Equity analysts at investment bank Deutsche Bank are not impressed with the UK’s major commercial broadcaster’s latest results. Indeed, the woes at ITV might arguably be replicated at most of Europe’s free-to-view commercial channels.

First up, Deutsche Bank admits that the current UK pre-occupation with an upcoming ‘In/Out’ referendum on its European membership might be causing a temporary uncertainty, and that post-June 24 – when the result is in – might lead to a 2H “bounceback”.

But the bank is far from convinced, saying: “Our checks point to 3 factors, none of which are going away: UK National Living Wage; falling number of adverts being watched from shifting viewing habits & advertisers being more aggressive on pricing. Consensus hopes for 2H recovery are too optimistic. A falling number of adverts being watched is of particular concern as it highlights our concerns for the linear TV ad model, where ITV is most exposed in Europe.”

The only advertising bright spot on the near-horizon is this summer’s Euro2016 football-fest. Deutsche Bank says that European investors are “remarkably sanguine on the growing risks to the linear TV [broadcasting model]”.  The bank stresses its view: “The argument that “Europe is different” is right, but European TV is more exposed, not less than US entertainment names. ITV is most at risk with the UK seeing most rapid shifts and 75 per cent of earnings from linear ads.”

The bank’s report points to a recent study (from GroupM) which shows a dramatically worsening situation as far as the key 16-34 demographic is concerned, where total [adult viewing] impacts are evaporating. While this fall-off is not yet quite so dramatically replicated amongst “all adults”, the downward trend is also declining.

“At the outset it is worth emphasizing that our case is not that TV advertising spend is going to collapse in the near term,” says the bank. “TV is still the most effective ad medium for building mass reach for advertisers. Our concern is that, at the margins, spend is seeping away and this will relegate Euro TV linear TV ad spend to below-historical and sub-GDP growth rates.”

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