Sky’s £2bn promise to keep Coronation Street on the road

Sky is poised to strike one of the most consequential deals in British television in years, with a £1.6 billion takeover of ITV’s broadcasting arm expected to be accompanied by a separate £2 billion spending commitment to ITV Studios, the production business that houses Coronation Street, Emmerdale and some of the country’s most recognisable entertainment formats.

According to people familiar with the negotiations, the agreement would see Sky, which is owned by Comcast, buy ITV’s media and entertainment division, including its linear channels and streaming platform ITVX, while leaving ITV Studios listed separately on the London Stock Exchange. The transaction could be announced as soon as early July, after months of bargaining over structure, valuation and the future shape of the broadcaster.

The likely arrangement reflects a growing recognition in British media that the old boundaries between broadcaster, producer and streamer have become increasingly difficult to defend. ITV has spent the past decade trying to preserve the economics of free-to-air television while also building a viable digital future. Sky, meanwhile, has been adapting to the same pressures from a stronger position, backed by Comcast’s deep pockets and its own pivot towards streaming and premium sports. A deal of this kind would be less a conventional acquisition than a reorganisation of the UK television landscape around a new set of realities.

The proposed £2 billion commitment to ITV Studios over five years is designed to give the production arm a firmer footing as a standalone public company. It would also, in practical terms, reassure both regulators and investors that the most valuable parts of ITV’s creative output are not being hollowed out in the process of the sale. Under the arrangement understood to be under discussion, Sky would secure contracts to continue making some of ITV’s most commercially important programmes, including Love Island and I’m a Celebrity… Get Me Out of Here!, helping to preserve a pipeline of content that remains central to ITV’s identity and financial performance.

Most immediately, the spending pledge would give greater certainty to Coronation Street and Emmerdale, two of ITV’s flagship soaps and among the longest-running fixtures in British popular culture. Coronation Street remains the UK’s biggest soap opera and still attracts about four million viewers a week, according to Barb, the ratings organisation. That is a respectable audience in an era of fragmentation, but it is a far cry from the days when the programme could draw eight million viewers or more. The decline is emblematic of the pressures facing all traditional broadcasters, who must now defend mass-audience programming in a market where attention is scattered across streaming services, social video and subscription platforms.

ITV Studios itself is not an incidental part of the story. It accounted for just over half of ITV’s £4.1 billion in revenues last year, underscoring how much of the company’s value now lies in production rather than broadcasting. Rooted in the creation of ITV in 1955 as a challenge to the BBC’s monopoly over British television, the group has become a patchwork of dozens of production companies serving not only ITV’s own channels and ITVX but also rival broadcasters and global streamers. That breadth has given it resilience, yet it has also complicated any attempt to split the business cleanly from its distribution arm.

Those complications are at the centre of the current negotiations. The talks have been slowed by the practical and commercial difficulty of separating ITV’s channels and streaming service from the production engine that supplies them. The companies involved must ensure that the broadcast business can be sold without undermining the studios operation, while also preserving the contractual relationships that make the broader group commercially viable. In this case, the shape of the deal appears to have been influenced as much by corporate engineering as by strategic logic.

The inclusion of Love Productions, maker of The Great British Bake Off, in the package is another indication of how the transaction may be structured to preserve value within ITV Studios. It is understood that ITV Studios would buy the business from Sky, in a move that could value it at about £200 million based on prevailing production sector multiples. Such a step would not only add a well-known entertainment brand to ITV Studios’ portfolio but would also reinforce the impression that the surviving listed company is intended to remain a substantial and diversified producer, rather than a diminished relic of the old broadcasting model.

Dame Carolyn McCall, ITV’s long-serving chief executive, is expected to remain in post at the studios business at least until the deal is completed. Her continued involvement would offer a measure of continuity through what is likely to be a lengthy regulatory and operational process. It would also signal that the board is keen to present the transaction not as a fire sale but as a considered reshaping of the company’s future. McCall has spent years attempting to balance the demands of advertising-dependent broadcasting with the need to build a business better suited to the age of streaming. The prospective deal with Sky suggests that the logic of that strategy may now be reaching its endpoint.

