Good morning, thank you for joining us for ITV's 2022 full year results. As always, Chris will update you on our operational and financial performance. I will then take you through the delivery of our More Than TV strategy, and of course, we will then have plenty of time for questions. Before I run through our highlights, I wanted to share a short tape. This shows the quality of our global content slate last year and the brilliant programs we showed on our screens in 2022. Please play the tape.
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He may be armed and dangerous. How are you today? Well. Let's bring her right out. All the wonderful weirdness comes to its dramatic conclusion. Did you enjoy it? Yes. We wanted ATI and loads more. It just doesn't get better than this.
2022 was a year of strong execution and significant progress for ITV, delivering what we set out this time last year. We enter 2023 with real momentum. When I look back to 2022, several key highlights of a successful year stand out. ITV Studios grew faster than the market, with revenue up 19%, and it's an increasingly diversified business. M&E delivered the second highest ad revenue in its history, reflecting the unique role mass reach continues to play in the advertising mix for brands and for agencies. M&E grew digital revenues by 18% with a significant increase in content, improved user experience, and the successful launch of ITVX, which had a really good, strong first two months.
This is building a demonstrably more balanced business, which is ideally placed to take advantage of the growing demand for quality content from viewers, broadcasters, and streamers, and to take a larger share of the online advertising market. As I'll go on to explain, the launch of ITVX, combined with Planet V, our leading addressable advertising platform, enables ITV to take continued market share gains in a rapidly growing targeted advertising market. Our balance sheet is robust, which enables us to invest to support our strategy, while at the same time delivering returns to shareholders. In line with our dividend policy, the board has proposed a final dividend of 3.3p, giving a full year dividend of 5p, which we expect to grow over time. I'm going to hand over to Chris to talk you through our operating and financial performance in some more detail.
Thanks, Carolyn. Good morning, everyone. ITV delivered strong top-line growth with external revenue up 8%, driven by ITV Studios and M&E digital revenue. Group Adjusted EBITDA was GBP 717 million, and within this, Studios' EBITDA grew strongly. M&E EBITDA declined, reflecting investment in content and technology to build ITV's streaming presence, culminating in the launch of ITVX in December. This investment will drive long-term growth and value for shareholders. In the year, we delivered GBP 23 million of cost savings across the group, ahead of our target. We've now delivered GBP 106 million of cumulative savings since 2018. Statutory operating profit was flat, statutory EPS rose to GBP 0.107, reflecting significantly lower exceptional items in the period.
There was GBP 65 million of exceptional items in 2022, which largely related to digital transformation projects and our move to White City, both of which will drive a permanent ongoing reduction in our cost base. There are more details in the appendices. Going into Studios in a bit more detail, ITV Studios delivered an impressive performance with a strong slate of deliveries as we continue to focus on growing and further diversifying by genre, by geography, and by customer. Total revenues were up 19%, including a GBP 56 million favorable FX movement, with good growth across all businesses, but particularly from the U.K. and the U.S. Total organic revenue at constant currency was up 14%.
Looking through the COVID interruption, we've grown broadly in line with our 5% average growth target, with total revenue up 15% and external revenue up 18% in the three years from 2019. Adjusted EBITDA was up 22% to GBP 259 million, with an Adjusted EBITDA margin of 12.4%, up from 12.1% in 2021. You'll be familiar with our studios key KPIs, which we use to track progress against our priorities. Whilst maintaining margins, we intend to grow faster than the overall content margin by leveraging our existing strength in global unscripted formats and capturing an increasing share of the highest growth areas of the market, which are, by genre, high in scripted drama, and by type of customer, local and global streaming platforms.
Taking each of the KPIs in turn, revenue growth in 2022 was better than expected, driven by a particularly strong Q4. Margin was constrained by general inflation in the production sector, together with additional costs for productions which were delivered in 2022, but started at a time when COVID was still a significant factor. We remain committed to our Adjusted EBITDA margin target of 13%-15% from 2023. Margin will be at the lower end of the range in the shorter term, but remains industry-leading. We made good progress in the faster-growing high-end scripted market, with the number of hours sold up 58% to 276. The number of formats sold in three or more countries, which we see as a measure of international success, increased from 15 to 19.
Formats that become truly global are more profitable and reinforce our strength in unscripted. The percentage of total revenues from streaming platforms increased significantly, up 9 percentage points to 22%. Turning to Media and Entertainment. Total revenue declined 1%, driven by total advertising revenue, which was also down 1% as expected. Total digital revenues were up 18%, with 17% growth in digital advertising and a 29% increase in subscription revenue, with both Hub+ and BritBox U.K. seeing growth. As previously guided, SDN's revenue is under pressure this year, down 21% as older contracts were renewed at the new lower market price for DTT capacity. We expect this pressure to continue into next year as further contracts are renewed. Partnerships and other revenues decreased by 2% following very strong 2021 competition revenues.
Content costs were up 5% with the return to a full schedule following the disruption caused last year by the knock-on effects of COVID, together with additional investment in ITVX content. Variable costs were up 2%, mainly driven by an increase in commercial payways and bandwidth costs, which grew in line with increased viewing. These increases were partly offset by lower payways on competition revenues. Infrastructure and overhead costs increased by 9%, mainly driven by investment in ITVX and data capability, as well as one-off costs such as the donation of proceeds from the Concert for Ukraine and cost of living payments to ITV colleagues. Overall, the investment in data, tech, content, and launch of ITVX came in slightly under guidance, but we still expect investment to be as previously guided for the two years, 2022 and 2023, taken together.
The 2022 investment was partly funded by our continued cost-saving program, which delivered GBP 60 million of M&E savings in the year. In total, Adjusted EBITDA was down 22%. Looking forward to 2023, while we continue to see strong growth in digital advertising revenue up around 25% in Q1, the outlook for total advertising revenue is challenging. Our current estimate is that it will be down around 11%, which is in line with our budget assumptions. It's early days for April. We expect total advertising revenue for the month to be down between 10%-15%. Looking at 2022 total ad revenue in a little more detail, the categories with the largest year-on-year movements were airlines and travel, up 59%, following travel restrictions in the prior year, and telecommunications, up 21%, driven by device launches and World Cup related spend.
Cars and car dealers are down significantly as a result of their supply chain issues, and government and charities are down off the back of COVID-related spend last year. E-commerce companies, excluding gambling, decreased 17% in the period. Within this category, the largest declines were online retail and food delivery brands that spent heavily in 2021, and from energy comparison websites for obvious reasons. This was partly offset by growth in online travel brands. ITV's M&E division is primarily an ad-funded business, and advertisers value both volume, the number of times an ad is seen, and reach, the number of different people who see the ad. Our M&E KPIs reflect the needs of our advertisers and our strategy of growing digital revenues, those are the KPIs in yellow, and maintaining mass reach, those in teal. Starting with digital revenue drivers.
