff. We're bringing sexy back right here, okay? Let's talk about the shows a little bit and our customer base. I think the great thing about us in the U.S. is we have great program scale and diversity, that is key in an evolving market. We are in business with just about every network and platform. I think there's two key things you have to have as a producer, that is established hits and the ability to launch new IP. Let's talk about the established hits first. We've got a strong catalog of returning series. We are over 500 episodes into "Pawn Stars." "First 48," "Alone," "Counting Cars," "Marriage Boot Camp" all have been recommissioned for next year.
The big kahuna, I like to call it, "Hell's Kitchen," Season 18 is premiering this fall, the ratings remain really strong as the highest-rated unscripted program in broadcast on Friday nights. We are currently discussing a new order for 2019. It's important to note that we did not deliver any "Hell's Kitchen" this year because we delivered two cycles the previous year. On to the new hits. This is a key thing for us. We launched the highest-rated premiere in unscripted in three years this year, on Fox with "The Four." Thank you, P. Diddy. We are currently in negotiations on Season three. The other big one that we are about to go into is the launch of "Love Island" on CBS. We're very excited about it.
I think the interesting thing about this one is that there was competition in the marketplace for "Love Island" on broadcast, cable, and SVOD. The content could have lived on any of those platforms. The benefits of owning "Love Island" are not just margin, we participate in ancillary and integration revenue. Again, that shows the power of why IP ownership is critical to our business. Really selling to CBS has a halo effect on "Love Island" globally, and Maria will give you a little bit more on that later. One more show I love to highlight, "Queer Eye" is returning for Seasons three and four. We're in production right now. Last week we won three Emmys. I was there too, so had that going for me. It's nice to win. You know what?
The amazing thing with the Emmy wins is not just about winning, it is also the fact that these were the first unscripted Emmys that Netflix had won. That is critical for us to be breaking new ground in these SVODs and winning them the awards first. One other big note. In 2016, we had two projects in development with OTTs. This year, we have 14 in production or development. You can see that our business is continuing to grow. But the key factor here is we are strong in broadcast, cable, and SVOD. Let's move along. Okay. Market opportunities. The U.S. market is kind of flooded with opportunities right now. A lot of people are getting into the unscripted business. But we cannot lose sight of the linear importance to the business model.
I say that because ultimately, linear is still the one place that is providing big volume for us. We have not found that yet in the OTT world. The key fact here is known IP is at an all-time high, as trusted content is cutting through a cluttered market. That gives ITV's library of formats and original IP a huge market advantage. A good example of this is "Four Weddings," which had been on the shelf for a few years, and we are now reactivating for TLC. Going back to the volume point, the cable market is still providing the volume. A good example of that is we delivered 40 episodes of "Forged in Fire" last year. We have got 20 more coming this year.
We have got 30 episodes of "First 48," and there are still hits being broken on cable, like "Live PD" or "Fixer Upper." We are very excited about the volume play that is still coming through there. Of course, Unscripted is doing well on OTT. We are excited to be breaking there too, but we have got a lot of new buyers coming into the marketplace too. Again, creating big competition. Katzenberg's NewTV. We are hopeful Mr. Iger wants to throw his hat into the ring too. He seems to have a big appetite these days. Up next, key priorities. This is really about what we are focusing on in 2019, and what we are going to be doing in the marketplace. Targeted development.
As the cable market shifts and their brands become more and more defined, we are focusing our six core labels, as you can see on the bottom, on what they do best. They are all focused on specific genres. ITV Entertainment will be doing big game, big format. High Noon, lifestyle. Leftfield Pictures, male programming. Sirens, female. Good Caper, crime. Really, those six core labels represent one-stop shopping for OTT players as well, who are hunting in every single genre. That is very unique to ITV America. That is something nobody else can say they have. We are focused on OTTs, as you can see, increased focus on the SVOD market, and broadcast. We are in business with two of the four broadcasters with projects in development, NBC and ABC. We have got new series coming to Netflix and Facebook. Last up, operational efficiency.
