Two reports by the stock broker suggested that ITV would be hit by a short-term fall in impacts – the number of people who see an advert – and a long term threat from the rise of the personal video recorder.
Merrill Lynch announced it had downgraded its verdict on ITV shares – no longer recommending them as a buy and rerating them under the term neutral – as it claims that flagship channel ITV1 will end the year more than 5% down in its share of impacts, despite a fight back in the ratings since September.
Under the terms of the contract rights renewal process, this would entitle agencies to move more than £100m out of ITV and into other broadcasters.
In a separate report, entitled The Rise of the Machines , Merrill Lynch claims ITV will be the worst hit of all European broadcasters by the anticipated take up of the PVR, because of the aggressive push by BSkyB behind its machine, Sky+.
Although Merrill Lynch claims the impact will not be truly felt for a couple of years, the reports predict PVRs will wipe out 25% of advertising in homes that take up the technology – which are predicted to amount to 2.5 million among Sky subscribers alone by 2010.
The monthly share report shows ITV’s adult impacts down by 6.7% during the first nine months of the year – from 43% to 40.1% – and Merrill Lynch claims ITV1 is likely to suffer a large share of impacts deficit in January and February, “putting 2006 revenue forecasts under pressure.”
Despite the prediction, Graham Duff, the managing director of ITV Sales has dismissed fears that there will be a mass exodus of ad revenue for ITV under the CRR process during the negotiation season, which is already underway.
ITV’s sell will certainly be boosted by the strong performance already of ITV2 and the launch of ITV3 on Freeview and cable on 1 November. The broadcaster is expected to make a strong case for agencies to stay with ITV because of the growing strength of its digital line up.
Duff also said he saw a silver lining in the clouds of the report regarding PVRs, pointing out that Merrill Lynch predicts that broadcasters will adapt to the threat in areas such as sponsorship, interactivity and product placement.
Duff described some recent reports about the danger of the PVR as “hysterical”.
ITV and the Advertising Association are already in talks with
By Ian Quinn
The great ITV sell off of assets is continuing apace.
The company is thought to be close to agreeing a £50m deal with Thomson to dispose of special effects firm the Moving Picture Company.
ITV is looking at raising around £550m through the sale of non-core assets, also set to include Carlton Screen Advertising and its share in Granada Sky Broadcasting.