ITV has reported a 10% drop in advertising revenues in the first three months of this year, and said it expected the situation to get even tougher in the coming months.
The company warned of a “challenging” outlook for ad spending overall as businesses cut back their marketing budgets during an economic slowdown and cost of living crisis. The broadcaster predicting a further drop of 12% in ad revenues in the three months to the end of June, including a 14% fall in June alone.
However, ITV’s chief executive, Carolyn McCall, said the decline in the first quarter of the year was smaller than that experienced in the wider TV advertising market.
She added that the group pulled in large streaming audiences for exclusive series such as Nolly and The Twelve at its online video-on-demand service ITVX, which launched just over a year ago.
ITV, which also broadcasts I’m A Celebrity… Get Me Out Of Here! and Love Island, said ITVX had sustained its strong launch, with digital revenues up 29% and streaming hours 49% higher in the first three months of this year. Digital ad revenues are forecast to be up more than 20% in the second quarter.
Overall media and entertainment revenue at the broadcaster fell 9% to £495m between January and March – but within this total, digital advertising revenue rose 30% to £87m. Revenues from ITV Studios were flat at £457m.
McCall said live “simulcast” viewing of ITV’s biggest shows and sports events – including Love Island and the FA Cup – had been popular with streaming audiences.
She added: “We are looking forward to the third quarter with Love Island and the Rugby World Cup set to draw large broadcast and streaming audiences. ITV is successfully executing phase two of its “more than TV” strategy, despite the current challenging macro and geopolitical environment.”
The company is adding shows such as Malpractice, Crime and Love & Death to its ITVX programming, and is hopeful that it will deliver at least £750m of digital revenues by 2026.
Sophie Lund-Yates, of analysts Hargreaves Lansdown, said: “ITV is throwing a lot at its digital transformation, and digital advertising revenue is proving more resilient. However, this isn’t enough to stem losses elsewhere, showing how deeply rooted ITV still is in traditional broadcasting.
“Studios revenue is on track to deliver mid-single digit revenue growth. This area of the business is sitting on a well of future demand thanks to the huge swell in appetite for content from other providers. There are tricky elements to deal with in content creation though. It’s a very tough business in which to inflate margins.”
ITV is targeting £15m cost savings this year as part of a £50m package of cuts by 2026. Its shares fell 4.5% on Thursday morning.
