All 1 entries tagged Advertising And Recession
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March 05, 2008
Is ITV Going down the tubes?
Beginning to examine the British TV system in the contemporary Broadcasting / Multicasting environment can be little else but a work in progress which at least gives a notion of forward movement. It is highly debateable whether TV as we know it has got a promising future. Here we examine the long-term decline of ITV which up until the early 1990s had been the companion of the BBC in the British Broadcasting duopoly. What is discussed below is the question of whether the gloabl economic recession will send ITV to the wall or will it force a takeover or set of mergers. Whatever the outcome it is expected that ITV will not survive the next 18 months in its present form.
One of my alert Sixth Formers alerted me to the fact that a problem had been announced with ITV, this morning. Well it was a very big but expected problem. ITV profits sank by a monstrous 38%.
Commercial broadcaster ITV has seen its annual profits for 2007 fall by 35% to £188m after a difficult year, but says its "turnaround plan is on track" (BBC News online check this page to listen to Michael Grade's rather tetchy protesting too much responses to serious questions. What does that tell you?)
It certainly begs the question about whether current shareholders should run for the exits and get what money they can for the shares despite the presence of the rather abrasive Michael Grade who came in a year ago to try and turn around ITV's lack of fortunes. It is a problem exacerbated by the great phone calls rip off, where loyal but rather naive suckers were phoning in to try and win competitions after the entries had been closed by the institution without telling anybody.
Michael Grade currently ITV Chief Executive
Former BBC One controller Peter Fincham will join ITV as director of television, replacing Simon Shaps, the commercial broadcaster has said.
Of course I should have guessed these highly significant results were coming out as Monday's Media Guardian was full of upbeat messages about how well TV was doing with viewing hours up. The back page even featured a full page advvert claiming that teenagers were spending more time on line "discussing what they had seen on the TV Yesterday"!!!!
teenagers online...discussing what they had seen on the TV Yesterday"!!!!
Well I don't think so! Neither did anybody else in the class. A couple said they mentioned a TV programme if they had just seen it and were explaining what they were doing, but to pretend that this is a harkback to the days of mass TV audiences who discussed a significant programme such as Coronation Street the following day...RISIBLE (LOL 2U).
Grade's struggle to turnaround the failing ITV
Below I look at the beginnings of change in the approach of ITV and place it into the contemporary world of rapidly increasing economic crisis in the US and ultimately the UK. The fact is that the health of the macro-economy is extremly important to the survival and profitability of media companies. I suggest that the emerging economic crisi as well as a changing media environment is going to dramatically effect companies which are effectively medium scale regional players. ITV is one of these and it has had a series of failures and problems in the past few years which now make perhaps the weakest media company in the UK. With the chill wind of recession gathering pace there is little chance of ITV surviving in its present form. Whilst there is no doubt that Grade is probably the best man to get the best out ITV when it gets taken over or merges with another company or is broken up into a production arm and a distribution arm the market view is currently very pesssimistic.
As far as Sky is concerned they would probably prefer to see the company break-up into a production arm and a distribution arm. With a 17.9% chunk which will need to be sold as a single chunk they are undubtedly engineering deals behind Grade's back. Perhaps with Disney is one suggestion. A likely outcome would then be the production arm being sold off, which might end up with Virgin Media who have no production presence and sorely need some in an era when production for the mobile market after 2012 is going to be highly significant. It is hard to imagine what Disney would want with the news service and obviously Sky don't need it. Perhaps Virgin would take it on board? another possible is Bertelsmann, certainly speculation is rife, just don't expect ITV to last long in its present form. Grade is increasingly embattled.
Bertelsmann has always been the obvious buyer for BSkyB's stake in ITV. Its subsidiary RTL already owns channel Five. Now that Bertelsmann has shelved plans to spend £710m buying the remaining 10pc of RTL that it does not own, perhaps it will seek new targets to channel those funds. (By Juliette Garside Daily Telegraph Last Updated: 11:48pm GMT29/01/2008)
One of ITV's original strengths was the fact that it was a network and that it provided strong regional idenitities. Arguably it forced a change in the Public Service Broadcasting (PSB) remit. Nowadays it wants to maximise profits (well minimize losses in thier case). As a result massive cuts are being made in regional programming. Given that one of the remits for PSB in the 2006 white paper was to provide for regional identity this is a little ironic! Let's look at what the Press Gazette has to say about it all:
ITV has already cut its regional budget by almost five per cent ahead of a drastic reorganisation of its news output over the next two years, the broadcaster revealed today.
