Moving from commercials to content
WE’RE about to have the kind of summer that advertisers dream of. The combined effect of the Olympics, the Euro 2012 football championship and the Queen’s Diamond Jubilee will sharply push up bookings, even as the macro economic environment darkens. ITV yesterday said it expected its own ad revenues to jump by between 12 and 17 per cent in June, prompting a raft of upgrades. Numis estimates that every one per cent lift in annual ad sales is equivalent to £15m extra revenues and £12m more profit for the broadcaster.
It works both ways of course. ITV’s huge exposure to the UK advertising market will be a major asset this summer, but a liability in the future. ITV’s slice of overall advertising spend is only going to decline in the coming years, a fact underscored by its declining share of commercial impact (Soci), a key measure that dipped by five per cent in the adult category in the first quarter.
Hence chief executive Adam Crozier’s plan to wean the company off of its reliance on ads by making – and selling – more shows. Yesterday’s update suggests the so-called “creative renewal” is coming along nicely. Revenue at ITV Studios, its in-house production arm, was up 61 per cent in the first quarter, although shareholders shouldn’t expect this kind of performance to continue. This was largely because many of its biggest sellers, such as Hell’s Kitchen and the US version of the Jeremy Kyle show, were delivered to buyers at the start of the year. Instead, revenues at ITV Studios are expected to grow by around 11 per cent or so this year, the same rate as last year. Crozier will of course welcome this summer, but the company’s long term future depends on content – not just ads.