Advertising picture at ITV set to be gloomier than forecast
Blow for broadcaster as firms fight shy of competing with Olympic sponsors
Monday 23 July 2012
The City will be anxious to know the depth of a worse-than-expected downturn in TV advertising when the Downton Abbey broadcaster ITV reports half-year results on Thursday.
Analysts have rushed to downgrade forecasts as it became apparent that many advertisers have decided to pull spending rather than compete with brands that are Olympic sponsors.
Economic jitters have put further pressure on marketing spend, with Numis Securities saying "anecdotal evidence" suggests the TV ad market "could be down 5%-10%" in July and August.
ITV is expected to be particularly hard hit because the BBC has all the Olympics coverage and Channel 4 has the rights to the Paralympics. "We view risks on the downside," warned Numis, noting that every 1% movement in advertising spend is worth £15 million in annual revenues and £12 million in profits before exceptionals.
"The outlook for the crucial autumn months is currently unclear," added the broker. First-half ad revenues are still forecast to be up 3%, thanks in part to Euro 2012, and profits should rise as ITV is now debt-free City analysts will also be hoping that ITV chief executive Adam Crozier will have better news about ITV Studios, the in-house production arm that makes shows such as Titanic and Come Dine With Me.
He has made the expansion of ITV Studios a key part of his transformation plan to reduce reliance on advertising. There is continued industry speculation that ITV could be interested in buying Big Brother production company Endemol but Mr Crozier has previously dismissed such talk.
Meanwhile, BSkyB is expected to report record annual profits on Thursday but analysts are more worried about the storm clouds on the horizon for the pay-TV giant.
Chief executive Jeremy Darroch spent almost £2.3 billion to regain Sky's Premier League football rights, up 40% on previously, and last week he launched Now TV, a cut-price internet movies service to combat the rise of Net Flix and LoveFilm.
Some in the City have been concerned about how Sky's pay-TV subscriber growth has slowed in recent quarters as the economic downturn and the rise of online rivals, known as over-the-top (OTT) players, take their toll.
"What started out as a defensivemove against the new OTT players in town could backfire if cannibalisation of its core business takes hold," Ted Hall, analyst at Informa, warned, referring to Now TV.
Sky maintains that Now TV, which will offer movies for as little as 99p each, is a pro-active step to offer consumers more choice and it says it can absorb the extra cost of the Premier League rights through efficiencies.
After freezing prices a year ago, Sky is expected to increase subscription costs for much of its near-10.5 million customer base this autumn. Other questions also remain about media regulator Ofcom's ongoing "fit and proper" investigation into News Corporation, Sky's biggest shareholder with a 39% stake, in the wake of the phone-hacking affair. Rupert Murdoch stepped down from the board of all of News Corp's UK newspaper businesses at the weekend.
- 1 Home Office says Nigerian asylum-seeker can’t be a lesbian as she’s got children
- 2 What happens to your body when you give up sugar?
- 3 Japanese island overrun with cats after population explodes
- 4 Apple and Google users being spied on for a decade because of 'Freak' security flaw
- 5 Have sex with your iPad thanks to the new sex toy no-one asked for
The City of the Monkey God: Archaeologists claim to have found city lost for 1,000 years in remote Honduran jungle
Japanese island overrun with cats after population explodes
Delhi bus rapist blames dead victim for attack because 'girls are responsible for rape'
Bubonic plague-carrying fleas found on New York City rats
London property boom built on dirty money
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Durham Free School: 'Creationism taught at' free school facing closure
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
Ukip would cut billions from Scottish budget to fund English tax cuts
End of the licence fee: BBC to back radical overhaul of how it is funded
Ukraine crisis: Top Chinese diplomat backs Putin and says West should 'abandon zero-sum mentality'
iJobs Money & Business
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...
£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...
£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...