ITV considers switching digital channels to subscription-only

ITV has been in talks with BSkyB about moving its advertiser-funded free-to-air digital channels such as ITV2 to subscription, which means they would no longer be available on Freeview.

The commercial broadcaster has been forced to consider switching its channels amid the ongoing economic downturn, despite the success of its current free-to-air strategy, which has made ITV2 the most watched non-sports digital channel in the UK.

ITV is thought to be considering moving the popular youth-focused entertainment channel ITV2, the classic ITV drama strand ITV3 and its male-oriented channel ITV4 to subscription-only, according to reports.

One option could involve ITV paying BSkyB a nominal carriage fee for broadcasting the channels and receive a guaranteed cut of revenues from channel packages sold to subscribers in return.

A move back into the pay TV market would help the broadcaster reduce its dependence on advertising – the UK TV ad market fell by 4.8% year on year in 2008 and ITV forecasts a 16% year on year fall in the first six months of 2009.

However, by switching the digital channels to pay-TV, ITV would lose distribution in around 10 million homes that currently receive digital TV on their main set via Freeview.

ITV would be forced to rely on Sky, which remains its largest shareholder with a 17.9% stake despite being told to reduce it to less than 7.5% by the competition regulators.

The commercial broadcaster would also need to come to a separate distribution deal with Virgin Media, which has around 3.5 million cable-TV subscribers across the UK.

ITV’s latest proposals are part of its wider cost-cutting strategy, which has seen the company cut 1,600 jobs since September as well as drastically slash its annual programming budget.

The company also hopes to save money by selling off assets, including Friends Reunited and SDN.