As we fully acquire these companies, it gives us the ability to find efficiency. We're looking at things like back of house and consolidating real estate, to give us a little bit more of a market advantage. A good example is we merged our Silver Spring office with our N.Y. office this year. Lastly, this year we're doing something very unique. We're launching a Connecticut tax plan initiative. We are the first company to be taking advantage of a 30% tax credit in Stamford, Connecticut. We're set to have 11 series flowing through there this year. We're really doing this for two reasons. It's the only tax credit state in the U.S. that's close to a metropolitan media hub, which means we have access to the workforce.
The second is it helps us take advantage of our scale, and it creates a competitive advantage for us when networks are ordering content. That concludes my U.S. presentation. I hope I didn't bore you to death.
Never.
Never. Okay. I will introduce Maria, who is the President of International-
Everyone knows whose shoes.
Did you get the message from Carolyn?
Run.
Fast. Take your time. All right. I'd like to expand on what you've heard already from Julian and David about our international production operations. We are in all the major territories. I won't list them, in the interest of time, I won't list them. Again, to reiterate something Julian said, we're there for two reasons. They're either creative hubs, like Netherlands and Nordics, or they are strong, big, valuable territories like Germany or France in their own right. Across our international group, we have a lovely, nice mix of shows that they are producing based on formats which they are importing in, which is good because it means we're utilizing our scale and leveraging our overall business. Also, they're coming up with original ideas. Last year, it was roughly about 60/40 across the whole of the international group.
If you rewound the clock four years ago, again, I'm reiterating stuff you've already heard, the international group, it's a smaller timescale. I'd say three to four years ago, we were a completely different group of people. It was largely a factual business. We were not big producers in our territories, and that has completely and utterly transformed in the last few years. We have rejuvenated those companies. We've brought in new management, we've brought in new production teams, and we've really, really tried to focus people on those two value drivers, entertainment and drama. It's had a substantial impact. Our revenue in that division, in the international division, has grown by over 80% between 2015 and 2017 alone. That's just two years. A huge, huge step in that transformation was the acquisition of Talpa.
It brought something that is really special and it's really still quite unique and rare, I won't say unique, rare in our industry, and that is a truly global hit in "The Voice." The show has now been made in over 65 different versions. That's an astonishing number, it's continuing to perform strongly, it also provides for a multitude of different ancillary exploitation opportunities, from apps to cruise ships, believe it or not, to sponsorship. The show has been a huge boost as well to our efforts to attract talent. It was really important to us to bring the best people in. A show like "The Voice" is very, very attractive. I'm going to give you an example just to bring this to life. In France, "The Voice" is the number one franchise on air.
It vies for that position with Banijay's show, "Survivor." When we bought Talpa, we moved the production rights over to us away from a third party. We needed a team. We couldn't convince TF1 to trust us unless we had the right people producing the show. It struck us that the right people were the people who'd made "Survivor" such a hit all those years. Franck Firmin joined us after having run Banijay's "Alpe d'Huez" for about 10 years, and he built a team around him. That is paying off dividends. It's created a virtuous circle for us, and that is something we've replicated over and over again. That virtuous circle is a great show brings in great talent, and that great talent wins new commission.
The most recent launch we've announced in France is that "I'm a Celebrity" is coming back to screens next year. As well as bringing in new teams, we have also very selectively bought a few companies. Now, those companies have been focused on the drama genre, where lead times are longer and the expertise is specialized. Last year, we announced three acquisitions. In February, we announced Tetra, which is a leading French drama business. In October, we announced Italy's Cattleya, and at the end, in December, we announced a startup built around a lady called Piv Bernth, who is one of the most respected and well-known of the Scandinavian executive producers, and she's based in Denmark. As you already heard, drama is a key driving genre for us.
We expect it to be a bigger part of our revenue and our portfolio going forward as a production company. Why European drama when it's the English language that really has dominated this industry for all these years? We had two reasons for it. One was the European shows are performing better in their own markets. Secondly, European shows, non-English language shows, are traveling more widely to a more welcoming audience than ever before. There's a lot of evidence to support what used to dominate a lot of European broadcast schedules, i.e., U.S. scripted shows, U.S. network procedurals, are not delivering to their broadcasters as much as they used to. Again, just take the example of France. 2011, of the top 15 shows, 50% of them were U.S. scripted shows, and they were dominating the upper reaches of that 15.