In its end-of-year results, published this morning, ITV said its regional programming costs were reduced by £5m in 2007, down 4.2 per cent to £114m.
Regional news accounts for about three quarters of this budget, or £85m - a figure which could be cut to £40m if ITV's regional news reorganisation is approved by Ofcom.
Under the proposals, the existing 17 news regions will be merged to form nine bigger regions. Widespread redundancies are expected as part of the cuts.(Press Gazette Paul McNally)
Grade's optimism seems wildly misplaced given that the economy in general is heading into a downturn. However deep that downturn is the advertising industry is always the first to react. Just look at the regional advertising for newspapers from the important Johnstone press group which also announced its results today:
Johnston Press has ruled out making any "significant acquisitions" this year and has warned it is beginning to feel the impact of a slowdown in advertising.
The regional newspaper group posted a 4.6 per cent decline in profit to £178.1m for 207, with revenue up 0.9 per cent to £607.5m.
In its end-of-year results, published this morning, Johnston said print advertising revenue fell 2.1 per cent in 2007.
Early indications based on the first few weeks of 2008 pointed to a 4.2 per cent decline in ad revenue compared with the same time last year, with motoring and property advertising among the worst-hit. (Paul McNally)
Economic Slowdown / Recession / Stagflation: The Evidence
Grade has tried to brush off the ITV share price as just a bit of a 'panic about a consumer downturn' however Evan Davis the BBC Economics editor makes some salient points about retail sales. Let's take a look at what is actually going on. The state of the US economy is fundamental in what happens because it represent 25% of the total world economy! The BBC economics pages make this clear:
The US economy, a $15 trillion giant which makes up 25% of the world economy, is in trouble, and could drag down world growth. The US central bank has cut interest rates aggressively and the US Congress is planning an economic stimulus package to prevent a recession.
The chart from the 31st of January 2008 below is a disturbing one.
This useful BBC timeline provides links to Bank losses in January and February
US economy in slowdown says Fed 5th March
Thursday March 6th. Large rise in USA of people losing their homes
United States March 7th Unemployment rises. This will contribute to a rise in home forclosures. A dangerous downward spiral is in danger of occurring.
By Friday the Seventh March the US Federal Reserve seems to have been panicked yet again
Monday March 10th: BBC reports consumer prices at a 16 year high
Monday March 10th: Oil hits record price of over $108 per barrel
Monday March 10th: ITV Targets Youth Audience on BEBO. (Adaptation or desperation)
Tuesday March 11th: The UK's employment outlook is the weakest for 15 years, as companies continue to cut back on their recruitment plans, a report claims.
Tuesday March 11th: The price of crude oil has set a fresh record at $109.72, its fifth day in a row of historic highs.
Tuesday March 11th: The mortgage market is shrinking under the impact of the continuing problems in the banking system, say lenders.
Tuesday March 11th: The world's largest central banks have launched their latest co-ordinated action to calm jittery credit markets. The question many re asking is whther this is a sign of panic and whether they do anything more than hold up flagging markets for a bit. Many commentators argue that central bank intervention can't deal with the underlying issue of too much spending on credit in the UK and the USA.
Wednesday March 12th: The price of crude oil has set a fresh record for a sixth consecutive day, hitting $110.20 as a falling dollar encouraged buying.
Thursday 13th March looks unlucky for some
- Big fall in retail sales in the USA in February. Is this more than straws in the wind?
- Gold hits $1,000 per ounce for the first time ever. Gold always goes up when investors are looking for 'safe haven'. Bit more than a consumer panic I think Mr Grade
- Whilst this news will create a flood of crocodile tears the fact that a hedge fund Carlyle Capital is going under even after the Fed and other central banks have taken action to try and reassure the markets shows how deep the lack of confidence is. Read this article and the associated Peston blog to see why this is important
- The fact that AOL has acquired BEBO for what seems to be something of a bargain price shows just how down the market is on media and advertising at the moment. A good buy for AOL - does this harbinger a good-bye for ITV as the media sector loks to 'consolidate'? AOL itself has suffered recent profit falls and is seeking to reposition itself in the internet marketplace. They can afford to buy ITV cannot!