Streaming hours, an indicator of the volume of our digital inventory, were up 9%. Importantly, within this, viewing on our own services, where we can serve ads and monetize, was up 18%. This was driven by a combination of a strong live schedule, an increase in the number of hours available on ITV Hub, and improved functionality in preparation for the launch of ITVX in December. This was offset by lower viewing on platforms such as Sky and Virgin, where we reduced the availability of pre-transmission drama drops and box sets because we were not able to monetize the viewing. The number of monthly active users is a measure of the reach of our platform, which is so important for advertisers.
They were up 6% at GBP 10.5 Million, driven by the increase in content on the platform and new types of content, which has attracted a greater breadth of user. Total U.K. subscriptions were up 17%. By increasing streaming hours, monthly active users, and subscribers, we grew our digital revenues this year by 18%. While digital advertising is the fastest-growing segment, advertisers still place huge value on the ability to reach large live audiences. ITV's unique position as the largest commercial broadcaster enables us to satisfy this demand. The final two KPIs, share of top 1,000 programs and share of commercial viewing, demonstrate our continued strong performance. In addition, a quick word on BritBox International, which continues to perform strongly with 25% growth in subscribers to 3 million.
It's now available in eight countries. We continue to look at opportunities to roll it out further. On to the balance sheet and cash flow. Profit to cash conversion was lower in 2022 at 75% due to both the growth in the Studios' business and the timing of deliveries. It also reflects commissions for ITVX, where we've taken delivery of programs but not yet made them available on the platform. In 2023, we estimate profit to cash conversion to be around 70%-75%, which we expect to increase over time. Net debt at the end of the period was GBP 623 million. Included in this is a EUR 259 million bond maturing in December this year, which we expect to refinance.
We're currently exploring medium to long-term refinancing options. In the meantime, have full availability of other loan facilities should we need to utilize them. Net debt to Adjusted EBITDA is 0.8x , our covenant leverage is 0.7x . We have total liquidity of just under GBP 1.1 billion. The accounting surplus of our pension scheme is GBP 192 million compared to a GBP 8 million deficit at the end of 2021. The next triennial valuation is underway. We aim to conclude it as quickly as possible. This year, we've had a number of draws on our cash. The dividend, pension contributions, which includes a one-off payment relating to the extension of our asset-backed scheme, and the acquisition of Plimsoll Productions.
The euro bond that matured in 2022 was redeemed using available cash, which improved the efficiency of the balance sheet and strengthens our credit metrics. Our closing cash balance at the end of the year was GBP 348 million. The board keeps returns to shareholders continually under review, and I wanted to remind you of our approach to capital allocation. First, we will continue to invest in the business in line with our strategic priorities to create shareholder value. Second, we manage our balance sheet consistent with our commitment to investment-grade metrics over the medium term. Third, we want to sustain a regular dividend which will grow over time, and we'll continue to consider value-creating M&A opportunities against strict financial and strategic criteria. We will always return any surplus capital to shareholders. Here's a reminder of our full year planning assumptions.
Content costs are expected to be around GBP 1.3 billion rather than GBP 1.35 billion as previously guided. This is largely due to a reduction in content amortization driven by the windowing of content between streaming and linear, together with a more cautious approach to commissioning, given the economic uncertainty. The current higher rates of inflation will impact non-content costs by around GBP 40 million as previously guided, although we are looking carefully at further mitigation measures. Exceptional items are expected to reduce again to around GBP 40 million, and pension deficit funding returns to a more normal level of GBP 62 million. Back to Carolyn.
Thanks very much, Chris. You will be familiar with this slide, which highlights the three key drivers of our business. ITV, as you know, is a world-leading producer and distributor of premium video content with two growth drivers, ITV Studios and M&E Digital, and a resilient cash generator in the third, in M&E's linear broadcasting. We have a clear vision to be a leader in U.K. streaming and an expanding force in U.K. and global content. Our strategy to deliver this is by expanding studios further, by supercharging streaming, and by optimizing broadcast. Being a vertically integrated producer broadcaster and now streamer gives us real competitive advantages, and more on that later. Let's take studios first. ITV Studios is a scaled global producer in a large and growing international market.
External forecasts estimate that the market will grow 2%-3% per year to 2026. Within this, streamers will grow much faster at around 5%. ITV is the number one producer in the U.K. and one of the largest independent producers in the world, with over 60 production labels. We are one of the top three international producers in most of the markets that we operate in. This, on our global scale, gives us access to key content buyers and top creative talent in the leading markets around the world. While growth continues at a global level, the trends within that vary over time, which is why diversification within studios is such an important element of resilience and success.
Additionally, in the battle to offer viewers a greater range of content, having a huge catalog of over 90,000 hours has given the ITV Studios distribution team their best year ever. ITV Studios is unique among production companies in the range of its diversification by genre, by geography, and by customer, as demonstrated in this slide. This enables ITV Studios to respond to changing viewer and customer needs. The best content is, of course, made by the best creative talent, and ITV is a very attractive home for talent due to our label structure, our creative culture, and the vertical integration with media and entertainment. We added to our pool of talent in 2022 by acquiring Plimsoll Productions, as Chris mentioned, and Lingo Pictures, and securing the leading producer, Ben Stephenson, who has now launched Poison Pen Studios, his new transatlantic drama label.
In previous presentations, we've talked about our talent deals with Nicola Shindler and Dominic Treadwell-Collins. They are now extremely well-established at ITV and have very strong slates. In 2022, between them, they delivered three commissions, Nolly, Holding, and You and Me. In 2023, five further commissions are expected to be delivered, and there are many more in the pipeline. Diversification also means maintaining a broad range of customers. ITV now sells to over 1,000 customers globally, and no external customer makes up more than 5% of its revenue. This slide shows our high quality and growing scripted pipeline. This pipeline enables studio to capture the increasing demand for drama, particularly from streamers. We thought we'd go into a bit more depth into how we maximize the value of our content with a case study just to bring it to life.
We've chosen Vigil, the police procedural set on a nuclear submarine. As this slide illustrates, as the creator, owner, and distributor, ITV Studios can optimize the windowing of its content across different distribution channels and customers. This allows ITV to extend and maximize the global value of its IP. For the initial commission, we earn a production fee, and through the sale of the international rights to the first window alone, we ensured that Vigil was profitable before it even went on air. Vigil has now sold to over 65 partners over 157 international territories. The recommission of the program and subsequent launch of a second series will provide a new sales opportunity, as well as driving renewed interest in the relicensing of series one. The unscripted market also remains strong.
