ITVX Advertising Woes: Will the British Broadcaster Finally Find a Solution?
ITVX's advertising struggles persist as analysts dismiss hopes of improvement, citing Carolyn McCall's attribution of the broadcaster's forecast decline to the stagnant UK economy
Concerns over the performance of the UK economy have led to a ripple effect on broadcasters, raising alarm among advertisers. Carolyn McCall, CEO of ITV, has pointed out that the sluggishness of the UK economy, along with the resultant decline in advertising sales for 2023, can be attributed to a lack of government initiatives. Addressing a Royal Television Society conference on September 21, McCall expressed, "The second half of the year has proven to be quite challenging. Our advertising revenue will be negatively impacted, dragging down all our results. Unfortunately, the UK economy is not faring well."
In July, McCall expressed optimism about the broadcaster's prospects for the second half of 2023. However, despite the success of building digital revenue with ITVX, the outlook for the rest of the year appears bleak. The Bank of England's decision to unexpectedly hold interest rates at 5.25% and a small improvement in consumer confidence in September have not been enough to offset the negative impact of the ongoing cost of living crisis on advertiser confidence. As a result, return on investment continues to be a priority.
ITVX and digital revenue
On the other hand, ITVX is consistently mentioned by the broadcaster as generating an increase in advertising revenue as well as enhancing brand equity, which is consistent with other OTT services introduced by linear broadcasters.
According to Harrington, this situation poses a challenge for the overall ITV business. The emphasis on digital revenues is notable, and though they are growing, the shift from linear programming incurs costs. The allocation of payments between digital and linear airtime can be unclear depending on the specific deal structure. Despite this, digital growth has not yet offset the losses in linear programming. Although analysts are relatively optimistic about commercial television's performance from 2024 onwards, the period leading up to that will be tough for ITV and its competitors.
PwC's media and entertainment leader, Sam Tomlinson, highlights the need to overcome the industry's current weakness while expressing long-term optimism. He predicts a decline in TV advertising in the UK in 2023 compared to the exceptional performance in 2022, but expects growth to resume in 2024 according to PwC's forecasts.
Tomlinson emphasizes the growing appreciation for premium, brand-safe, and fraud-free advertising environments, as well as the expansion of targeted TV advertising, which will contribute to the sector's continued health.
Even though ITV reported positive results in its H1 2023, the advertising environment remains challenging. However, it has become even more daunting as McCall criticizes the UK government for leaving broadcasters to navigate a difficult economy on their own.
