ITV: Risks ahead
March 5, 2015
The initial results from the UK’s leading commercial broadcaster ITV were received well (pre-tax profits up 39 per cent to £605 million for the year). But now the analysts have had a chance to get their teeth into the numbers, and they have some concerns as to the state of play at ITV.
William Packer, an analyst at investment bank Exane BNP-Paribas, praises the results overall, and in particular the work done on improving margins at ITV’s Studios and Broadcasting as well as its Online divisions.
One new revenue target for ITV is winning retransmission fees from distributors such as Sky UK and Virgin Media. Exane says it expects barriers to be hit with this aim.
Packer also warns that ITV’s audience demand and loyalty remaining weak, and “a key challenge” for management. “We see ITV’s ability to protect [its] audience as key in sustaining their substantial ad-share.”
This theme is echoed by Berenberg Bank. Analyst Sarah Simon compares and contrasts ITV’s position with that of the major US networks and multichannel broadcasters, saying: “While management played down audience share loss, further declines in January and February render ITV vulnerable to structural change. In the US, while the broadcasters defied poor ratings for a while, once advertisers began to shift money to online video, TV advertising growth turned negative. We think ITV is vulnerable to this trend, potentially as early as 2016.”
Simon also warns that the likes of Netflix are not alone in looking to steal eyeballs away from ITV. She highlights Facebook, YouTube and AOL “all of whom are seeking to take money from the TV industry.”