The FT reports this morning that media agency Zenith is following in the footsteps of many other analysts and brokers by downgrading its 2001 ad revenue forecasts. Three months ago, Zenith forecasts adspend growth for the year at 3.6% but have now amended this figure and are forecasting a drop in adspend for the year of 0.8% (see Forecasts). Reports from the US of firms continuing to slash advertising budgets and rates decreases have led analysts to reconsider their position on adspend, both UK and Global, and most have downgraded previous estimates.
Television appears to have been hit hardest by the much-talked about ‘period of economic uncertainty’. Carlton’s stock price tumbled when its results showed a fall in like for like revenues of 6% although it is important to consider that last year TV revenue was riding high on the dotcom wave. ABN Amro believe that at a result of this, CPTs rose to an unrealistic high relative to other commercial channels causing ITV to lose its advertiser share and leading to difficult comparisons, year on year. Carlton responded to the situation by announcing plans to bring their digital terrestrial TV service, ONdigital, into the ITV fold, creating a free-to-air, pay television and online business under a single management.
Today, Granada Media warned of dire consequences for ITV and ONdigital if the changes to media ownership rules are delayed for at least another two years, as seems likely following the opening of Parliament last week. In a leaked correspondence published in this weekend’s Sunday Times, Granada chairman Charles Allen and CEO Steve Morrison told the government that as a consequence of the delay, Granada may be bought out by a foreign company and ONdigital closed due to its financial difficulties.
In the letter, Allen was said to disclose that he had already received approaches from foreign investors, tempted by Granada’s increasingly depressed share price . Denied the possibility of the planned merger with Carlton, Allen said that fending off such bids may not be possible, especially as delays to the bill are likely to further reduce the companies share price.
Another consequence of the delay could be the end of Carlton and Granada’s financially draining digital TV business, ONdigital. The Granada chairman warned that even if independence was retained, shareholders’ tolerance for pouring money into the project may not be. Such a move would mean a serious dent in the government’s plans to achieve enough digital penetration to switch off and subsequently sell off the analogue signal.