Given the shorter production cycle and lower relative cost, unscripted is particularly attractive to customers when there is pressure on content budgets. ITV Studios is one of the largest distributors of unscripted formats globally, and has an incredibly strong track record for not just creating them, but sustaining and growing unscripted formats that can be monetized over many years. We offer customers around the world shows that will gain and retain an audience, and who return every year. ITV has sold over 60 different formats in 2022, and like our dramas, there's a strong pipeline of programs to come. As you can see from this slide, ITV covers every single stage of the evolution of successful shows, from established brands like The Voice and I'm A Celebrity, to next generation formats like Rat in the Kitchen, and recent launches such as Loaded in Paradise.
The successful execution of ITV Studios' strategy has resulted in consistent growth. From this strong position, we expect ITV Studios to continue to grow ahead of the market over the medium term, and to continue to deliver the industry-leading margins as we rebuild profitability after COVID. ITV Studios is well on track to hit all of its 2026 KPI targets. Given the success we've had in growing revenues from streamers, we've also increased our target for them to 30% of total revenue from 25%. On to our M&E division. As you know, this encompasses both streaming and broadcast, powered by a single content budget and a very established commercial team. This means viewers can access our content however and whenever they want to watch it, through live linear and on-demand streaming, and on a multiplicity of devices.
We now offer advertisers both mass reach and targeted advertising that they need in their marketing mix to be effective. First, let's look at broadcast. This slide highlights ITV's unique position as the U.K.'s largest commercial broadcaster with unrivaled audience and reach. Our scale and quality enables us to compete effectively for viewing and command a premium from advertisers. The first pie chart demonstrates our significant share of viewing amongst commercial broadcasters. The second chart shows our USP for delivering mass reach on broadcast TV, which in such a fragmented market, is increasingly scarce and valuable to advertisers. The final chart shows that despite the changes in viewing habits in recent years, and the significant growth of the streamers, ITV has around the same share of viewing in the U.K. As all of the streaming services combined.
This has ensured that our linear revenues have remained resilient, declining just 1% over the last five years, and it demonstrates the unique role that mass reach plays for advertisers in building brands and driving commercial performance. This is backed by evidence from the U.S., where broadcasters have grown revenue through CPM inflation despite a decline in viewing. This small decline in linear revenues has been more than offset by the 26% growth in digital revenues over that period. As the next chart shows, the total advertising market has grown in the last decade, primarily driven by newer online forms of advertising, as shown in the pink. Other traditional advertising media has declined during the same period. TV advertising revenue, including broadcast of video on demand, which we call BVOD, has grown despite gradual declines in audiences.
In the near term, whilst the current economic backdrop makes the whole U.K. ad market challenging, we expect the total market to continue growing, driven by online. Importantly, ITV is well-positioned now to benefit from this growth in online advertising. This chart shows the online video and display advertising market, a subsector of the online and TV markets in the previous slide. In 2018, when ITV Hub was just a catch-up service, we were only able to compete in the smaller BVOD market. Today, with the launch of ITVX and the investments we've made in tech and data to support Planet V, we have the foundations in place to take greater share of this BVOD market and also to successfully compete for other online video budgets, including platforms such as YouTube.
Therefore, our serviceable addressable market, or SAM, has now increased from GBP 400 million to almost GBP 6 billion. While some of the long tail of advertisers within the online video market may be too small for us given the size of their campaigns, it does demonstrate the significant opportunity we have. Our confidence that we can take share within this online advertising market is based on the fact that we have built a substantial streaming position in the U.K. now, spearheaded by ITVX. Here is a brief reminder of the ITVX proposition. It is ad funded, free to watch. It has over 12,000 hours of high-quality content, including a weekly original exclusive, one of the largest free film libraries now in the U.K., 20 FAST channels, and all of ITV's linear channels.
It also has a premium subscription tier, where consumers can watch all of ITVX content ad-free, including BritBox U.K., and this totals 19,000 hours. In addition, we've just agreed a partnership with StudioCanal for an additional 1,000 hours of films and TV series such as Paddington, Apocalypse Now, and The Deer Hunter, and there will be other partnerships to come. Let's now look at how ITVX has performed in its first two months. It's been really positively received by viewers and advertisers and commentators alike. The quotes on this slide from viewers refer to its great layout, ease of use, why they love the content, and that they will be watching more. It is attracting more viewers, 1.5 million new registered users signed up in just the first two months.
We've seen a 69% increase in viewing compared to the same period last year. Of course, we had the end of the World Cup and Love Island during this period, but by any measure, ITVX has made a very good start. One of ITVX's aims was to attract what we call main streamers. Now, these are harder to reach viewers or lighter viewers who are particularly elusive and therefore attractive to advertisers, but they are familiar with ITV, so they have come into ITV in the past. I'm pleased to say that we've seen a 94% increase in consumption by this group and a 109% increase amongst 16-34-year-olds. What's particularly encouraging is that our viewing data is showing that lighter viewers are coming in to watch our exclusive ITVX originals, and then they're staying on to explore and discover and watch other content.
This will be a continuing focus for us in 2023, and we are constantly saying internally that 2023 is a launch year. Pulling this all together, ITVX will continue to give us significant increases in addressable inventory and reach which the commercial team will monetize. I'd just like to turn to ITV's competitive advantages. From an advertising perspective, we provide a brand safe and measurable environment. Planet V provides programmatic targeted advertising complemented by the deep relationships our commercial team have with brands and agencies. I'm just gonna go into that in a bit more detail in the next slides.
From a viewer perspective, ITV has a track record for commissioning and producing content which appeals to U.K. audiences, evidenced by over 95% prompted awareness for ITV amongst U.K. viewers. Being vertically integrated gives ITV access to a fantastic production slate from ITV Studios and provides advertisers with really innovative and quite impactful opportunities to integrate their brands into our shows. All of this is underpinned by 37 million registered users, one of the U.K.'s largest first-party datasets, which is available to be targeted by advertisers, which is very, very valuable in a world of increasing privacy legislation. Planet V underpins ITV's ability to take share in the growing online advertising market. As you know, it's an end-to-end platform, which means we control our own sales and our pricing, and there is no value leakage to intermediaries.
