ITV Ad Sales Drop as Brexit Forces Companies to Cut Spending

(Bloomberg) -- Advertising income is tumbling at broadcaster ITV Plc as companies brace for Brexit by cutting marketing budgets.

The British maker of hit shows like “Coronation Street” and “Love Island” said it expects total ad revenue to fall by between 3 and 4 percent in the first four months of the year. It’s been slowing since the final months of 2018 as the political deadlock over Brexit deepened.

ITV shares fell 2.2 percent as of 8:01 a.m. in London.

“There’s a lot of contingency planning going on at the moment, and people are spending money in different ways and they’re also protecting margins as much as possible,” Chief Executive Carolyn McCall said on Bloomberg TV Wednesday.

“Most people in Britain in business thought there would be a withdrawal agreement by now,” she said. “I’m afraid companies have to look at their bottom line and be more cautious and that is exactly what is happening between January and April this year.”

Analysts have been forecasting a 0.6 percent decline in total 2019 ad sales at Britain’s biggest free-to-air commercial broadcaster, according to a consensus compiled by the company.

“It could be difficult to get back to that level from this start,” said Bloomberg Intelligence analyst Matthew Bloxham. “Perhaps it doesn’t recover so quickly if Brexit is delayed.”

Theresa May’s government on Tuesday offered lawmakers a vote to delay Brexit if her European Union exit deal is not approved, reducing the risk of a chaotic no-deal departure while potentially prolonging the uncertainty for businesses.

ITV’s ad revenue is also threatened by more viewers switching to internet video services. The Brexit-induced slump comes just as ITV prepares to begin a subscription streaming service to respond to Netflix Inc. and Inc.’s Prime Video.

Streaming Service

ITV said it’s in the concluding phase of talks with publicly-funded British Broadcasting Corp. to establish a strategic partnership to begin a subscription video-on-demand service, called Britbox. The BBC said the project is on track for a launch in the second half of the year.

The streaming service is part of McCall’s push to grow alternative revenue streams, including boosting ITV’s production studios and developing more initiatives like events and merchandise around programs.

The company is pumping out more shows from its production studios every year. ITV Studios total hours of production grew to over 8,900 last year, up from 8,400 hours in 2017 and 7,800 in 2016.

ITV’s shares have declined 24 percent in the past 12 months through Tuesday, compared with a 1.8 percent fall in the FTSE 100 Index.

Full-year 2018 external revenue rose 3 percent to 3.21 billion pounds, in line with the average of 15 analysts’ estimates compiled by Bloomberg.

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