- Oh yes and car depreciation rates are set to increase by %8 more than usual this year. Whilst a glimmer of schadenfreude passes the lips as a Range Rover passes the fact of the matter is that all the signs of recession there. In an era when targeted rather than mass advertising is the thing, particularly finding the premuim markets, what is ITV going to be advertising and too whom. Taking a topslicing if the government offers might be a good idea!
- A rather telling quotation from a city economist rather than a panic stricken consumer: "Looking at the markets there is a complete loss of confidence and that's because the markets are concerned over the US financial sector and ultimately what the Federal Reserve will be forced to do to support that sector."
- US bank Bear Stearns has got emergency funding, in a move that raises fears that one of Wall Street's biggest names is on the verge of collapsing.
- ...if Bear Stearns had been allowed to collapse, it could have put the whole financial system at risk.
Bear Stearns shares dropped as much as 53% on the news before finishing Friday trading down 46%.
- Gold hit yet another high
- Oh yes I nearly forgot another hedge fund collapsed! - Carlyle. With the sharp slowdown in the US housing market, doubts have emerged about the viability of mortgage assets even if they are not linked to sub-prime borrowers with poor credit. And it is this which has hit Carlyle - which held Triple A mortgage securities backed by government-sponsored mortgage lenders..
Monday 17th: Well the day Bear Stearns banks is taken over for peanuts. This is a powerful financial institution with shares worth at one point apparently 100 times the selling share price of a mere $2.00 US!!! OK ITV isn't a bank but then its shares were never a few hundred dollars.
Still think Grade was right about brushing off the state of the economy? The fact isthe outlook is bleak for the weakest sections of the media in general. Expect 'consolidation' over the next 18months (especially with ITV).
The Financial Services Authority (FSA) has warned banks that the crisis in the financial markets will force them to change the way they do business.
All this very recent economic and business data shows had bad it is becoming, it seems that an advertising slowdown is well under way. Grade may get a larger share of a falling market but is that good enough? Well most investors must be examining whether it worth holding onto their shares at the moment. Obviously Sky TV hold around 17% of these shares which it bought at a much high price in order to block any potential takeover from Virgin Media. If forced to sell Sky would make a large loss but from a strategic perspective it would probably be worth it.
The fact of the matter is that everyday the business and stock markets come out with worse news about financial expectations. The debate over the preceding months has moved from one of a bit of overexposure to sub-prime mortgages in the US to yesterdays slumping markets as a recognition that the US is inexorably heading into recession comes to the fore. The problem for the rest of the world is that it is still highly dependent upon the US which has been living on credit for a long time. Now people are begining to draw the line.
The UK is clearly in a very weak economic position with an overvalued pound, a housing market which has become entirely disconnected to economic fundamentals because of the availability of cheap credit which has lulled houseowners into feeling richer than they are because the house prices have nominally trebled in value in recent years.
This is likely to have an enormous effect upon ITV and other commercial media companies, becuase the advertising spend is going to to start drying up big-time. People are rapidly reigning in their spending at a time when the basic cost of living is suddenly beginning to soar in terms of fuel and transport, heating and food costs. At the same time the cost of products is beginning to rise because of the cost of basic commodities such as metals. Interestingly there has been the return of the term "stagflation" in economic discourse.
Stagflation is a term which emerged in the 1970s partially as a response to high oil prices which coincided with the end of the post-war economic long-boom. It described a period when prices were increasing faster than wages and economic growth had halted accompanied by a gradual rise in unemployment.
Whilst the sort of recession seen in the world in 1929 is very unlikely because financial institutions are far more aware of how to manage things there is likely to be a prolonged downturn in spending in the U.K. This means that advertising budgets will become rapidly reduced and overall economic activity is likely to see the weakest media organisations go bankrupt or be taken over by the strong. however a quick read of the influential 'Lex' column this morning (Saturday 08 / 03 / 08) makes my glomy prognosis by no means the most pessimistic about economic futures :
Now after a very nasty week in markets, the whispers are that it might be the big one: the worst crisis since the 1930s. Signals of distress abound: Yesterday's non-farm payroll data were awful, the US auction rate market is closed, bank shares are collapsing, interbank rates are back in the dnager zone and debt spreads are ballooning. even sovereign borrowers such as Italy are being hit. Meanwhile credit funds that made silly bets are dying."
