Advertising picture at ITV set to be gloomier than forecast

Blow for broadcaster as firms fight shy of competing with Olympic sponsors

Gideon Spanier
Sunday 22 July 2012 23:15
Comments

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.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Please enter a valid email
Please enter a valid email
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Please enter your first name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
Please enter your last name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
You must be over 18 years old to register
You must be over 18 years old to register
Opt-out-policy
You can opt-out at any time by signing in to your account to manage your preferences. Each email has a link to unsubscribe.

By clicking ‘Create my account’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in