British broadcaster ITV’s ad revenues for the first half of this year were down 11 percent year-on-year, according to the company’s financial update today, contributing to a one percent fall in total revenues. CEO Carolyn McCall said weak ad revenues had been “expected” given the “very tough advertising market”.
Significantly, total revenues from ITV’s production arm ITV Studios have now overtaken revenues from its Media & Entertainment segment, which is primarily made of ad revenues, as well as subscription revenues and a few other revenue streams.
ITV’s results follow last week’s announcement of major job cuts from European broadcasters Viaplay and ProSiebenSat.1, both of which have also been hit hard by a tough TV ad market. Collectively, these results demonstrate an extremely turbulent period for the broadcasting market, as TV companies rapidly try to transform their business models while dealing with a steep decline in linear TV ad revenues.
Studios the focus
McCall kept an overall positive tone despite the results, saying that ITV has made good strategic process in its transformation plan. Questions remain over how big of a role advertising will play once this transformation is complete. Currently, growth in digital ad revenues aren’t enough to offset declines in linear, meaning advertising’s contribution to ITV’s overall revenues is decreasing. Whether this continues to be the case will likely depend on whether the broadcaster can avoid further steep declines in linear advertising.
Essentially, ITV’s plan is to concentrate on its two growth areas, namely its production arm ITV Studios, and its digital business, through both its streaming platform ITVX and its self-serve ad buying tool Planet V.
Both of these saw strong growth in the first half of the year. Total studios revenues was up eight percent, reaching £1 billion. Total digital revenues, which includes digital advertising and other digital revenue streams, rose 24 percent to £218 million. Total digital ad revenues specifically were also up 24 percent, to £179 million.
And ITV expects this growth to continue. ITV Studios is expected to deliver five percent average organic revenue growth per year to 2026, while ITV says total annual digital revenues will reach at least £750 million in this same window.
Linear meanwhile, ITV’s core business not so long ago, will increasingly become more of a sideshow. The current steep falls in linear ad revenues aren’t expected to last – total ad revenues are expected to be up seven percent year-on-year in August, and growing overall across Q3. Nonetheless, it’s increasingly clear that ITV sees ITVX as the future of its ads business.
ITV’s presentation accompanying the results spoke of “repositioning ITV towards the growth drivers of ITV Studios and the M&E digital business, supported by a cash generative linear broadcaster”. By 2026, ITV expects two-thirds of its total revenues to come either from ITV Studios or the digital side of its media and entertainment segment.