ITV is in a very weak position. It appeals to audiences who tend to be in the lower income brackets and who will feel the consequenses of any economic downturn the most. In the past this would have meant a reduction in profits but shareholders in a stable media environment would know that this was very much a cyclical business with any economic good news rapidly being translated into increased advertising revenue.
Because the nature of employment has changed quite a lot of economic activity can be reduced on the margins of society. People will go out to eat less and jobs for teenage studnets may become lower paid, shorter hours or disappear altogether. This is important because these teenagers usually feed their earnings straight back into the market-place buying cultural goods and services feeding the "cultural industries".
Already in the US we can see problems emerging in organisations such as Starbucks which is very much the beneficiary of some spare cash in the system:
Starbucks has been hit by a combination of rising raw material costs, which has forced it to raise prices and a drop in consumer confidence as a result of the sub-prime mortgage crisis, which has made its expensive coffee a little less alluring. The company increased prices over the summer but pricing pressures are continuing - milk prices, for instance, have increased more than 60% since the start of the year. (Guardian November 2007)
Now if you read this story at first sight it seems to contradict my argument regarding advertising becuase they are going to try and advertise their way out of trouble. Prior to this though Starbucks had never advertised and the other thing is they now have much more competition. Given the nature of the crisis it is unlikely that advertising is going to make anything other than a short-term difference. The next step will be special offers and promotions and will provide evidence that Starbucks is no longer a premium brand. By January 8th Starbucks had lost its chief executive:
Starbucks has sacked its chief executive Jim Donald and handed the reins back to its chairman and former chief executive, Howard Schultz. (BBC Report)
What we can expect in the UK over the next 18months is a consolidation of the market with brands coming up for auction. Possibly private equity will encourage the merging of a couple of brands. We have Cafe Nero / Costa Coffee / Starbucks in most town and city centres. Expect some to go!
The Changed Media Environment
As if the general outlook for media in genral is pretty bleak there are specific factors which contribute to ITV's position as the investment dog amongst media companies. A lot of things have changed in the British media environment in recent years. The internet is still making a huge difference and models of media are still adapting and creating. Here the audience of ITV will tend to be less computer literate and to have lower numbers of computers in the household. Many of this lower income audience upon whom ITV relies upon especially in the north of Britain have been largely excluded from the nominal rise in house prices which have fuelled the hidden inflation promoted by the government. They are most exposed to the credit squeeze and they inevitably end up with the most expensive credit which after all is spending one's future earnings / income at a price!
The vast range of different types of media consumption is also also changing audiences. young people spend a lot of income upon games, mobiles, iPods etc.
The changing media environment had meant that increasingly commercial TV companies had started to change the basis of their revenue streams in a mockery of much hyped so-called "interactivity". This was the increasingly popular model of creating TV Premium phone-lines for viewers to "particiapte" in media events that were being staged (so-called "reality-TV" for example). To some extent this was managing to move commercial broadcasting companies away form their dpendence upon advertising revenue as advertisers themselves began to migrate onto the internet taking thier budgets with them.
As if the above unfurling economic slowdown isn't enough of a problem there is a problem of fragmenting audiences who are getting their content from elsewhere often via the internet. Young people seem to be gradually migrating away from TV and the TV they watch is clearly more targeted at youth audiences. My sixth form students seem to watch Channel Four the most and experience it as the main TV company which is aimed at 'Youth'. With a range of digital channels and forms of public service broadcasting coming from the BBC such as Asian Network there is also a growth of ethnically based media consumers as well. An OFCOM research report from July 2007 suggests that there will be little incentive for ITV to provide public service broadcasting for regional news services.
