OTT concerns for ITV

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Over 50 per cent of UK homes are now signed up to OTT services, according to BARB data released last week. This suggests there could be problems ahead for ITV, the UK’s main commercial broadcaster.

The numbers are staggering with 27 million UK homes accessing one or more OTT services (led by Netflix with 12.35 million homes, followed by Amazon Prime or NOW TV) and a quarter-on-quarter rise of 600,000 homes since Q3/2019.

A report from investment bank Exane/BNPP says that the numbers show why it remains cautious on the prospects for ITV. It also feels that ITV’s own SVoD plans (via Britbox) mean that the bank is anxious because of Britbox’s lack of marketing power and content libraries.

The bank says it has a preference for the combined SVoD plans of France’s Salto pay-TV system “which should help on the competitive dynamic front.”

A recent wider study by the bank on European commercial broadcasters says: “TV has changed a lot, but the worst is yet to come – France & UK the exceptions thanks to cyclical tailwinds The traditional TV advertising market has been relatively resilient over the past decade as the rise of Digital has largely eaten into only Print. TV price (CPMs) rises have offset to some extent audience declines driven by the medium’s promise of reach – a trend we view as unsustainable as audience fragmentation is set to accelerate.”

Exane’s report adds: “While we believe the narrative of declining TV ad revenues is generally acknowledged (even TV chief execs expect TV ad budgets to constitute a smaller share of their revenue mix in the years ahead), this is not yet reflected in consensus estimates in our view. TV net advertising forecasts still look too high and margin erosion is not fully reflected in estimates either. We see further downside risk ahead particularly in Spain, Italy and Germany. In France and the UK we see upside risk to consensus estimates as cyclical tailwinds are in our view set to more than offset structural headwinds.”


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