Sky buys ITV's media division for £1.6 billion to compete with Netflix in the British market

The deal marks Sky's entry into the UK free-to-air television business, adding ITV's free-to-air channels, including ITVX, its streaming platform. The resulting group will become Britain's largest commercial broadcaster by revenue and audience, according to analysts consulted.

A new giant takes on the global giants

A new giant takes on the global giants

The stated aim of the merger is to create a British competitor capable of standing up to global platforms. Sky, founded by Rupert Murdoch in 1989 and currently controlled by Comcast, will combine its pay-TV business with ITV's general-interest channels, known for programmes such as the soap opera Coronation Street. Together, the two companies represent around 70 percent of the British linear-TV advertising market, including contracts with third-party broadcasters, according to analyst estimates cited by the trade press.

Sky CEO Dana Strong described the deal as a "defining moment" in British broadcasting. In the same vein, industry sources stress that "the combination of Britain's biggest free-to-air commercial broadcaster, home of the soap opera Coronation Street, and subscription television company Sky would have been unthinkable just a few years ago, but the rise of YouTube and the streaming giants has left traditional companies exposed".

Market reaction

Market reaction

On the London Stock Exchange, ITV shares rose as much as 1.22 percent to £0.8275 in early trading after the announcement. By contrast, Netflix shares showed little movement in pre-market trading ahead of the NASDAQ open, trading around $77.59 with a 0.08 percent decline, suggesting investors do not anticipate an immediate impact on the streaming giant.

On the regulatory front, the companies' statement notes that "regulators and lawmakers will now decide if they accept the companies' argument that the radical change warrants more flexibility in how deals are assessed". Both the Competition and Markets Authority (CMA) and Ofcom will have to assess whether the new entity exceeds concentration thresholds in the TV advertising market.

Background and timeline

Background and timeline

The agreement comes after months of discreet contacts between the management teams of both companies. Comcast, Sky's parent since 2018, had long been looking to strengthen its position in the UK through high-reach local content. ITV, for its part, had been under pressure for years from the rise of global platforms and the decline in linear-TV advertising revenues.

Analysts at JP Morgan Chase & Co. recommended in March 2021 maintaining an "overweight" position on ITV, one of the few positive recommendations recorded in equity-tracking databases compared with older tips such as "ITV halten" from J.P. Morgan in February 2013 or "ITV verkaufen" from HSBC in April 2013.

Implications for the European audiovisual sector

Implications for the European audiovisual sector

Although the transaction is confined to the British market, its effects could be felt across Europe. The combination of a free-to-air broadcaster with a pay-TV operator of Sky's stature sets a precedent for how traditional groups try to scale up in order to negotiate with platforms such as Netflix, Amazon Prime Video, and Disney+. In Germany, where Sky Deutschland has operated for years, the deal will also be watched closely, although no specific moves have been announced for now.

On a broader level, the deal confirms a trend experts had been anticipating: the consolidation of European broadcasters to counter the dominance of US platforms. The question now is whether other markets, such as Spain, France, or Italy, will follow suit in the coming months.