ITV certainly isn't targeted at today's aspirant consumers it is a channel "for grannies" commented one of my sixth-formers. Perhaps a little ageist but the fundamental point is that advertising itself is fragmenting and chasing 'niche' audiences. These niches themesleves are quite dynamic and multicasters have to be able to respond to changing tastes and fashions very quickly.
Loss of trust in ITV and to some extent BBC
As mentioned earlier revenue streams for broadcasting companies previously dependent upon advertising increasingly promoted a model of cheap TV which provided the opportunity to get audiences to participate using premium phone-lines. Here I argue that to a large extent this led to an increased 'dumbing down' of popular TV and ultimately led to a total ripping off of the audiences. The long-term outcome of this is still unfolding however it is questionable whether ITV can continue in its current form.
- Trouble started to emerge about a year ago as the BBC reports
- In 2007 ITV lsot the trust of vast numbers of its audiences when it was revealed that these audiences were being totally ripped off by phone-in scams:
- In July The Times suggest 25 million were ripped off by phone scams
- By the end of July 2007 the scandal was causing resignations as the Telegraph reports
- July also saw trouble for the BBC as they themselves had to report. Whilst the business was merely a slap on the wrist for a very minor infraction it helped to create to an atmosphere of mistrust
- Independent September 2007 on dropping of the British Comedy awards
- It led to large fines for GMTV as the BBC reports
- By October 2007 the Guardian was reporting that the Serious Fraud Office were involved
- On the same day politicians were becoming increasingly critical of ITV repported the Guardia (Interesting to note here that Peter Hain was forced to resign only a few weeks later!)
Where is ITV Now?
There are signs of desparation crreping in at ITV as Michael Grade carries on with attempting what appears tobe structurally impossible. This recent Daily Telegraph comment on the business angle shows a scepticism is is hard to disagree with:
Show goes on for Grade as Shaps exitsBy Alistair Osborne, Business Editor
Last Updated: 1:40am GMT01/03/2008
ITV has instigated a bold management shake-up that sees the departure of television director Simon Shaps and the extension of Michael Grade's tenure as executive chairman for another year.
As the Telegraph notes in ITV:
The shares, down 37pc in the last 12 months, slipped 2.4 to 68.7p. Mr Grade said: "The share price is all to do with panic over a consumer downturn and the overhang of BSkyB’s 17.9pc stake."
Below in July an investment advice website This is Money noted the optimistic outlook of Michael Grade who argued in July 2007 that advertising outlook was looking strong. Clearly this argument is obviated by the current economic conditions outlined above.
First-half ad revenues at ITV1 were down 9% at £595m, slightly better than Grade had forecast at the group's annual meeting in May. With digital stations ITV2, ITV3 and ITV4 and GMTV together producing a 24% rise in ad revenues to £122m, the overall group decline in the first half was 5%.
The British television advertising market looks to be recovering strongly and is expected to be up by 10% in July. ITV's own experience shows that demand became increasingly strong through May and June.
Chief operating officer John Cresswell said: 'Returning stability in the total TV advertising market has been an important feature of the first half, as has the improving schedule performance and the roll-out of itv.com.'
Below are the latest share prices taken from the BBC Markets page on Saturday 15th March. They make pretty grim reading having dropped by a quater since Xmas.
Here is a chart for the ITV share price for the last 12 months, it makes pretty grim reading for Sky who have bought over !7% of the company:
Under the circumstances the ITV News at Ten initiative without adverts seems like a desperate measure to recapture audiences reports the Guardian :
ITV is running its resurrected News at Ten without any advertising breaks - a move that is set to cost it hundreds of thousands of pounds in lost revenue.
The broadcaster said today it had no immediate plans to introduce a commercial break into the programme, after the first edition of the new-look programme ran uninterrupted last night, with a commercial break at the end before the regional news.
ITV traditionally runs commercials halfway through its nightly news bulletin, with 60-second spots some of the most expensive on the network at up to £100,000.
Industry sources said the move to run the new
ad-free is a bid to lure more viewers away from BBC1's 10 O'Clock News, which runs uninterrupted.
The Guardian reports that the return of News at Ten haslargely been a failure leaving ITV an even more unconvincing bet:
BBC1's Ten O'Clock News has pulled in almost twice as many viewers as News at Ten since the ITV1 bulletin was relaunched a month ago.
