Advertising decline at ITV quickens

Bleak forecasts are in line with similar warnings across the industry

ITV is preparing for a serious fall in advertising revenues over the final three months of the year, warning yesterday that it expects sales in the final quarter to be almost a tenth down on the same period last year.

The UK's largest commercial television company warned it had already begun to feel the effects of the economic slowdown, with advertising sales down in the first nine months of the year, but it now expects the decline to become much more serious.

Over the nine months to the end of September, advertising revenues were down 2.5 per cent to £1.04bn, ITV said. It predicted a 9 per cent drop in sales over the three months to the end of December.

ITV's problems may actually be slightly less acute than those of the overall commercial television market. Michael Grade, ITV's executive chairman, said the company believed sales across the sector as a whole were down 3.2 per cent during the first nine months of the year and that it was projecting a 9.4 per cent decline in the final sector.

Mr Grade said ITV's forecast reflected "tough economic conditions" and that the company was now outperforming the wider sector, with its share of television advertising projected to remain stable for the first time in 25 years.

Nevertheless, the broadcaster is expecting a very difficult year in 2009, particularly over the first six months, with the slowdown expected to continue to hit both television advertising sales and revenues from online advertising, which is becoming increasingly important to ITV.

The company's bleak forecasts are in line with similar warnings from across the advertising industry. WPP, the country's biggest advertising agency, said last week that it expected sales across the industry to fall in the UK and Western Europe over the next 12 months, as companies cut back on marketing budgets.

ITV plans to bring its online operations under the control of Peter Fincham, its highly regarded director of television. The broadcaster's expanding online activities include Kangaroo, the video-on-demand service in which it is investing heavily alongside partners BBC Worldwide and Channel Four.

The company is also struggling to make cost savings while staying within the terms of its public sector broadcasting remit. It expects to make savings of £40m from regional television operations next year, with a further £35m of cost reductions scheduled for 2010.

Mr Grade is keen to make further savings by renegotiating the terms of ITV's public sector broadcasting commitments. Earlier this year, he threatened to hand back the company's Ofcom licences if ITV is unable to secure some sort of deal with the broadcasting regulator. However, such a radical move would not be without risk. Ofcom has warned that broadcasters that fail to meet their licence obligations could face heavy fines. Dropping the licence would also jeopardise ITV's valuable positioning on electronic programming guides.

Nevertheless, a prolonged slowdown in the advertising market would leave ITV with little choice but to press its case for regulatory reform more forcibly. It has already won some concessions. Last month Ofcom suggested the broadcaster should be allowed to reduce the minimum number of programmes made outside London from 50 to 35 per cent.