ITV Companies Face Strategic Challenges, Says Lehman Brothers

The two companies now need to concentrate on the core ITV business, targeting advertising sales and the programme schedule. Advertising is now showing a turnaround, beginning with a 10% boost in June and a 6% rise in July, largely due to the World Cup. The year is expected to end down by 6%; 2003 is forecast to show a 4% rise in ad revenue overall.

Pressure on viewing figures However, in terms of programming and viewing figures ITV is certainly feeling the squeeze between the BBC and multi-channel television, says Lehman.

ITV had a peak time lead over BBC1 in H1 2002, but it used to target a lead of 6.5%. Its ratings have slipped gradually over the last and major problems with the new BARB audience measurement survey have hit both ITV and Channel 4 in particular, according to the broker’s report.

Merger expected The Draft Communications Bill, released in May, paved the way for a merger of Carlton and Granada into what would essentially be a single ITV company. The Bill also opened up the possibility of non-EU ownership of the ITV companies, although analysts believe that a UK merger is more likely as a starting point. However, the merger is still at the mercy of the Competition Authority, which is not guaranteed to approve of such a deal.

Lehman says that even if Carlton and Granada do successfully merge, there are still a number of strategic challenges facing the single group. Firstly, there is the continued shift of advertising spend away from television and toward below the line advertising, as well as other display media such as radio and outdoor. This is a problem for all TV companies exposed to advertising, say analysts.

The second problem faced by ITV is to revitalise its audience share which is being squeezed down by the BBC and multichannel stations. “Despite arguments about the relative share of commercial impacts, audience measurement system changes and the large four-year Unilever deal recently announced, the ITV audience share performance is of serious concern to advertisers,” say the analysts.

Comparing the January-April 2002 period with 2002, ITV1’s share is down by 17% in all homes, 10% in multi-channel homes and down 13% in peak time. By comparison, multichannel viewing has increased by 28% over the same period.