The downgrading of Granada’s share price last week, sparked by the City’s realisation that ITV will struggle to match the ad revenue achieved in the first half of this year, signals some good news for advertisers.
The fall in ad revenue means that airtime inflation is not expected to reach the exorbitant levels of the past year. In fact, some are predicting that airtime inflation could fall to its lowest levels for three years. But at the same time, advertisers will want assurance that the decline in ITV’s peak time viewing figures will be reversed.
ITV’s strong ad revenue performance over the past year – a result of the Rugby World Cup last October, Euro 2000 in the spring and a liberal sprinkling of dot-com ad spend – was always going to be a hard act to follow.
So Granada’s view that last week’s 14 per cent fall in the share price was “overdone” has some credence. It has been known in the industry for some time that this year would prove a tough comparison for ITV, but City investors seem to have only just caught up with the news.
This October, ITV’s airtime sales are forecast to crash by 15 per cent compared with October 1999, when the Rugby World Cup enticed upmarket sectors such as financial services and cars to advertise. October 1999 was ITV’s most successful month ever, raking in &£216m, but revenues this year are expected to fall back to October 1998 levels of about &£190m.
Granada has admitted its first-half performance to March 2001 will not be as strong. “We are not expecting to match last year’s revenues from broadcasting in our first half to March,” said its trading update, released last week.
Phil France, managing director of ITV sales house Granada Enterprises, recently suggested advertisers should “fill their boots” in October (MW August 24).
France declined to comment to MW this week, but he told a Granada spokesman that “nothing much has changed” since he made the previous comments and that “there will be airtime deflation, which will be good for advertisers”.
The extremes of airtime inflation experienced this year are unlikely to be repeated next year, but this depends on whether ITV audiences continue to dwindle. Can daytime viewing be saved by a rehash of Crossroads and the teatime soap Trafalgar Road? And will viewing be buoyed up by new drama, episodes of Survival and Match of the Day? A key date in the television advertisers’ diary will be October 9, when ITV unveils its programmes for 2001.
ITV director of strategy John Hardie expects peaktime audiences to finish the year at about 38 per cent. This is below the station’s previous target of 38.5 per cent but above recent lows of 34 per cent. The two-and-a-half minute increase in advertising minutage as a result of ITV’s deal with the Independent Television Commission over the Ten O’clock News will also help to keep airtime inflation down, he believes.
But for advertisers, the most important thing will be for ITV to keep audiences buoyant. Oliver Cleaver, media director of paper products company Kimberly-Clark, says: “We think there will be 10 per cent airtime sales inflation for young women and housewives with kids – the kind of audiences ITV should be cleaning up on.” He says that earlier this year, inflation for these audiences hit 20 per cent, and in February it was 43 per cent.
“ITV is very good at marketing its product to new clients. But dot-com advertising revenue was only about &£50m this year, which is not massive when total television revenue is likely to be &£3.3bn.”
It has also been predicted that car manufacturers’ ad spend will decline next year as a drop in car prices leads to lower marketing budgets. But Mike Moran, commercial director of Toyota, says: “It’s a very general statement to say they will spend less next year. We don’t plan to spend less – in fact, maybe a bit more.”
After a year of complaining about the rising costs of advertising on ITV – still the only effective medium for mass-market brand-building according to most industry experts – advertisers may be able to take advantage of the new situation. But all will depend on ITV’s ability to pull in the audiences.