By Amy-Jo Crowley and Paul Sandle

LONDON, May 13 (Reuters) - Comcast CMCSA.O-owned Sky is advancing towards a deal to acquire ITV's Media and Entertainment unit in a transaction that will include a payout dependent on the British broadcaster's performance, three people familiar with the matter said.

The broadcaster that is home to "Coronation Street" and "I'm a Celebrity..." said in November it was in talks to sell its M&E unit to pay-TV group Sky in a deal that would value the business at 1.6 billion pounds ($2.18 billion). The tie-up aims to create a top-three UK streamer to compete with Netflix NFLX.O, YouTube, Amazon Prime Video AMZN.O and Disney+ DIS.N.

Under the terms being discussed, a portion of the compensation will be contingent on the future performance of the business, the people said. Two of the people said the so-called earn-out portion amounted to around 200 million pounds ($270.34 million).

ITV STUDIOS GAINS SOME SKY TV SERIES RIGHTS

The transaction is also set to include ITV Studios buying a production unit of Sky that holds the rights to a number of TV series, the people said.

The acquisition would bolster ITV Studios’ scripted portfolio and allow it to retain control of valuable intellectual property as ITV exits its media and entertainment arm. ITV Studios would be a standalone business after the deal with Comcast.

The structure of the deal under negotiation has not previously been reported.

If negotiations and financing are concluded successfully, ​a deal could be announced as soon as next month, the people said. The sources, ​who asked not to be named because the matter is confidential, ⁠said there remained a chance of no deal.

ITV, Comcast and Sky declined to comment.

UK BROADCAST MARKET VOLATILITY

Having a portion of the deal based on future performance highlights the volatility of the broadcast market in the UK, where channels like ITV are facing declining advertising.

Talks had slowed in recent months, after a lull in engagement from Comcast's Philadelphia headquarters partly due to complications related to the spinout of Studios, which makes many of ITV's biggest shows, sources told Reuters previously.

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