After Google, it is now the second-largest video ad tech platform in the U.K. Planet V allows advertisers to match their data with ITV data and with third-party data to create even more precise audience segments to be targeted on ITVX. Over 90% of ITV's online inventory is booked through Planet V, and it's used by all the major agencies. While ITVX delivers the scale and breadth of eyeballs and an addressable audience, Planet V enables us to create and deliver unique and effective advertising products which are really valuable for media agencies and advertisers. As this quote says, Planet V enables agencies to be better equipped and will further transform their processes by delivering a more streamlined approach to planning and buying. Its many benefits have attracted over 600 new advertisers and helped deliver over 60% growth in digital advertising since its launch in 2020.
Our unrivaled competitive advantage is our ability to offer advertisers three powerful propositions: mass reach, targeted advertising, and creative partnerships. It's a unique proposition in the ad industry. Many advertisers use all three to drive the most effective and impactful advertising, and a great example of this is the retailer Boots. Across 2022, Boots ran 14 different linear campaigns, increasing their spend year-on-year for products ranging from beauty, healthcare, and summer sun care, to promotions and Christmas. Taking advantage of our unique ability to deliver mass reach to drive awareness and build consideration and positive sentiment for their brands.
Using Planet V, Boots have also taken advantage of the full suite of targeting options on offer, as well as being a test partner for a number of our ITV Ad Labs innovations, such as Data Match and weather-based targeting, where their hay fever campaign only served consumers when the pollen count hit the appropriate level and their sun cream campaign served when the temperature hit a certain level. Across 2022, we've worked together to build a number of integrated creative partnerships. Boots continued to be a key Love Island partner, taking on a full license agreement with the show that included 12 different Boots products placed in the villa, resulting in a 50% uplift of sales, as well as branded social content and in-store point-of-purchase activation. As their CMO said, we have a truly multifaceted partnership, which is underpinned by relevance, creativity, value, and innovation.
I'm pleased to say that M&E is on track to deliver its 2026 KPIs. With 18% digital revenue growth this year and the successful launch of ITVX with our planned continuous enhancements in product, content, and distribution, we remain confident in delivering at least GBP 750 million of digital revenues by 2026. I just wanted to remind you of a slide that we shared with you at the half year. To deliver GBP 750 million, we would expect to see CAGR growth in the mid-teens for digital advertising as we increase our share of the broadcast and online digital advertising market, in the mid-20s for subscription revenues, and in the mid-single digits for other revenues. Our digital revenue target represents a minimum threshold, as we've said.
As you can see from the sensitivity analysis, if we delivered high-teen CAGR for digital advertising, we would grow our digital revenues to GBP 850 million by 2026. I hope we've shown you that being a vertically integrated producer, broadcaster, and streamer gives us a unique set of competitive advantages for both studios and M&E, as we've been talking to you throughout this presentation. It gives ITV Group a number of advantages as well. Of course, it provides studios with a base of core commissions, a significant promotional engine for its content. For M&E, it secures great content for ITV's channels and ITVX. Just a recent stat, nearly 2/3 of ITVX's original commissions in 2022 came from ITV Studios. It provides uniquely valuable partnership opportunities, as we've shown, for brands to integrate their marketing into our content.
You've seen with Boots and other examples include Ring with Saturday Night Takeaway, eBay, really successful with Love Island, and Heineken Zero embedded in Emmerdale and Coronation Street. In a highly competitive industry, it really does help attract and retain the best creative talent. For the group, it helps deliver growth in both M&E and Studios revenues and profits, and it delivers attractive economics. ITV has been a business historically dependent on linear advertising, and therefore exposed to the cyclicality of that advertising sector. While mass reach will continue to have an important role in the advertising mix, this slide shows the changing revenue profile of ITV since 2018 and what we expect over the next four years. By 2026, we expect around 2/3 of ITV revenues to come from our growth drivers, ITV Studios and M&E digital revenues.
We expect to continue to grow the business over this period and beyond, with growth in studios and digital expected to offset any change in linear. As we've said earlier, the macro environment in the U.K. is uncertain. Our key value drivers and strong execution ensure we are very well positioned to deliver phase two of our strategy. We expect group margins to continue to reflect investment. With an increasing offset from higher margin, high growth digital revenues, as well as profitable growth in ITV Studios. This will help drive increased profits from the inflection point in 2023. As we've said, we are well on track to deliver all of our KPI targets in 2026. We will continue to invest to support the strategy and the long-term profitability of ITV while delivering returns to shareholders.
We have great momentum and a highly motivated team who have executed really well to date and are very focused on the key drivers of value creation. Before we take your questions, we have another video highlighting some of the exciting slate of programs to come this year on ITV, ITVX, and from ITV Studios. Please play the video.
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Great things ahead, darling. Welcome to the South Coast. Who do you think is behind the mask?
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What a serious lineup. What happens next? Life is a big adventure. Who knows where it will lead? This is just the beginning.
Hi, everyone. I'm gonna just hand over to the operator now to take your questions.
Thank you. If you would like to ask a question, then please dial into the conference call and press Star followed by one on your telephone keypad. If you change your mind, please press Star followed by two. When preparing to ask your question, please ensure that your phone is unmuted locally. As a reminder, Star followed by one to ask a question. Our first question comes from Tom Singlehurst from Citi. Tom, please go ahead.
Yeah. Thank you very much for taking the question. Thank you for the presentation. Tom here from... The first question I had was, I suppose, a little conceptual in the sense that, I mean, obviously, the push into digital advertising in particular is proceeding apace. Historically, we, on the sales side and investors, have talked to media buyers with a we're trying to get a sense of how sort of net advertising revenue trends are developing. I'm just wondering, as a starting point, you know, how valuable you think that process will be going forward. Specifically, you know, when you talk about the outlook for the 1Q and April, how do you actually capture growth on digital channels?
I presume some of that revenue growth is gonna be down to volumes of consumption and streaming hours. I'd love just a general some help with that. Second question, briefly on scheduling costs. You've brought the number down, which makes sense. In the event that advertising ends up better, should we just have in the back of our minds that that scheduling cost guidance might reverse and it might move back up again?
Okay.
Those are the two questions. Thank you.
Okay. Tom, there's a bit of an echo. I think your first question related to, I think I've got this right, that, you're saying is the process by which you glean data on, digital advertising the right process. Is that correct? Are you asking something more about us?
Apologies about the echo.
Sorry. Don't worry. I think we're fixing.
I was gonna say, how do you factor in the variance in streaming hours into your commentary on the outlook for advertising?
What do you think?
Yeah. Tom, I think the... As we said in the presentation, you know, the whole purpose of ITVX is to increase the inventory that's available for targeting. That involves increasing the number of streaming hours by increasing dwell time. That gives us the volume, then increasing the number of MAU, which gives us the reach. With that inventory, you know, it's the commercials team's job then to maximize that for advertisers and for ITV. There can be quite a complex relationship 'cause certain demographics are, you know, much more valuable than others. Also with the beauty of Planet V and the sophistication of that platform, you know, Kelly and team can layer in increasingly valuable ad products for advertisers like the weather targeting, like the Data Match product.
