LONDON: Comcast's Sky has agreed to buy the broadcast channels and streaming service of Britain's ITV for £1.6 billion ($2.13 billion), creating a British champion with the scale to compete with global players like Netflix, Amazon and Disney.
Sky CEO Dana Strong said the deal, announced on Monday and confirming a recent Reuters story, was a "defining moment", one of the biggest in the history of British broadcasting. It will now face scrutiny from regulators and lawmakers.
The combination of Britain's biggest free-to-air commercial broadcaster and the pay-TV 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.
COMBINED COMPANY HAS 70% OF TV AD MARKET
The merger of the public service channels of ITV, and the leading pay-TV business of Sky, founded by Rupert Murdoch in 1989, would account for more than 70% of the UK television advertising market, analysts have said.
Strong said the deal would deliver "outstanding British programming" in a rapidly changing world.
"ITV will remain a public service broadcaster at the heart of British life, and we're excited about the future we can build together," she said.
To satisfy regulatory concerns, Sky may be forced to relinquish its third-party ad sales contracts, for example for Paramount-owned Channel 5, as the 70% television ad share includes those contracts.
Dealmakers and companies in Britain will be watching this transaction closely, to see if a deal that would once have been blocked could be approved after the government in 2025 called on regulators to prioritise the conditions for growth and investment.
Culture Minister Lisa Nandy showed she had the appetite to shape media deals when she said last week that she could intervene in the U.S. Paramount-Warner tie-up.
The new combined company will reach over 20 million households. But at a time when traditional television is losing audiences to streaming and YouTube, particularly amongst 16-24 year olds, the companies will argue they need to merge to compete.
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ITV LEFT AS STANDALONE PRODUCTION BUSINESS
Shares in ITV traded up 0.5% to 82 pence in early deals on Monday. The company has for years struggled with a tough ad market, and its shares have lost 36% over the last five years.
The deal will leave ITV as a standalone production business, making shows for the combined ITV-Sky, such as Love Island and Coronation Street, as well as other broadcasters and streamers globally, such as Rivals, made for Disney, and The Reluctant Traveller for Apple TV.
The merged ITV-Sky company has committed to spend a minimum of £2.1 billion over 2028-2032.
ITV will receive £1.2 billion in cash, and in an earn-out agreement will get up to £200 million dependent on its advertising performance in the 2027 financial year. ITV will also get Love Productions, maker of "The Great British Bake Off", which will join the remaining ITV Studios business, the companies said.
In Britain, Sky was for decades synonymous with the Murdoch family, with Rupert's son James holding key positions.
Sky was sold to Comcast in 2018. The US giant said in June it would spin out its media assets, including NBCUniversal and Sky, from its cable business, reflecting the growing pressure from streaming rivals.
($1 = £0.7497)