Last year, there was one U.S. show, and the rest of them were French shows. It is the local production that is filling the gap left by the U.S. network shows. Then my second point about traveling widely. One of the impacts of Netflix is that they are providing for all of us a more diverse range of shows to watch. Netflix have demonstrated their understanding of the need for diversity and local relevance because they have committed a certain amount of money. I think they've publicly stated that GBP 2 billion will be spent on European shows, as well as saying that half of their originals will be produced outside of the U.S. in the coming years. That's provided a home for our show, "Suburra," the man with the gun that Julian showed you right up front, which was their first ever Italian commission.
It's also done something else, which is it's stimulated competition. A lot of the European platforms are responding because they are also upping the investment in original drama across the whole of the continent. We're really, really confident right now that the renaissance we're seeing in European drama isn't static. It's actually going to increase, and we're in a good place. The next big show for us that I just want to sort of put on your cards so you keep an eye out on it is "ZeroZeroZero," and it's a big epic, multi-territory, multi-language show from the same creative team behind "Gomorrah," produced by Cattleya and funded through a consortium of buyers, including Amazon, Canal+, and Sky. To summarize, the international productions.
Because of shows like "ZeroZeroZero" coming up, because the strength of The Voice just continues to sort of increase, because we have rejuvenated teams, because the demand for local content is increasing, and lastly, because of the rollout of a hit show like "Love Island," we feel we're very, very, very well placed for further growth. Turning to GE. You've sort of gotten the message, I think, between Julian and David, that creativity is a local activity, but exploitation really has to be a global one. This is what GE does. It steps in, and it's our international global exploitation arm. GE takes the shows produced by the 50 plus labels, and it sells those shows outside of the territory, outside the primary window within the territory.
As DVDs, although that is a much smaller bit of our business now than it was 10 years ago, and as in the case of the animated series, as toys and other consumables. Again, just reiterating some of the things you've already heard, with "Love Island's" success in the U.K. and the impact it's had on the commercial team, we are also very confident that we can translate that into increased licensing revenue for "Love Island" in the future. GE has a broad and diverse portfolio of content, and even though it sells some third-party content, most of what we sell are our own shows. That ownership is a really, really key point because we create and keep the value that attaches to creation. We produce, we keep the production margin, and we distribute, and we keep the commission that attaches to distribution.
That is a differentiator. Not all of our competitors are in the same position as us. We're not over-reliant on any one client. Even though the opportunities afforded by the digital platforms does mean that Netflix this year will be our biggest client for the first time ever. Still, the top 10 are no more than a third of our revenue, which we feel makes us very resilient. Unlike the production businesses, GE is skewed towards scripted. Most of our revenue comes from scripted rather than unscripted, and the growth in the last few years has been fueled by shows like "Victoria," by "Poldark," by "Good Witch," all of which are sold in over 100 territories. Coming up soon, and why we again feel we're in a very good position, "Snowpiercer," "Bodyguard," "Vanity Fair," a lot of the shows you've heard about already.
In the future, these will be supplemented by the European developments that I mentioned. GE's role has changed. David explained how deficit funding works, where GE comes in. What that means in terms of behavior is that GE has to be a partner to producers. It is no longer this sort of old-fashioned distributor waiting for shows to sort of come out of a pipeline. It is very important that GE is very early on in the creative process, finding funding opportunities from third parties, whether it is co-productions or whether it is pre-sales, et cetera. Also, where we are talking about ITV shows, it connects with our own network to make sure that decision-making is done on a full 360 information basis. Especially important as the ambitions of our dramas have increased. Moving on.
GE needs to interact with all the production labels, we use the team as the connecting tissue for collaboration within the studio group. That collaboration takes the form of regular creative exchanges. We put the scripted guys together, we put the unscripted guys together. We encourage them to co-develop ideas from scratch. We encourage them to occasionally co-fund with each other. We encourage them to leverage their access to talent. A good example of this is "5 Gold Rings," which was a bottom-up co-development between Talpa and Possessed and has already rolled out into eight territories. This connecting tissue also allows us to share best practice. It allows us to send in flying producers when we have a new show launching. It allows us to work through common challenges.
One last thing that GE does is it brings back intel into the business because the sales team are regularly interacting with 100 plus buyers. They are quite good at spotting themes. They tend to be the first place that says, "You know what? Let us move slightly over there." I think that is also really important to have within a connected business, is that you do have the bits of the business sharing information, sharing knowledge. Finally, something we should never forget is to talk about our heritage, because it is something we should be very, very proud of. Shows like "Prime Suspect," "Morse," "Cracker," those are the shows that define the British crime genre, and they are all our shows. They are ITV shows. They are ITV shows that give us enduring returns. We continue to sell our catalog year after year after year.