It's not a simple linear sort of view from.
Yeah.
-volume to pound.
Ad load comes into that as well. You know, we have made a very conscious and concerted effort to reduce the ad load on ITVX because the user experience is better, and we have to get that balance right. Obviously, the ad load decides how much advertising you're gonna take and how much money you're going to take. It's a fine balance between multiple factors that we take into account. Does that answer your question? Tom?
Yeah. That's great. Yeah.
Yeah.
Yeah, that's perfect. On the schedule cost, any risk of that?
On.
It goes back up in the event that advertising...
No, it's not really. I mean, Chris will say, I mean, and I will say it's, most of that GBP 50 million is amortization. Therefore, we wouldn't see it as a recurring, you know, something that would recur this year, so it would be a captured cost.
Yeah. You know, the schedule's pretty fixed. It'll move around the edges, particularly, with some sports and particularly dramas, depending on when they get dropped on linear following scheduling on ITVX. I think you could say take the GBP 1.3 as a fixed number for the year, regardless of where advertising lands for now.
Tom, you did mention the outlook, the advertising outlook for Q1 in April. What I would say on that is it's broadly in line with the TV market, so we're not out of sync at all in that. I think the whole TV market has seen the same kind of minus figures, and that's just worth noting 'cause you know. It's relevant to us, obviously.
Again, as we said in the presentation, it's exactly where we thought it would be.
Yeah.
when we were setting budgets at the back end of last year.
Yeah.
Very clear. Thank you. Sorry for the echo on the line.
No, not at all.
No problem.
Thanks very much.
Thank you. Our next question comes from Richard Eary from UBS. Richard, please go ahead.
Yeah, many thanks.
Yeah.
Morning, everyone.
Morning.
Couple of questions from myself. Firstly, just, I think, Chris, on the call, you mentioned something about guidance for the variable cost and the infrastructure cost with inside M&E. Was I correct that we should simply bundle those together? We're adding GBP 40 million in from inflation and then minusing GBP 15 million for the cost synergies. That's the first question. The second thing is on Studios. Obviously, we've had the acquisition of Plimsoll coming through. How does that impact 2023 Studios growth, and how should we think Studios growth grows in 2023 versus the long-term guidance of 5%? Just lastly, going back to sort of Tom's question on schedule costs, obviously understand that those are now locked in for 2023, but how do we think about FY 2024 in the view of where the ad market sits?
If the ad market still remains pretty weak, will we see that number change as we go into FY 2024 to reflect the change in the ad market?
I'll take the last one first if that's all right, Richard, and I'll bring Chris in for the cost questions. I think on full year 2024, it's too early really to tell. One of the things we can do without damaging ourselves, as a. You know, we'll be very careful about content costs 'cause, you know, as I keep saying, content is at the very heart of how we monetize everything that we do. We'll be very careful about that. It is flexible in that we are able to defer, we're able to, you know, we're able to do things. That doesn't mean we necessarily take the cost completely out. We might postpone costs. It really all depends on 2024.
It does give us some flexibility, though, on the bottom line. I think too early yet to give you any guidance on that.
Yeah. Richard, on the cost front, absolutely, inflation of GBP 40 million, sort of pay and energy being the big components of that, which we haven't been able to offset. We have the GBP 15 million coming from the rolling cost-saving program. If you recall, we set a target of GBP 100 million of savings between 2018 and 2022. We've delivered GBP 106 million against that. We're now scheduling another GBP 50 million of efficiencies through to 2026, of which GBP 15 million will come through next year. That's on the cost. On Plimsoll, yes, we will get a bit of a tailwind, in terms of revenue and profit from Plimsoll. We had half a year of results last year. We've got a full year next year.
It's around the edges in terms of the overall growth, but it, you know, it is a positive for us. That long-term guidance target of 5% is organic growth. There's, you know, if there's inorganic, then you'd expect that to be on top. Remember, that is average growth over the period to 2026, and we had really good growth in 2022, obviously.
Chris, can I just ask a follow-up just on that? How should we think about FY 2023 studio growth? Have we still got tailwind effects? I presume that you've got a lot, a decent line of sight of visibility on that number.
Mm-hmm.
Is this a 7%, 8% number or? I don't know whether you can comment on that.
Well, you know, As you know, we don't give specific guidance on Studios growth. Remember that in Q4, we have outperformed where we thought we would be. It was the absolute value of Studio sales is going to be a significant move ahead in next year, in 2023, sorry. The percentage is influenced by the fact that it's off a much higher base in 2022 from when we gave the guidance.
You know, 'cause we took a lot of Q4 deliveries.
Yeah.
You know, they all came into Q4, so, you know, there's a whole range of them that we could name, and that made it a much higher base to work off this year.
Yeah, but, you know,
It's a strong year.
Yeah, exactly.
Yeah. I mean, Julian's here, so he can answer any other further questions on how strong a year Studios is having this year.
Yeah, we're still expecting really good growth off the back of amazing growth in 2022, we've got a good line of sight onto it as well. I mean, I think it's important to say, there's, you know, there's been a lot of kind of speculation in the market about streamers slowing their spend and so on. Really, I mean, that market is still very vibrant, as you can see from our 2022 numbers and 2023 numbers.
Yeah. On that streamers point, actually, you know, streamers are still spending a load of money, and many of them are still spending more year-on-year, and Netflix is maintaining its GBP 17 billion budget. You know, you hear a lot of noise around streamers, but actually Apple and Amazon are increasing their budgets year-on-year. There's a great market. In fact, we're so confident about our pipeline to streamers that we've moved our target up to 30% of revenue from streamers. That just gives you an idea of how strong we think this year is.
Thanks very much.
Okay.
Thank you. Our next question comes from Julien Roch from Barclays. Julian, please go ahead.
Yes, good morning. Following I have three questions. Following up on the questions we had on content cost. When will you unveil your ITVX strategy? You said content cost will be GBP 1.35 billion. You're saying [GBP 1 billion] because of amortization. When asked about next year, you said that you'd be careful with content cost. You had flexibility. It was too early to say. Does that mean we should forget altogether that GBP 1.35 billion and the new base is GBP 1.3 billion? That's my first question. The second one is.
Easy answer.
total viewing.
Sorry.
Easy answer. Okay.
Go on.
No, go ahead, go ahead. If you wanna answer now, that's fine.
