World Cup: How England, Spain Exits Will Affect ITV, Telecinco

10:17 AM PST 06/23/2014 by Georg Szalai , Pamela Rolfe
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The U.K. and Spanish commercial broadcasters' ratings are expected to see an impact, but much of their ad revenue was booked in advance, say analysts.

LONDON – U.K. commercial broadcaster ITV has drawn strong ratings and advertising revenue for its World Cup coverage from Brazil. ‎But how will England's early exit from the Cup after its second loss in the group stage late last week affect the company?

Analysts say it won't have any major impact on financials or investor sentiment, but U.K. ratings are expected to be weaker than if the team was still in contention.

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"It is a small negative," said Sanford C. Bernstein analyst Claudio Aspesi. "Most ads were sold well in advance — at most they may lose some late [advertising] money."

The fact that England has been eliminated early from the World Cup could affect BBC and ITV viewership in the early knockout stages as some hoped the team would make it to the Round of 16 or even beyond, according to observers. The broadcasters share the TV rights.

"Less viewership of the World Cup [would] slightly depress [share of commercial impacts] and lower pricing, marginally, next year" for ITV, Aspesi ‎said.

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Liberum Capital analyst Ian Whittaker recently reiterated his "buy" rating on ITV shares, calling the stock "our top pick in media." He wrote in a report: "While we like it for long-term, fundamental reasons, shorter-term advertising trends also provide a catalyst. In this context, the suggestions that advertising momentum is improving around the World Cup should help."

He added: "Media buyer feedback suggests that [flagship channel] ITV1 is seeing June TV advertising revenues up 24 percent year-over-year, which is much stronger than ITV's guidance."

The latest England game, the 2-0 defeat to Uruguay on Thursday night, scored the best TV ratings in the U.K. since the 2012 London Olympics, with ITV seeing an audience peak of 20.29 million viewers. The average audience amounted to 13.3 million.

It wasn't clear how much total revenue ITV was targeting from World Cup ads. ITV declined to comment.

Media agency ZenithOptimedia recently estimated that ITV may get $468,000-$510,000 (£275,000-£300,000) for a 30-second ad spot during England group games. Matches without England would draw only $68,000-$170,000 (£40,000-£100,000), it estimated.

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Overall, U.K. TV advertising is forecast to be up 10 percent in June over the same month last year as sports, alcohol, car and other brands spend around the World Cup.

In Spain, commercial broadcaster Telecinco, which is celebrating the 10th anniversary of its stock market listing this week, said the Spanish national team's early World Cup exit wouldn't be a major drag, but that it has to find solutions for advertisers who had been expecting more games with the Spanish team.

"The commercial agreements for very important events like the World Cup are negotiated in an all-encompassing way well in advance," a spokesperson said. "The investment in these rights can be considered profitable, and [parent company] Mediaset Spain, as a brand, can only benefit for bringing the games of such an important competition of tremendous sporting and broadcasting interest to its viewers. The audience is enthusiastically following all of the matches, and the impact of the Spanish national team's exit will affect the audience by a few tenths [of a percentage point] for the month."

At this time, the broadcaster is moving time slots that advertisers bought for what were expected to be future national team matches to other matches or comparable audience slots, Telecinco said.

"Obviously the rates that Telecinco was charging for the national team's games cannot be maintained," said Azucena Garcia of Spanish research firm Infoadex. "An audience of 4, 6, 9 million people that the national team could easily secure is difficult for other programs to attract."

Email: Georg.Szalai@THR.com
Twitter: @georgszalai

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