‘ITV’s ad share to plummet after BT Sport Champions League landgrab’

ITV’s share of the TV advertising market is set to be eroded following BT’s landgrab of the exclusive rights to broadcast the UEFA Champions and Europa Leagues from 2015 to 2018, according to analysts at Citigroup who have downgraded the public service broadcaster’s share status from “buy” to “neutral”.

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BT Sport has paid out £897m for its three-year deal to broadcast all 350 live Champions League and Europa League matches each season. The new contract is worth more than double the existing UK broadcasting arrangement, which is currently shared between ITV and Sky. BT announced this weekend it will show the final and at least one match involving each participating British team for free every season.

Much of the commentary since BT Sport launched has surrounded the channels’ impact on BSkyB’s subscription and advertising business – but in terms of the loss of European football, ITV is to be the “biggest loser” of the two. ITV still remains the home of England home internationals until 2018, but it has also relinquished FA Cup rights to the BBC and BT Sport next season. 

In a note to investors, Citi analysts said in 2015 ITV will lose the “tentpole” that supports not only its male sports ratings but its advertising rates more broadly. It predicts ITV’s share of the ad market will drop by 4.5 per cent as a result.

BT’s exclusive acquisition of the Champions League broadcasting rights is also set to increase competition in the market for drama. The increased programming budget released at BSkyB is likely to be reinvested in UK original drama commissions, a move that could crowd out existing players.

Such a push into drama by BSkyB would be a direct challenge to the position of ITV – which recently launched a marketing push with the strapline “ITV where drama lives” – as the provider of premium drama.

Citi caveats its downgrading of ITV shares by adding for the past three years it has said ITV has been on a positive trajectory in terms of quality, audience share, advertising share and margins, with this the first directly negative piece of news in this time. In the six months to 30 June, ITV reported a 2 per cent increase in total revenue to £1.31bn. It next reports to the city on 19 November. 

Citi’s note states: “To be clear, we emphatically don’t think this will blow up the ITV business model. We are not even convinced it will seriously derail growth, especially against the backdrop of an improving UK macro backdrop. We do think, however, that ITV is probably the bigger casualty of BT’s Champions League rights acquisition and this should give investors pause for thought.”

Analysts at Morgan Stanley take a less dramatic view, saying the loss of Champions League rights is “inconvenient rather than seminal for ITV”.

In a note to investors, Morgan Stanley says ITV approaches sports rights “opportunistically” and would not contemplate a big increase in the cost of rights this time around.

It continues: “Overall the market is likely to look at this as just a blip in the ITV story. The relative importance of the Champions League is demonstrated by ITV showing the Tuesday game live so as not to disturb the transmission of Coronation Street on Wednesday nights.”

Elsewhere, analysts from Barclays believe ITV can compensate any likely revenue loss by replacing the lost football matches with “strong but cheaper content”.

ITV said in a statement: “ITV is proud to have been the UK free to air broadcaster of the Champions League since it launched in 1992 and of the Europa League but we were not prepared to pay over the odds in the latest live rights round. Viewers will be able to continue to watch both competitions free on ITV through to 2015 and we remain the home of live England football.”

BT Sport’s European football rights acquisition is “not good news for either advertisers or viewers”, according to media agency the7stars’ head of strategy Dino Myers-Lamptey.

He adds: ”The Champions League on ITV was a 21-year commitment, that kept the nation interested in the biggest cross league club competition in the world.  For advertisers this meant large guaranteed live audiences, and quite possibly the biggest of them all if the final involved English clubs.  The value of large live audiences is increasing daily, with more and more people viewing by PVR and on catch up services.  For advertisers, this means it can be harder to distribute a perfectly timed broadcast message, where large audiences see your key communications at the same time.”

”BT Sport may get there, and this is certainly a big bold step to help get them there, however we suspect that it won’t migrate all the viewers over, and even though they may still freely broadcast the finals, without the build-up games, the numbers won’t compare to what ITV could achieve.”

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