Not only that, it also gives us the opportunity for remakes. Super important, because it is the remakes that gave us "Thunderbirds," "Dancing on Ice," and really, really importantly, "Love Island." Back to Julian.
Thanks, Maria.
Quick wrap
In conclusion, this won't take long, will it?
No, really quick.
An hour?
No. Quick.
No.
Time to go.
Two brief slides for you'll be glad to hear. First of all, key priorities going forward. I'm not going to go into a lot of detail on these. These essentially build off what you've heard over the last 45 minutes or so. Number one, to continue to build the creative strength of the group. That is a never-ending task to retain and attract great talent. Second, you've heard a lot about the integrated producer-broadcaster relationship. We want to push that collaboration even further. Good example of that would be the joint funding of some entertainment pilots by Kevin and I in the search for new entertainment shows. Third, you've heard a lot about the international scripted business. That's a very big priority for us. We feel that we're in a very exciting moment. We want to build on that with further investment in our drama development.
Fourth, we want to build our capabilities to monetize our IP to the max. We've seen how successful that can be with shows like "The Voice" and "Love Island," and we want to build our capabilities further in that space. As you'll know from the half year, to help and support these priorities, we're planning to invest an additional GBP 10 million phased over three years. Last slide. Is that a cheer I heard?
Come on. Take the hint.
To up some. Okay, I hope you got a sense of how positive and confident we feel about the future. You can see from the half year there, some of the commitments and targets that we've talked about. That confidence flows from two big things. One, that we operate in a strong and attractive market, secondly, that we feel we have a real competitive advantage as a group. Partly because we're part of an integrated producer-broadcaster, partly because we're a scaled international player. Of course, to end where we began, it's also because at the end of the day, the foundation stone of this business is great talent and great shows. On that note.
Thank you, Julian
We are done.
Hey. Thank you. Right. Quick time for questions. I'll go Julian, Laurie, and then over there. Julian Roch. Thanks, Emma.
Thank you. First question is, as you said many, many times, it was all about talents. Do you think it would be possible to merge ITV Studios with a business of similar size?
Ooh.
Ooh. Big one.
1 plus 1 would be equal 1.5 as opposed to 2.1. From a talent standpoint, do big mergers in content make sense? That's my first question. The second one on the split you gave between free to air and pay and other, in terms of revenue, how do you define pay and other, a mixed model like a CBS, which is both advertising and pay? Did you put that in pay and other, or in free to air, or I guess the question is, how much of your revenue is pure SVOD, Amazon, Apple, Netflix, within that split? Those are my two questions. Thank you.
Okay. I'll ask very generically about scale.
Yeah.
The effect of the question is, does scale do anything for talent?
Yeah. Look, obviously I'm not going to comment on any speculation. Two things I'd say. First of all, I hope it's come across in this presentation, we're very comfortable with the scale that we have. Well, I hope it's come through the benefits and dividends of our scale. Look, our approach to any M&A remains unchanged. We always look at the creative talent. We always look at the creative business. We look at whether it's a strategic and cultural fit, whether it's value creating, whether you can acquire it at the right price. We've been very disciplined about that in the past. We continue to be very disciplined about that going forward.
the second one was about the split between FTA-
Split. David, I don't know
pay and other and OTT.
Yeah, it's relatively pure. Specifically, you mentioned CBS, that would be included in the free to air. We're not breaking out the FANGs as a specific number. We see it as a growing part of our business. I think David George mentioned we've got 14 shows in either production or development with the FANGs, and we've mentioned some of the co-pro partnerships in terms of scripted. We feel very confident about that being a growing part of our business. That's included within the pay and other.
Okay. Laurie?
Thank you. It's just Laurie here from Deutsche again. The 12% ROI you quoted, does that include all the earn-outs and what you currently include in the exceptional charges? Second question is just over the 7% organic. Does this include the consolidation of acquisitions after two years? Because it was a multi-year duration you presented.
Yes.
If we stripped out growth in internal commissions, what would the actual external organic be?
