In a statement announcing the deal, Sky said the UK media market was undergoing “a profound and rapid transformation, and as competition for audiences intensifies, scale matters more than ever in order to compete with global streaming giants and YouTube in the UK”.
The chief executive of ITV, Dame Carolyn McCall, also said the deal would help both broadcasters take on the streaming giants.
“I think Sky and ITV need this deal because the entire market has changed and the change has been exponential, Dame Carolyn told the BBC.
“So when you look at viewers, there are now 800,000 streaming hours in this market. Five years ago, that was 240,000. That doesn’t even include YouTube.”
She added that competition for viewers and advertisers had become “ferocious”, and it had become more difficult to invest in new shows.
“In order to keep investing in great British content, in order to preserve and protect what we are so proud of as a commercial public sector broadcaster, we believe this is absolutely the right deal for ITV,” she said.
Former ITV chairman Sir Peter Bazalgette, who owns shares in ITV, said the deal was “essential” for the survival of the broadcasters.
“If we don’t see consolidation between domestic broadcasters, we won’t have any in 20 years time and it’s the same for all the European countries because of the competition from the streamers,” he told the BBC’s Today programme.
“It’s a good deal for viewers because it sustains, will sustain, ITV’s investment – as its obligations are as a public service broadcaster – in international news, national news, regional news and all the programmes that its viewers love”, he said.
Sir Peter added that consolidating channels in the UK would put them in a better position to compete against global players, as the sheer size of the US media market gave its firms huge financial firepower.
Dame Caroline Dinenage, chair of the Culture, Media and Sport Committee, said the combined business could “have more clout to attract audiences and advertising revenue”.
However, she added that given the combined market share of the two, Ofcom and the Competition and Markets Authority “will have to look closely to make sure the deal is in the best interests of audiences”.
“Viewers will also want reassurance that there will be no impact on their favourite shows,” she added.
The takeover is still subject to approval from regulators, but when it is completed ITV Studios will become a standalone business.
Under the terms of the deal, ITV will receive £1.2bn in cash and Sky’s Love Productions business, whose shows include Great British Bake Off, which is valued at £200m. ITV will also get a further £200m in 2028 if it meets advertising revenue targets.
Sky said it had also agreed to spend £2.1bn on content from ITV Studios over a five-year period.
Susannah Streeter, chief investment strategist at Wealth Club, said the deal would be a “significant step in the reshaping of Europe’s media landscape”.
“Traditional broadcasters are having to change tactics fast in the battle for audiences whose attention is increasingly fragmented across streaming platforms, social media and online video, making advertising revenues harder to sustain,” she said.
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