INSIGHTanalysis: ITV Arrests Audience Decline, But For How Long?

BARB data from MediaTel.co.uk show that the turnaround in impacts for the adult audience began at the beginning of the year, with only June showing a year on year decline so far in 2003 and this is due to the effect of World Cup coverage in 2002. This is a significant improvement on 2002, when all but two months reported a year on year decline, as illustrated on the graph below.

Viewing share ITV1’s share of viewing has largely underperformed BBC1’s since the beginning of last year, surpassing the Beeb in only in February 2002 across the whole period. All the while, share to cable and satellite channels has been creeping up behind ITV, eventually overtaking the Network in June this year and staying ahead since then.

However, despite multichannel’s sustained strong performance, ITV1’s average share is down by only 0.7% points year on year in the eight months to August 2003. By comparison, BBC1’s average share is down by 0.3% points on the same basis, whilst multichannel’s rose by 1.7% points.

Average Share Of Monthly Viewing Jan-Aug 2003
	Average Share Of Viewing Jan-Aug 2003 (%)	Year On Year Change (% points)
ITV1	24.2	-0.7
BBC1	26.0	-0.3
Others	21.9	1.7
Source: BARB, MediaTelINSIGHT

This arrest in audience declines at ITV follows an £80 million increase in the Network’s programming budget, up from £750 million in 2002 to £830 million this year (see INSIGHTanalysis: ITV1 Share Further Eroded In 2002).

However, even with this investment boost, the long-term picture for ITV’s share of viewing is not one of growth, or even stability. Its share will be continually eroded by the rise in multichannel television, with Merrill Lynch forecasting a decline from 22.0% this year to 17.7% by 2010.

ITV’s advertising outlook For the time being, the current stabilisation of audience decline should help ITV in the upcoming round of negotiations with advertisers. These negotiations are due to be taking place at the moment, but some media agencies are understood to be holding back until the outcome of Carlton and Granada’s merger plans is known.

Analysts at Merrill Lynch say that 2004 should see ITV obtain a stable advertising share or even outperform the market. Circumstances will be aided by the BBC’s intention to freeze its programming spend at current levels over the next few years, in the run up to its charter renewal in 2006. This follows a period of aggressive investment and advertising by the Corporation that has led some in the commercial sector to call for a curb on the BBC’s commercial approach to mass broadcasting.

A relaxation in the BBC’s commercial endeavours was predicted earlier this year by analysts at Lehman Brothers, who claimed that the Corporation would return to a stronger public service policy ahead of charter renewal (see BBC’s Commercialism May Have Peaked, Says Lehman Brothers).

ITV has consistently underperformed the total UK advertising market in terms of monthly growth, as shown in the table and graph below. The last month that ITV outgrew the ad market was in June 2000, according to Merrill Lynch.

Net Advertising Revenue Monthly Trends
	UK Total	ITV
May	14.1	9.4
June	10.9	10.7
Q2 2002	6.6	2.0
July	7.7	3.9
August	14.6	7.2
September	11.1	1.9
Q3 2002	11.1	4.2
October	14.2	10.1
November	7.8	3.3
December	0.0	-3.9
Q4 2002	7.8	3.6
January	4.7	-2.5
February	2.0	-3.5
March	-0.7	-5.9
Q1 2003	1.8	-5.1
April	4.8	5.0
May	0.8	-2.5
June	-7.1	-17.0
Q2 2003	-0.5	-4.9
July	-1.8	-7.0
August	-3.8	-11.5
September	13.4	3.4
Q3 2003	3.4	-4.5
Source: Merrill Lynch/media buyers

ITV’s financial year ends in September and Merrill is forecasting a 2.5% decline in ad revenues for the twelve month period.

ITV Quarterly Advertising Revenue Trends (September Year-End)
	Revenue (£m)	Year On Year Change (%)
Q1	458.5	-10.0
Q2	385.9	-13.1
Q3	432.5	2.0
Q4	392.0	4.2
FY 2002	1,668.9	-4.8
Q1	475.2	3.6
Q2	370.1	-4.1
Q3	411.5	-4.9
Q4F	370.0	-5.6
FY 2003F	1,626.7	-2.5
Source: Merrill Lynch, September 2003