Have you been writing those down, Carly?
Yeah, I have.
Okay. Good.
First thing is.
Let me.
12%, is it excluding earn-outs?
Let me start on the middle one, I think.
7% organic
which is the 7% organic.
Yeah.
That is based on excluding all revenue from all acquisitions made from 2011. It's not a definition of organic we give in our kind of normally when we talk about organic being anything we've owned more than 12 months. It's a much purer view of organic in terms of it's excluding everything from 2011 that was acquired since that point in time.
There was a question about external organic.
External organic. We don't look at them as we have to win the business, whether it's internal or external. We don't look at it in the sense of internal business is easier to win than external business. I think that's just an important point to make up front. I'm looking at Kevin as I say that. The percentage of our IPB overlap period, I didn't talk about it in the presentation. We've grown from about 55% of the network spend to 66% of the network spend over the 2011 to 2017 time period. That's been a very deliberate part of our strategy, is to try and maximize the benefit of being part of an IPB.
If you strip out, and this is broadly directional, so I'm not going to get into the percentage, our organic growth will be probably, excluding internal, the external organic growth would be between 4.5% and 5%.
Okay. The ROI, does it include or exclude earn-outs?
Again, it's based on grossing up the original consideration. It's not based on an extrapolation of what we think the earn-out would be. It's based grossing up the original consideration up to 100%.
Effectively, it does include.
It does include it, but not based on a projection basis, based on a pure just gross up. If we acquired something 70% for GBP 100 million, we'd just gross it up. We'd gross.
With all of the earn-outs that are associated with that, because obviously you've got quite large. I'm thinking here specifically about Talpa, but I imagine there's more in there where you've.
It wouldn't include earn-outs. It would include gross up of put call, of where we have a partial acquisition. It would include the gross up to 100%, but I don't believe it includes the earn-out.
Do you have any sense of what that would be if you included earn-outs?
Not off the top of my head.
That's quite a large part of payments.
Not off the top of my head, no.
We'll come back to that, Laurie.
We'll come back to it.
Thank you.
There was a question just next door to Laurie there. Sorry, I beg your pardon. I couldn't see you.
Hi, it's Lisa Yang from Goldman. A few questions. First one, you mentioned Netflix and Amazon spending $11 billion. Clearly looks like a big number. To put it in context, do you have any number in terms of how much, the Tier 1 and pay broadcasters are spending on content overall globally, to have a sense of the TAM? The second question is, if you look at across your portfolio, where do you feel you need to gain more scale in terms of whether it's genre or markets? How do you think about the mix between organic versus external investments? The last one is really about could you maybe help us understand what's the supply versus demand dynamics? Looks like a lot of people are trying to invest in original content.
At what point could we see a sort of oversupply of content in the market?
I'll take the second one. Essentially going to repeat what I said earlier, which is we're very comfortable with the scale that we have. Again, I hope that really came through in the presentation. We've got some very clear criteria, with something, of course, we always evaluate. We're very comfortable with the scale and the markets we're in. I missed the third question.
There was organic versus acquisition, and there was supply versus demand dynamics, which I guess you should take.
Yeah. Well, the organic versus acquisition, the targets we have set out are organic targets. They're not including acquisitions.
The 5% CAGR-
The 5% of CAGR is an organic target, not including acquisitions.
There's a question over there and there. Jill. Thank you.
Hi, again. It's Adrian again from Merrill Lynch. First of all, if you read the last annual report form Endemol Shine, they mentioned that there was pricing pressure coming from broadcasters internalizing content production instead of externalizing to content producers like Fremantle or ITV Studios. Is that also something you're witnessing at ITV Studios, first of all? Second of all, should we consider Netflix and Amazon fully as partners? Can they be sometimes enemies because they might commission content themselves rather than relying on people like ITV Studios? Thank you.
Okay. Julian take both, I think.
Yeah. On pricing pressures, I'd be very careful about the big generalizations around that. One of the great things about our business is that if you have the right idea, it all depends on the idea and the market. I'm personally very, very cautious about big general statements like that. The point about Netflix, look, if you're sitting in this seat here, the world of SVODs, the new buyers, you see that through the prism of opportunity. Remember, when we're working with, say, a Netflix, we're working with them in a multitude of different ways, from U.S. unscripted, to tape sales, to co-productions, to originals. We have a whole mix of relationships. From our point of view, it's opportunity.