Figures for the revamped News at Ten show that since the bongs returned on January 14, it has pulled in an average of 2.7 million viewers, Monday to Thursday, when the ITV1 bulletin is head to head with its BBC1 rival.
This compares with the 4.8 million viewers who have been tuning into BBC1's 10pm news on average.
The ITV Owned loss making Carlton Screen Advertising
As if the above information isn't bad enough one of ITV's subsidiary organisations is managing to make a magnificent loss in the Cinema advertising industry. Hard to make a loss in a part of the economy which has been doing well but is likely to be hit as the recession develops. The Times recounts the sorry story yet another in the story of ITV mismanagement making you feel sorry for Michael Grade (well almost):
The company behind Australian cinema chain Hoyts is looking to buy loss-making Carlton Screen Advertising from ITV.
Pacific Equity Partners is one of two parties to have registered interest with Grant Thornton, the broadcaster’s adviser.
Once worth £80m, analysts now value CSA at nothing, despite healthy cinema attendances. ITV may even have to pay someone to take it off its hands.
The backdrop to declining audiences for both ITV and BBC in 2007The Daily Telegraph noted on the 19th January 2008 that:
The fall in ratings follows an embarrassing 12 months marred by phone-in scandals, with both channels being forced to apologise to viewers for encouraging them to enter competitions they never stood a chance of winning. BBC1's share's of viewers during the peak 8pm to 11pm slot fell from 24.22 per cent in 2006 to 23.43 per cent in 2007, while ITV fell fromFor the first time in television history, fewer than half of viewers watched either BBC1 or ITV1 during prime-time last year. 26.82 per cent to 25.32. The ratings, published by Broadcast magazine, were based on official figures by the research organisation Barb.
Grade stands by ITV strategy By Ben Fenton Published: March 5 2008 08:05 | Last updated: March 5 2008 21:18
This article by Fenton in the Financial Times below sees Grade upbeat despite evidence to the contrary:
Analysts said that, although the company had reported a good start to 2008, it was vulnerable to a slowdown in consumer spending and would be among the first to suffer the effects of tighter advertising budgets.
Below is a share chart of the successful advertising agency WPP over the last 12 months which doesn't make pretty reading and clearly shows what he market thinks about the liklehood of a serious downturn in the eonomy in the near future. Inevitably advertising and media are very responsive to change in consumer budgets:
WPP was very confidant about a good 2008 as can be seen in this trading statement:
WPP, the world's second-biggest advertising group, expects 2008 to be a bumper year for the industry. The Beijing Olympics, the US presidential election and the European football championships are expected to boost business, it said.
Maintaining a Public Service Broadcasting Remit
Michael Grade is nothing if not dogged. At this Ofcom conference in Cardiff whilst the phone-in scandal was reverberating Grade put the case for how wonderful ITV is at regional broadcasting:ITV's role in the nations and regions
But I want to start today by emphasising the place that ITV plays in national broadcasting and reflecting all of Britain back to itself.
This year ITV will broadcast around 2,000 hours of dedicated programming for the nations of Wales, Scotland and Northern Ireland, across news, current affairs and other programming.
That represents a total investment of tens of millions of pounds every year across SMG, UTV and ITV Wales in programming for the nations.
Remember none of our main commercial competitors provide a single minute or invest a single penny in such programming. It is just ITV providing a vital alternative to the BBC in this critical genre.
In addition, producers in the nations continue to win network commissions out of the 50% of the ITV1 budget that goes outside London. That represents a further £30 million over the last couple of years, including programmes as diverse as Rebus and The All Star Poker Challenge.
Of I fully accept that "All Star Poker Challenge" is a fundamentally crucial piece of regional broadcasting which manages to maintain the identity of a region of gamblers, sharks and small time crooks and presumabaly tax-evaders (are we talking the Isle of Man here?). Certainly the term "diverse" can hide a multitude of sins. Please note that the current government wants to top-slice the licence fee to support this kind of drivel. This is how business media analysts view Public Service Broadcasting as Brand Republic argues:
Grade has also managed to dump most of its remaining public service obligations (arguably bringing back 'News At Ten' is ITV's attempt at compensation for this) and he may even be able to get rid of the hated Contract Rights Renewal (which allows advertisers to reduce their spend in line with ratings) soon.