Even if the commercial terms are settled, the transaction still faces a difficult passage through the Competition and Markets Authority and Ofcom. Both will scrutinise the implications for competition, plurality and media ownership. That scrutiny is likely to be extensive and could take months. For the CMA, the central issue will be whether the merger would lessen competition in a market already under severe strain. For Ofcom, the concern may be broader, touching on the concentration of influence over news, entertainment and distribution.

In earlier years, a merger of this kind would have appeared highly unlikely. Sky and ITV once occupied clearly separate positions in the British television market, and a combination of their broadcast reach would have seemed likely to trigger serious competition concerns. Indeed, in 2008 the regulator forced Sky to reduce its 17.9 per cent stake in ITV to below 7.5 per cent, a reminder that the relationship between the two companies has long been subject to official suspicion. That history will not be forgotten in the current review.

Yet the argument being advanced by both companies is that the market has changed beyond recognition. Their contention is that the relevant competition is no longer primarily between established broadcasters, but between traditional television and the digital giants that now dominate advertising and audience attention, above all YouTube owner Google. In that reading, a Sky-ITV combination is less a threat to competition than a defensive response to a market that has already been transformed by technology companies with far greater scale and data advantages than any British broadcaster can match.

This is a powerful argument, though not an unanswerable one. Regulators may accept that the old assumptions about broadcasting no longer apply, but they will also be conscious that the consolidation of two major domestic players could still reduce choice in certain areas and concentrate influence over content, advertising and distribution. Particular attention is likely to fall on Sky News and ITV’s 40 per cent stake in ITN, the company behind ITV News, Channel 4 News and 5 News. Ofcom will want to understand what happens if the owner of Sky News also acquires a substantial interest in the wider news production ecosystem.

The strategic rationale for Sky is clear enough. Comcast has been looking for ways to make its British asset more robust, more competitive and less dependent on a shrinking pay-TV model. When Comcast bought Sky in 2018 for $39 billion, the acquisition was presented as a platform for international growth and long-term value creation. The integration was not painless. Comcast was forced to write down Sky’s value by $8.6 billion in 2022, a sharp reminder of how difficult it can be to extract returns from legacy media assets in a volatile market.

A deal with ITV would offer Sky the chance to spread costs, broaden its content base and gain a stronger foothold in free-to-air television, something that has become more attractive as viewing habits continue to evolve. Sky believes that by buying ITV it can strengthen its business model, including through shared overheads and the possibility of offering free-to-air windows for some of its subscription content. That would be particularly valuable if it helps bring more sports and entertainment to a wider audience in the UK while still supporting the commercial logic of subscription services.

There is also a more ambitious strategic calculation at work. Sky wants to build a top-three commercial streaming service in the UK market, and ITVX provides a ready-made platform with brand recognition, audience reach and an established place in British viewing habits. The addition of ITV’s channels would give Sky direct access to a free-to-air distribution base that could complement its pay-TV and streaming business. In a market increasingly defined by hybrid models, that combination could prove more resilient than either company might be alone.

The industrial implications are equally significant. British television has long relied on a delicate ecosystem in which broadcasters commission from independent producers while maintaining large in-house production bases of their own. ITV Studios sits at the intersection of that system. Keeping it independent, but underpinned by long-term commissioning commitments, may be the best available way of preserving competition in production while allowing the broadcast side of ITV to be absorbed into a larger group. If the arrangement works, it could become a template for further consolidation across European media. If it fails, it may merely accelerate the disappearance of another major national broadcaster into the orbit of an American owner.

Sky and ITV have both declined to comment publicly, which is unsurprising given the delicacy of the negotiations and the likely sensitivity of any announcement before the details are finalised. Behind the scenes, however, the talks appear to have reached an advanced stage. The expectation in the market is that an announcement could come in early July, setting in train a regulatory process that will test not only the economics of the deal but the policy assumptions that have governed British broadcasting for decades.

For ITV, the transaction offers both relief and uncertainty. Relief, because the studios business would be given long-term visibility in a sector often defined by short-term commissioning cycles and precarious margins. Uncertainty, because the company’s future as a broadcaster would effectively be outsourced to a larger, better-capitalised competitor. For Sky, the prize is a broader and more integrated position in UK television, one that could help it withstand the erosion of the traditional pay-TV market. For viewers, the likely result is less immediately dramatic than the corporate headlines suggest: familiar programmes, perhaps more secure than before, but made within an industry whose centre of gravity has already moved decisively away from the old age of broadcasting.