Well, no, I think you should take the GBP 1.35 billion as the baseline.
Yeah
because that's what we said.
Okay.
Yeah.
Okay. All right. Second question is total viewing hours have declined 2.7% a year since 2015, the first year you gave us the numbers, so from 16.7 billion to 13.8 billion. Can we get the trends in the first two months of full year 2023, and why is that not one of your media and entertainment KPI? 'Cause I would think that your revenue is driven by the overall number, which is a mix of linear and on-demand, not only on-demand. That's my second question. The third one is thank you very much for all the KPIs you've given. The 22% from streamers from ITV Studios is really useful. You also told us it was 13% internal and 9% external.
Can we get an indication of the split, between internal and external, for the 30% full year 2026 target? Thank you.
Okay. So content cost, as Carolyn said, take the GBP 1.35 billion. The reason there's a small impact of amortization this year is 'cause we're ramping up content throughout the year. In future years, you'll have the same falling into the year as is falling out in terms of amortization. In terms of total viewing, at that 13.8 billion hours, when you look at the most recently available information, which is to around mid-February for this year, ITV is. Those trends are improving, and ITV is actually performing better than every other broadcaster and indeed Netflix in terms of total viewing. Very pleased with the performance this year.
In terms of the sort of the detail of the mix of streamers between X, internal and external, frankly, we don't look at it at that level of detail. You know, the whole thing with Studios is it's a portfolio of customers, of genres, of labels. Big picture, we've got a direction of travel, which is to increase the number of scripted hours, retain our amazing position in unscripted, and then to increase our proportion of viewing from streamers. The, the mix between internal and external, I think, will depend on as the market evolving over the next three years.
Okay. Thank you.
Okay.
Thank you. Our next question comes from Matthew Walker from Credit Suisse. Matthew, please go ahead.
Thanks. Hi, Carolyn. Hi, Chris.
Yeah.
Good morning, everyone. Can you hear me okay?
Yeah.
Yep.
Good.
All right. Good. Yes, I've got a few, please. The first is, I know it's a long way away, but maybe if you could sort of think about or quantify the impact of the World Cup in Q4. When we're thinking about our models, should we be planning, do you think, for TAR to be up in Q4 or still slightly down? I know, I know it depends on the macro, but just if you could sort of think about the World Cup impact there. The second thing is, you know, you've had a really, really strong growth in ITV Studios. To get to the margin of 13%, what do you need to do with your cost base? Because in 2022 you saw the margin increase by about 0.3.
You have to get higher than that in 2023, so maybe some color around the margin to 13%, if that's okay. The last question would be on subscriptions. You've deliberately taken a view that you wanna push the advertising, 'cause that's the primary target for ITVX. In your plan you do have some subscription as well. When can we anticipate a bigger push on subscriptions? Any final comments on, you know, has Netflix and Disney doing advertising had any impact on the ad market?
Okay. let's just take We'll take this in order then, Matthew, 'cause they're, I think on the impact of the Rugby World Cup, I mean, I'd like to bring Kelly in here. I mean, first, we're not gonna guide you on TAR for Q4. We can't do We just can't do that because there's a number of other things going on in Q4, including the macro, but also, you know, we just wouldn't be able to do that. We would say that we would expect the Rugby, the Rugby World Cup is a big event for us, and it always does well, and it does particularly well. I think just to remind you, it does particularly well amongst a certain very valuable advertiser demographic. Actually, it's affluent.
It's usually affluent men of a certain age who have high disposable income. That We would expect it to do well for us. Kelly, do you want to add some color on kind of how well the advertising base has taken to that?
For the World Cup last year?
For the Rugby World Cup, yeah.
Um-
Yeah, it's FIFA World Cup last year versus Rugby World Cup.
Yeah. That's the problem.
Yeah. The FIFA World Cup, if we start with that, was probably one of the most successful World Cups we've had commercially in its own right. It sat within quite a challenging market. The rest of the TV market was relatively challenging. The World Cup within it was really strong. We were very significantly ahead of the market across November and December. I guess the difference between the football World Cup and the Rugby World Cup is we have it exclusively, we have every live game. It's slightly earlier in the year, across September, October.
We've already sold a sponsorship to Land Rover Defender, and we are in the process of selling, you know, packages of airtime for the Rugby World Cup at the moment. We've got very high hopes that September and October will be strong months, and you probably remember that they are against relatively easy comparables year-on-year. There'll be a shift in phasing, shall we say, across the second half of the year, between the two quarters.
Yeah. Thanks, Kelly. Chris, studio margin?
Yeah. I mean, the Studios team are brilliant at innovating and getting efficiencies around production costs, so that'll be the first place we'll look. You know, the team are looking at, well, have created these production hubs where we can do several versions of the formats. There's a hub for Love Island. There's a hub for I'm a Celebrity, so reduces the overall production cost, 'cause you've got that fixed cost of the, of the location that we can amortize over more, more shows. You talked about the fact that we'd gone forward 0.3 percentage points in 2022. We need to do more than that in 2023.
I think we'll also be helped by some of the margin issues last year, where, as I said in the presentation, were caused by productions that, believe it or not, they started in COVID, so they still had those extra COVID protocol costs in there. Increasingly, productions delivered in 2023 will have a much smaller proportion, if any, COVID impact in them. Just, you know, with scale, you do get the economies of scale, from the business as well. Also GD, I think, on the.
GD and G merging. I think we've announced that, haven't we? Yeah. we can say that, yeah. Talk about that.
Yeah. We've merged our unit that delivers finished shows and sells those around the world, and we've merged that with the team who sell the formats around the world. They're talking to the same customer. They're now going, there's two sales team both, but they're both going with both the finished tape, as we call it, and the formats in the bag, and they can sell them both to the same customer.
Yeah. We've merged the teams effectively.
Yeah.
We'll get quite a lot of efficiencies out of that.
Yeah.
Actually, it's just more productive to work that way. It's going to be much, much, much leaner, but better. There's the studios team are incredibly focused on the margin, and they have a clear plan with milestones to get to, you know, 13%. We've said we think we'll be at the lower end of that 13%-15%, in 2023. We're determined to get to 13%. On subs, you're absolutely right, Matthew. We have really, really, really concentrated on a successful launch for ITVX. It's gone really, really well. The team have delivered such a great thing really in quite a short space of time, relatively speaking. We focus very much on the things like user experience and, you know, all of that.
