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INSIGHTanalysis: Market Forecasts For ITV

INSIGHTanalysis: Market Forecasts For ITV

ITV’s share of television advertising revenue is set to steadily fall over the next five years, possibly to as low as 41%, according to forecasts from MindShare. This is at the bottom end of a set of figures compiled by the Competition Commission this summer as part of its inquiry into the merger of Carlton and Granada (see INSIGHTanalysis: What Next For One ITV?).

At the more optimistic end of the scale, from ITV’s point of view, are the predictions from Initiative Media, which put ITV’s share of net advertising revenue (NAR) at 48.2% by 2007. This is just 4.1% points lower than the average share of 52.3% which the station took during the first eight months of this year. However, ZenithOptimedia figures are more in line with MindShare’s, forecasting a share of NAR of just 43.7% by 2007 for ITV.
ITV Share Of Net Advertising Revenue (NAR) Forecasts 
             
  2002  2003  2004  2005  2006  2007 
Initiative Media 53.8 51.2 50.1 49.1 48.6 48.2
MediaVest 53.4 50.8 48.1 45.3 – –
MindShare 53.5 51.3 48.1 45.7 43.2 41.2
ZenithOptimedia 53.6 51.0 49.1 47.2 45.5 43.7
Source: As above, Competition Commission’s March-August 2003 ITV merger inquiry 

The figures also predict that ITV’s share of commercial impacts will steadily fall between now and 2007, although the rate of decline varies between different forecasters. MindShare is expecting a steep drop from last year’s 43.5% share to just 32.5% in five years’ time. MediaVest and Initiative are more optimistic and ZenithOptimedia’s figures fall almost exactly in between.

ITV Share Of Commercial Impacts Forecasts 
             
  2002  2003  2004  2005  2006  2007 
Initiative Media (Individuals) 42.3 41.9 41.4 40.9 40.2 39.8
MediaVest (Adults) 43.5 42.7 42.2 41.9 – –
MindShare (Adults) 43.5 41.7 38.7 36.3 34.2 32.5
ZenithOptimedia (Adults) 43.5 41.9 40.3 38.8 37.5 36.3
Source: As above, Competition Commission’s March-August 2003 ITV merger inquiry 

The ratio of ITV’s share of NAR to its share of commercial impacts gives a measure of the premium at which ITV airtime is running for advertisers. Currently, ITV trades on a premium of around 20%. In August this year, for example, it took a 51.2% share of all advertising, but only delivered 43.2% of all UK commercial impacts, hence the premium.

Using the impact and revenue share forecasts given above, it is therefore possible to generate a set of forecasts for this airtime premium. ZenithOptimedia, Initiative and MindShare all expect the premium to remain relatively stable after 2003, at a consensus level of around 23%.

However, MediaVest’s figures put ITV’s share of commercial impacts declining at the lowest rate, whilst its share of advertising falls steeply. This leads to a premium of just 8.1% by 2005 (the extent of the group’s forecast period), down from 22.8% in 2002.

Implied ITV Advertising Premium (Revenue / Impacts) 
             
  2002  2003  2004  2005  2006  2007 
Initiative Media (Individuals) 27.2 22.2 21.0 20.0 20.9 21.1
MediaVest (Adults) 22.8 19.0 14.0 8.1 – –
MindShare (Adults) 23.0 23.0 24.3 25.9 26.3 26.8
ZenithOptimedia (Adults) 23.2 21.7 21.8 21.6 21.3 20.4
Source: From above forecasts, calculated by MediaTelINSIGHT 

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