Another question there. Thank you.
Thanks. Naseem from Liberum. Three questions, please. First of all, just in terms of short form of content. Premium short form of content. That's been mentioned by quite a few people as potential area of opportunity. Just wondered how you actually set up for that at the moment. Whether you have the capabilities. The second thing, when look at the international opportunities, one of the markets that wasn't talked about was China. Obviously, you had a bit of a mixed issue there with The Voice there, but obviously given the growth that you've got in the services, some aspects may be considered to be quite attractive market. Any views there. The third thing is just coming back in terms of the FANGs, in terms of obviously a big opportunity in terms of growth.
You look at Netflix and you look at Facebook, they definitely had stumbles. Over the past six months or so forth.
If, for example, you start to see them having further stumbles, that puts pressure in terms of their business moving forwards and the amount that they can actually spend on content, how much do you think that impacts your business? Are you still quite confident with the growth rates, or do you think potentially that could be a major spanner in the works?
Julian, go.
Shall I take first and third, then Maria can take China. Short-form. Well, as you know, we're one of the investor partners in Quibi, I think actually it's become a very interesting area, short-form. Actually, if you talk to Jeffrey Katzenberg, he will tell you that actually the short-form content that he thinks is going to become most in demand is actually sourced from essentially the people who make long-form content. The way he describes it, and it was a penny drop moment for me, was he said, "Think of reading a 400-page thriller before 'The Da Vinci Code,' where you had 10 chapters.
What I'm after is still the same story of 400 pages, but it's in 50 chapters." Actually what I think you'll find is the same skills and expertise for long-form, certainly for a player like Quibi, are going to be pretty similar. The point about the FANGs, it's very hard to comment on a hypothetical around what would happen with their spend. What I would say is that, again, I hope that's come through today, is that we work with them in a multitude of different ways. Also they do form just one part of our business. We have a multitude of different partners. The truth is, most of our drama, that when we deficit finance drama, most of it isn't with global co-productions, with the SVODs. In the grand scheme of things, it's a relatively small, though growing part of the business.
China?
China. Just remind me, what was the question about China?
Just like why aren't we in China?
Why not in China? Okay. Well, the simple answer is regulation. It's the most regulated market that I can think of. I've been backwards and forwards to China a number of times, because it is a very large, potentially very valuable place to operate in. It is not of an open market. What they value at the moment, what our Chinese partners, and we do have Chinese partners, value at the moment is an opportunity to work with us to co-develop. They want to understand how they can originate shows out of China with a partner, which will then help them become a creative hub in their own right. That, at the moment, is where we are focused. It's show by show, case by case, partner by partner. How do we help them achieve what they want to achieve, and make that a successful business for ourselves?
It's not a country you can just batter the barriers down on.
Thank you. There was a question right at the back there. Mark.
Hi, it's Jason Selarcie from Macquarie. A very straight question this time. "The Bodyguard," what happened? The most successful drama.
I'm not giving away the last.
No. No spoilers. It's on BBC. Why not on ITV? What happened? Tell us about the internal struggles.
Funny you should ask that, just a few weeks back. Okay. There's a specific and a general answer to that. The specific one is, ideas are not developed in a vacuum. They come out of discussions and relationships. "Bodyguard" came out of Jed Mercurio, brilliant creator and writer. Obviously not a fan of "Bodyguard." Brilliant creator and writer. Oh, they're all leaving. Who was behind "Line of Duty" on the BBC. He had as a result of that a great relationship with the BBC. What came out of that was "Bodyguard" that was developed specifically for the BBC. That's the specific answer to it. There's a more general one that I would make, which is, we wouldn't be able to grow our drama business very much. It would naturally cap out if we only worked for the network.
We want to work with Sky, Channel 4, the BBC and so on. Of course, no one knows where the next hit's going to come from. We're delighted and very proud that it's on the BBC. We think that's a win-win, frankly, for ITV.
Yeah. Thank you.
Just a second question, please. 63% of your content goes to free-to-air and the remainder to pay and other. Do you want to increase free-to-air or others? Or pay and other? In terms of share.
Honestly, at the label level, it doesn't quite work that way. Honestly, we don't sit at HQ saying we'd like to tilt one way or another. What we really want is we want to take advantage of all the opportunities.