Personalization, quite a lot more of that design, and also, as I said, about how advertising works with the product team. We've been really pushing the AVOD side, as you said, but we haven't ignored subscriptions, 'cause as you say, we have a very clear target by 2026 to double subscriptions to 2.5 million, and that's in the U.K. alone. It's actually going quite well. We're actually at the moment static, because we're transitioning BritBox subscribers into ITVX Premium. BritBox is still there, but we've merged the two. You pay GBP 5.99, you get all of BritBox, and you get all of ITVX Premium, which means you get everything on ITVX ad free.
We've just signed a deal with StudioCanal about 1,000 hours of amazing films, actually, really, really strong films, just adding to our number one position. I mean, we've got the largest base of films now in the country, which is fantastic because viewers like watching films. When they come in for something, they'll browse around and then they'll watch a film. It's a really brilliant thing. We've already started on that push you mentioned on subscriptions. Our key thing will be to upsell people when we know they're more valuable to us in subscription tier than they are in the AVOD tier. Because of the amount of data we now have in ITVX, we're able to do that in a really, really informed way. It's not at all random.
We can say, "This customer is actually fine where they are in AVOD because they actually watch a lot and they're very good for advertising. These people are perhaps lighter viewers of certain shows, and we might wanna upgrade them to ad free." You'll also see, I think, other partnerships coming through in the pipeline for that premium tier. On Netflix, ad light, very, I can just use Barb data at the moment 'cause they're on Barb now. What we know from Barb is that the ad light tier has been taken by 600,000 Netflix homes, which is very, very low penetration of Netflix homes, if you think they're in 16.8 million households, so it's very low.
They're finding, I think, very difficult to fulfill even the smallest campaign that they've got, and they've actually announced that, and they're giving money back. It's a low reach, high CPM sell, totally different to what we do. Totally different. It's just a completely different proposition and a different sell. Our proposition is very compelling to advertisers. We've got these three major things that we can do for clients and agencies. One is mass reach, obviously. You know, you know our shows. I mean, even Vera, which has been a continuing series for, I don't know, Kevin will say, I think it's 12 years, nine years, 12 years, is still getting 7.5 million viewers. You know, all of the dramas have done really well for us.
We've got that mass reach is the only place you can get that is ITV. Now we've got this highly targeted ability on ITVX with Planet V underpinning that. That is, we've got scale on that. You know, all our shows, even on ITVX, will get, you know, hundreds and hundreds of thousands of viewers, and we'll often reach 1.5, 2, and more million, which is very, very different to what the streamers do. Our ability to target and deliver audiences of scale, relevant scale, is really strong. Then the third thing we do, which is extremely compelling, is creative partnerships. Because of the vertically integrated model, we can do two lots of those.
One is that people can get, you know, advertisers can get involved right at the start, at inception of programs or right at the beginning of productions, where they can really work with us as to how they are going to partner with us. eBay is a great example on Love Island. Really brilliant example of how we've worked with them for the last two years. But we can also just go and get sponsorship for our programs from advertisers. We just don't do the same thing as Netflix, really. I think we're very, very strong in the ad market for that reason.
Okay, thanks a lot.
Is that okay?
Thank you. Our next question comes from Omar Sheikh from Morgan Stanley. Omar, please go ahead.
Yeah, Morning, everyone. I've got three, if I could. Maybe first on ITVX. You've given us an average MAU number for the year. Could you maybe give us an end of year MAU number for December 31st? Maybe compare that to what it was or what the MAU count was pre the ITVX launch, so 8th of December. Then do you have a current number? I don't know whether it's end of February or mid-February. That would also be helpful. Secondly, on advertising, you've given guidance for Q1, could you give us a sense of what you think the market might do in Q1? Whether you're performing above or below the market in the quarter. Then is there a comp effect in April?
I don't know whether you can just give us what the comp was last year for total advertising revenue in April. Lastly, I mean, there were two press articles in the last few months about ITV Studios. Could you maybe just give us the current thinking on whether it would ever make sense for a structural separation or to sell a minority? Thanks.
Okay. I mean, we won't really give you. You know, we won't give you the MAU figure for the full year, but just be assured that it will be an increase and we know exactly what the target is. You know, you'll know that as when we do the full year results next year. I mean, we will. We're not, we're not shy of that. It's just that it's a sensitive number because we can, you know, our competitors can work out quite a lot of information from our MAUs. That's the only reason we don't, we don't give a full year MAU.
On advertising, on the markets, we would say we are, as I mentioned a bit earlier, I think that we are broadly, we are exactly the same as the TV market. Everyone's had a weak market in the TV market, as I said, broadly in line. I would just stress that this is not something surprising to us. You know, we are bang on where we thought we would be for Q1 and for April. It's not surprised us in a way, you know, our whole full year is not, it isn't kind of dislocated as a result of what we've reported in Q1. Do you want to add to that in any way, the ads thing?
No, I think. No.
No. April comp?
April, looking at it, I'm doing it in my head, but it looks like up 9%, last year, so 2022 on 2021. A relatively strong comp to go against.
Studios, I think, we've said very clearly that front of mind for us is shareholder value creation, and that the board regularly reviews strategic options, and we will continue to do so. We've also been very clear that ITV Studios is not for sale. You know, I think that, I hope that answers your question, Omar. Does it?
Very clear. Thank you.
Thank you.
Thank you. Our next question comes from Nizla Naizer from Deutsche Bank. Nizla, please go ahead.
Great. Thank you. I have two questions from my end. Firstly, on the sentiments of the advertisers that you're having conversations with now. I mean, you've given us the Q1 outlook and the April outlook, but is the sentiment changing on sort of the macroeconomic climate, are advertisers ready to sort of come back and advertise within the market? Some color you could provide on this, that would be fantastic. Secondly, on the cannibalization point that we're sometimes asked about, could you give us some color as to, you think of the ITVX sort of growth in the last couple of months, how much of that has come from linear advertising shifting to your digital channel versus maybe totally new budgets that have come from sort of online video ad budgets by your clients? Some color there would be great.
Customers, rather. Yes. Thanks.
Okay, thanks. I will just bring Kelly in on the sentiments as well because he talks to advertisers every day. I would just say when we've done together some CMO and CEO dinners, they are definitely profit protecting for this quarter because they would have laid down their budgets Q3, Q4 for TV last year. We are definitely hearing more optimism because the economic indicators are better than they were in Q3, Q4. If you remember the news flow last year, it was very, very gloomy, and TV takes time. You know, you have to lay it down. I would just say, I think there's a read-across because WPP reported very recently, and I know a lot of you follow WPP.
It was interesting to hear the comment that they have said that TV spend will come back to the pre-pandemic level this year. They've said the reason for that for TV is its effectiveness in satisfying reach and frequency goals for clients. I thought it was quite interesting. They're obviously, you know, right up there in the top three of our biggest advertisers in terms of agencies. Kelly, would you just add some color to some of the client comments?
