In our opinion, there are four main reasons for this deal.
Two are simple and apply equally to other media owners. The other two are less straightforward, and less likely to apply universally. And it is in these later two reasons we see most of the potential value in this deal.
The simple reasons are insurance and efficiency.
Insurance in that advertising expenditure is draining away (albeit slowly) from terrestrial television towards online. ITV has gained another source of advertising revenue, and thus reduced its exposure to a diminishing market.
Efficiency in that ITV Sales is a monstrous machine with better resources and networks than Friends Reunited on its own. Friends Reunited impressions should be better sold, and sold for more under an ITV Sales management team.
Much has been made of both of these points, but they apply to many offline media owners. Of more interest are the reasons unique to ITV: data and the permission to use that data.
Historically, ITV has not needed data. It grew up in a broadcast world where passive millions consumed the single schedule created by the network centre, and where the advertising business model reigned supreme.
Consumers, media landscape and business models have all changed, and continue to do so. Consumers now require choice and content tailored to their interests.
The people at Friends Reunited know their subscribers well. They know their interests, their achievements, and their social network. Friends Reunited knows where they live, and where they have lived.
In a world where context rather than just content is likely to be king, this will give ITV an advantage. If ITV wants to reinvent itself as a provider of truly local or truly individual content, Friends Reunited gives it a vehicle.
Business models in media are evolving. ITV has historically depended solely on advertising income, but is seeking direct consumer income.
Friends Reunited operates a mixed economy business model: part advertising, part subscription, part transaction. Friends Reunited should provide data as to which consumers might provide direct income for ITV.
Equally importantly, it could provide the talent and culture that will enable the efficient development of these revenue streams. In ITV's only other foray into direct sales, ITV Digital, both direct talent and culture were sadly lacking.
And, probably most importantly, Friends Reunited gives ITV permission to use this data. Subscribers have willingly confessed some of their most precious secrets -- early boyfriends, state of happiness with career, interest in new relationships.
Subscribers are used to Friends Reunited bringing them relevant information that they value. That consumer value should be reflected in value to ITV, provided it nurtures these relationships and does not abuse the trust historically earned.
In summary, we believe this is a good deal for ITV, but not one that sets absolute precedents for other media owners. Two unique brands will form a whole that if properly managed should be greater than the sum of the parts.
Mike Colling & Company represents Channel 4.
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