Online ads are changing the landscape for ITV
A SEA change in advertising is under way, with marketing big-wigs increasingly turning to Facebook and Google. That creates a headache for ITV, which earns a chunk of revenue by charging for its TV ad slots.
Added to economic uncertainty and contracting marketing budgets, and the effect is falling advertising revenue. ITV reported this had fallen 1.5 per cent to £1.8billion in full-year results last week.
The group also said coronavirus will be an extra headwind, and advertising revenue is expected to dip 10 per cent in April.
It isn’t just advertising patterns that are changing. The way we watch shows is unrecognisable compared with 10 years ago, thanks to the growth of Netflix and Amazon Prime.
A bright spot for ITV is growing online revenues, thanks in part to Love Island’s online audiences.
And CEO Carolyn McCall’s wider defence is diversifying ITV away from advertising trends altogether, and part of the strategy is bolstering the production business.
ITV Studios is responsible for just over third of the group’s business at the moment, and has been the manpower behind shows like Hell’s Kitchen and The Voice. Then there’s BritBox, its new joint streaming service with the BBC, which is home to British classics including Gavin & Stacey. However, a lot of people will have to sign up for this project to move the dial.
The overall picture at ITV is mixed. The market wasn’t convinced by last week’s results, and the share price fell almost 12 per cent on the day.
The broadcast business still makes up the lion’s share of profits. To some extent, ITV can only sit tight and hope conditions improve, and that’s not the best place to be in.
Reflecting these concerns, the shares change hands for 8.7 times expected earnings, significantly below the 10-year average. ITV plans to keep the dividend at 8p next year, but a challenging period lies ahead.
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