Well, I'd just reiterate what you said in that we expected Q1 to feel like it does at the moment because the economic narrative was so negative at the back end of last year. We are definitely sensing as the economic narrative improves, as you said, we're definitely starting to sense that advertisers are starting to think more seriously about their investment. Now, I would say they did the minimum of what they needed to do in Q1, and they're now starting to think much more positive. We're getting much more briefs through the door from advertisers from May onwards in particular.
Yeah, it feels like we thought it would do, that we had very tough comps Q1 and a very negative economic outlook at the end of last year and we're definitely seeing an improvement. I. Just in terms of the question about ITVX revenue, it's really, it's always, with so many working with so many advertisers, it's really difficult to see who's moved from linear to digital. I would say that driven by Planet V, we've seen something like last year we saw 400 advertisers come onto our digital platform who don't spend anything with us on TV.
We're definitely starting to see us make, you know, headwinds, making progress in attracting the kind of long tail of advertisers that sit in digital. Equally, major advertisers are moving more towards, they call it CTV or VOD advertising, because that's where, that's the engine growth of TV at the moment.
Yeah. I mean, there's the advertising. I think if you look at the slide in your packs, which is about the serviceable addressable market for ITV. You know, as a result of ITVX and the inventory and the underpinning of Planet V, you know, which allows it to do so much, we're able to play in a very different market. We were only ever able to do BVOD. I don't know if the slide can actually be put up. It would be quite helpful. In 2018 we had a, you know, a tiny sliver really, where we could go and get VOD advertising, which was BVOD, which is about GBP 400 million. I can't see 'cause I haven't got my glasses on.
Now the market that we are able to go after is about GBP 5.8 billion, nearly GBP 6 billion. I think we've just put it up. I think, you know, from an advertising point of view, we're expanding our ability to get more revenue. I think from a viewing point of view, I'll bring Chris in here, but big picture, it's really important to remember this, linear viewing is eroding gradually, actually. Very gradually. We're still in equivalent share larger as ITV than all the streamers put together. When you think of the competition that we've got in the market for viewing, and we'd include gaming in competing for attention, you know, we feel we're really holding our own.
The big picture point is that it's really not about cannibalization, it's really about retaining our viewers and attracting lighter viewers into ITVX who have perhaps gone off to experiment, to try to see what else is out there, 'cause there's a lot else out there. By having ITVX, it gives us a much better chance to attract viewers in, to retain viewers, because, you know, if you're watching ITV, you're going to watch ITVX. Also to get those light viewers who are much more elusive. What... You know, you've seen the numbers. We've done very, very well on light viewers already, and that's just going to aim. We're really focused on building that. The way we market has changed quite dramatically on light viewers. I mean, we're just doing a whole range of different things.
For instance, we're on Fortnite at the moment as ITVX. That's because we know that there are a lot of people that wouldn't normally view. They would come in for ITV for sport, for instance, but they wouldn't normally come in and browse. That's had a good effect. You know, we've wrapped the IMAX. You know, that got a huge amount of publicity. We've just done a whole load of things. We're using influencers in a way that we've never done before. You know, we're using a couple of influencers like Ali-A and Vikkstar. You probably haven't heard of them, but they've got, you know, millions and millions of subscribers, and that's not a place that we would never. You know, we would never have been, partnering with that before. That's all about getting light viewers into ITVX.
I just think you have to take a big picture of this. Cannibalization, you know, we have to really monitor that from a revenue point of view. Actually the CPMs stand up very well on ITVX.
Nizla, I mean, I That's absolutely right. I think there has been too much focus on cannibalization historically. The whole experience from the U.S. is that the networks have absolutely maintained their revenue, even as audiences have declined, actually more precipitously because it's a pay environment there, not a free to air. You know, Europe hasn't experienced the same. What we've seen is that CPMs for mass reach do inflate because it's so incredibly valuable, and as it grows more scarce, advertisers will be, you know, pay a reasonable amount more each year. Linear will remain really resilient in terms of revenue, and we can add all of the targeting from the light viewers and the incredible reach of ITVX.
What I find really exciting is that the more ways that you can watch ITV viewing, for instance, now ITVX is on Sky Q. As consumer behavior changes, people who wouldn't normally have PVR, they'd have recorded their shows and then watched them back later. We can't monetize that. We don't get paid for the ads in that. Those viewers, as they change habits, will go to ITVX for their on-demand viewing. That means we can serve ads to those people. You know, that's 5 million-6 million households where all of the catch-up TV over time will be coming into X. There's just so much opportunity. Same on, you know, same on Virgin. There was a catch-up service on Virgin. Now you can only watch a catch up for ITV via ITVX on Virgin.
That's another 3 million households that are exploring ITVX.
Yeah.
I think there's a huge opportunity, and going back to the slide that we showed, that slide 33, you're going from, you know, a GBP 800 million market that we're playing in to a GBP 5.8 billion market. It's a massive opportunity for us.
Mm-hmm. Yep.
Those are helpful. Thanks.
Thanks.
Thank you. Our final question is a follow-up question from Julien Roch from Barclays. Julien, please go ahead.
Yes, thank you for taking my follow-up question. You've restated the accounting of Studio to remove the unrealized profit and stock adjustment. That has gone from +2 in 2021 to -6 in 2022. When you say you gonna get to 13% margin in 2023, is that? Does that include the unrealized profit and stock adjustment, i.e., that's the lower number, or you're looking at Adjusted EBITDA pre the unrealized profit? If it is the higher number, can we have an idea of how much unrealized profit and stock adjustment will be in 2023? 'Cause we only have two years, and +2, -6 means it's impossible to forecast. Thank you.
Yeah. The short answer is the Studios margin that we declare is before that unrealized profit adjustment. You know, that arises on consolidation of the two businesses. The true margin within Studios, you're seeing a true picture of Studios as a standalone business. That number bounces around. Sometimes it's profit, sometimes it loss. It purely depends on the timing of deliveries both, you know, coming into the year. As you exit the previous year and as you exit the year that you're in. You know, we don't forecast it because it does bounce around. Historically, it's been one or two. This year it happens to be six, but there's no particular reason other than the timing of the deliveries.
Okay. central assumption is mostly flat and therefore doesn't make that much difference.
Yeah.
Great.
Okay.
All right. Thank you.
You need to look at it at the group level.
Pleasure. Yeah. Do you want to repeat that?
Yeah. Just look at it. It's a group adjustment. It's not a studios adjustment.
Okay. Thank you.
Okay. Thank you all very much for your questions, and see you all soon.