Commercial broadcaster ITV is to launch a new pay channel, dedicated to British drama, as it seeks to reduce its reliance on advertising revenues.
Buoyed by the success of hit shows including Broadchurch and Downton Abbey, the group will make ITV Encore available to Sky subscribers this summer as part of a wider four-year partnership between the two firms.
The channel, to be included in customers’ existing packages, will initially feature repeats of successful dramas such as Lucan and Vera, but ITV promised to add original shows featuring “big name” stars from next year.
Adam Crozier, the group’s Scots-born chief executive, said: “ITV’s brilliant dramas contributed to a fantastic on-screen performance last year – we had three out of the top five dramas in 2013, which helped us increase our share of viewing on the main channel for the first time in a decade.”
The former Royal Mail boss, who has been in the role for four years, added: “ITV Encore is right in line with our strategy of growing non-advertising revenues while at the same time creating even greater opportunities to showcase new drama.”
Non-advertising revenues at the group rose by 11 per cent to £810 million in the nine months to September, compared with a rise of just 1 per cent for advertising sales across ITV’s family of channels.
Analysts at Liberum Capital said the deal with Sky, which delivers its half-year results today, could also see ITV receive higher fees for transmitting its current stable of channels to Sky’s 4.8 million high-definition boxes.
The broker, which has a “buy” rating on the firm’s shares, added: “It is increasingly clear ITV is becoming cleverer about monetising its content.”
Sky chief executive Jeremy Darroch said ITV Encore will also be available on Now TV, the group’s internet television service that launched last year.
The £9.99 set-top box wirelessly connects to a broadband connection, giving contract-free access to the likes of BBC iPlayer, Demand 5 and Sky News. Viewers can also pay to watch Sky Sports and Sky Movies.
Darroch said: “Our customers love great drama and so we are delighted to bring them exclusive access to a new channel from one of the best-loved brands in TV.
“This is good news for Sky customers and a positive way for us to work with ITV in a broad, mutually beneficial partnership.”
As part of the wider agreement, Sky will also be able to use more ITV content, such as catch-up and video-on-demand services, in its online offers, while ITV shows will also be available to rent in Sky Store.
Although the deal with Sky means ITV Encore will only be available on its platform during the undisclosed period of exclusivity, it is understood the channel could eventually launch on rival pay-TV services such as BT and Virgin Media.
ITV delivers its full-year results next month and is forecast to report revenues of almost £2.4 billion for the year to December, up from £2.2bn last time.