Recent Reports on the Future of ITV
This Times report from October 2007 on the success of Google advertising probably sounded the death knell of ITV as even the flagship of former year's Coronation Street is shown to be a blast from the past when it comes to creating revenue:
Google’s headline advertising revenues surpassed ITV1’s in the third quarter as the search engine demonstrated it could generate more money from sponsored links than 30-second commercials in Coronation Street.
Grade may find a glimer of hope in this comment from the World Advertising Research Centre:
85% of consumers still find TV advertising to have the most impact on their buying habits, although online ads come second best with 65% saying they have the most impact, ahead of magazines at 63%. (World Advertising Research Centre March 8th 2008).
However the bad news for Grade is that according to WARC the UK at 14% has the highest share of advertising based upon the internet and it's rising. Try out WARC's clickable globe to compare UK and other countries.
ITV's Broadcasting Portfolio
The week ending Friday 21st March brought some interesting aspects of ITV's sports portfolio. sports after all has elements of Public Service Broadcasting embedded within it in terms of national regional and local representation it can also generate a lot of money in advertising.
The good news for ITV is that is has retained the broadcasting rights to EUEFA Cahampions League until 2012 as the BBC has reported:
From August 2009 the channel will broadcast the first pick of Wednesday night games, including the final and Uefa Super Cup Final.
however Sky has gained part of this competition:
BSkyB earlier won the right to show coverage of live matches and highlights on a Tuesday, plus matches other than the first choice on Wednesdays.
The BBC declined to bid for this one.
Thankfully that ecologically stimulating sport Formula One is back with the BBC who have regained it after 12 years. This is strange as with Hamilton a potential British World Champion giving such a strong naotional interest in the sport it has probably never ben more popular. Was ITV short of the readies to bid up? One must presume either this or else the possibility of splitting up. It seems that Ecclestone is concerned with the future prospects of ITV reading between the lines of his comment on Radio 5 Live:
Asked why he had decided to split with ITV, Ecclestone told BBC Radio 5 Live: "It's not that we are unhappy with ITV but I think maybe they will have their hands full with other things and maybe the BBC can service us a bit better.
Ex Formula One presenter Murray Walker who did it for both BBC and ITV has expressed his astonishment and also thinks there is something else going on:
Murray Walker, former F1 commentator for both the BBC and ITV, said: "I'm absolutely flabbergasted - I was lying in bed listening to the news this morning and I almost fell out of bed when I heard it.
"It's an amazing development because I think ITV did and do a superb job, and I think there is more to this than meets the eye." (ibid)
Whilst it is premature to predict the total demise of ITV, in its current format and in the current economic climate it is hard to imagine a viable business model for the future. With Sky having a 17.9% stake and Richard Branson around 11% it is clear that the sharks are circling. Grade's interview with the BBC business programme so viciously cut out any questions about ITV being split into production and distribution arms inevitably points up the weakest point in Grade's armour. As Virgin doesn't need a distribution system a deal with Sky for the 17.9% stake in which Virgin would keep the production arm might be a possibility. The fact that we can sit around and speculate the likely outcomes at all would have been unthinkable only a few years ago. It shows how far ITV has fallen and how it has really failed to keep up with the rapidly changing media environment. Obviously any deal would have to go through regulatory approval, however with the probability of declining revenues and the possibility of a failing company on its hands the regulator would be under considerable pressure from the market. Grade's strategy of producing better quality programming is an expensive risk which might have worked in a different economic environment but would rely upon increasingly risk averse bankers to provide the funding. One can only assume that Grade is trying to rally around other large shareholders and trying to stitch up a deal which allows him him to exit from the post with a semblance of dignity and which outmanoeuvres both Sky and Virgin. Grade could try to enlarge the group by merging with other troubled media groups such as Scottish Media Group. This would provide much needed consolidation in the sector and might act to water down Sky's holding but it seems a thin hope.
Coming back to this a couple of months later we can see how bombastic Grade's claims were. There has been aserious financial meltdown and there is little doubt that ITV will suffer from this. Added to this thay have just been fined a large amount of money by Ofcom over the telephone scam of around a year ago.