If you sell-
I think we're looking at a broader approach to diversify rather than necessarily double down in one area or another.
If you were to sell 100% to free-to-air, there would be little diversification.
No. I would answer that-
a recession comes
say that we manage the risks of all the different customers that we have, and we balance that by having a diversified view of the customer segments.
Understood.
We do that at both group level and at the studios board on a regular basis, so that we don't skew too much one to the other. Because you both asked questions. One is what happens to the FANGs if they stumble, and the other is free-to-air. It's just the balance between that. It's a portfolio business.
Business, yes.
We say this when we come and see shareholders one-to-one, we always talk about Studios as a portfolio business, and that's how you have to see it. It is about how you diversify in that portfolio and the success. Sometimes there's a lot in development. You won't get a success every time. It is genuinely a portfolio. It's like all your portfolios.
Thank you.
I think that's that. Now, if there's no more, are there any more burning questions for the Studios team? No? Oh, burning question.
No.
I've got high expectations for this question.
It's Richard again from UBS.
Yes.
If you look to the platform players, clearly, they're obviously adding more and more genres to their repertoire. Originally, it used to be much more about scripted.
Yes.
As the biggest producer of non-scripted, how do you actually try and fill those increasing demands for genres?
Unscripted is the opportunity for OTTs, basically.
Yeah.
David?
I mean, Dave, maybe talk about that through the prism of the U.S.
Yeah. I think one of the things I touched on in my presentation was development focus and becoming that one-stop shop. Ultimately, when we started learning that these OTT players were broadening what they were going after, we came to the realization that we were in a unique position of having these best-in-class producers in all these different genres. I think we just took advantage of something that I don't think when the acquisitions happened, it was set out to be that way, but it just ended up happening, if that makes sense.
Okay. Any other questions? If not, I'm going to thank the Studios team very much. Thank you very much.
You're welcome.
You can all sit back down. I'm going to cross over with you and just conclude. It brings us to the end of all our presentations. There was a lot of information there. I hope you found that really, really helpful. You have seen how enthusiastic and passionate the team is about what we're doing. They're very clear about what we need to achieve, and actually, most importantly, how we're going to achieve it. This opportunity, really, to succeed is underpinned by key strategic advantages. I really hope we've conveyed those strategic advantages because they are really very important to the next three to five years. We've got creativity. You've heard from Kevin all about that. You've heard from Julian about that. Our ability to monetize. Kelly's talked about that. Maria's talked about that. Everywhere we look, we are constantly looking for the commercial opportunities.
Of course, through the new area that we're creating, which is direct to consumer, that's Julian, and Rima, who's sitting over here, is going to be launching the Esports service in 2019. The IPB is a significant commercial and strategic advantage. I hope that's come across. It's really hard to explain the IPB in short meetings or at results presentations, and that's why we spent a bit of time doing that with you today. Underpinning all of this, we have this amazing fan base, these great customers. They've been viewers, but they are becoming customers. We really, really believe that we can engage with them much, much more going forward. Underpinning all of this, of course, is the strong balance sheet. We'll be very, very disciplined in the way we allocate capital. I know you'll be very pleased to hear that.
Finally, we have got fantastic people. You've seen some of the strength and depth of our talent, some new, a lot of very established people, very experienced management team. We're adding to that experienced management team with some key appointments. Karine, our CDO, you've heard about. Rima, you've heard about. You've heard Mark. Delighted that he's on the management board. We've also got recruited very recently, someone called Dan Colson, who's our Strategy Implementation Director. I'm saying this to you because I know really, really well how hard it is to execute strategy. It's great to have a great strategy, and I think we have got a really good strategy. Actually now, it's all about the execution. It's all about implementation. He will hold our feet to the fire. He's ex-BCG.
He's done this 150 times for hundreds and hundreds of clients. He will hold our feet to the fire to make sure that in every bit of the businesses that you've heard about today, we are delivering. We are confident. I, with all of the management team, are very confident that we can do that. On that note, I'd like to thank you for listening to us. There are drinks, you'll be pleased to know, in the Green Room. It's not going to be next door because they're filming Jonathan Ross. We don't want to bump into him. Drinks in the Green Room. Jack will ably show us the way.
Thank you very much, David.
Thank you all.