ITV Expects Slight Fourth-Quarter Ad Growth; Studios, Ad Revenue Fall Sharply in First Nine Months

ITV CEO Carolyn McCall
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ITV CEO Carolyn McCall

With 85 percent of productions back in production or delivered, "COVID restrictions and further national lockdowns have added production costs and are making it challenging to bring ITV Studios productions back to full capacity," says the U.K. TV giant's CEO Carolyn McCall.

U.K. TV giant ITV on Thursday reported lower revenue for the first nine months of the year amid advertising and production business challenges due to the coronavirus pandemic, but CEO Carolyn McCall highlighted "encouraging signs."

Total external revenue at ITV, led by, dropped 16 percent for the nine-month period to 2.17 billion pounds ($2.86 billion), with revenue at the ITV Studios content production arm, whose hit shows include Love Island, ending the period down 19 percent at 902 million pounds ($1.19 billion).

While the return of live sports has recently helped advertising, ad revenue for the third quarter ended in September was down 7 percent from the same period of 2019. Ad revenue for the first nine months of 2020 fell 16 percent to 1.04 billion pounds ($1.37 billion). But for the fourth quarter, the company sees a slight ad gain over the comparable period of 2019.

"We are seeing encouraging signs in both our divisions," McCall said. "Advertising trends are improving with the fourth quarter forecast to be slightly up year on year and 85 percent of our productions in the U.K. and internationally that were paused as a result of COVID-19 are back in production or have been delivered. However, COVID restrictions and further national lockdowns have added production costs and are making it challenging to bring ITV Studios productions back to full capacity."

The firm said July advertising was down 23 percent, followed by a 3 percent drop in August, a 2 percent decline in September, and October being down 1 percent. November ad revenue is trending up around 6 percent, ITV added. "A number of categories spent more year on year in the third quarter, including fast-moving consumer goods, supermarkets, publishing and broadcasting, telecommunications, food, government, charities and other, and household stores," it also highlighted.

ITV touted a "strong" fall schedule that "is delivering mass audiences and key demographics, including Des, Honour, The Sister, Prince William's A Planet for Us All, John Bishop's Great Whale Rescue and the continued strong performance of our soaps, news and daytime shows."

Streaming service BritBox U.S. now has over 1.5 million subscribers, "and the international rollout of BritBox is on track," ITV said on Thursday. "Australia is launching imminently with further rollout following quickly thereafter."

ITV previously unveiled plans to cut its programming budget by "at least £100 million," or $125 million, while doubling its 2020 target for overhead cost reductions to £60 million ($75 million).
It also abandoned its dividend and full-year 2020 guidance amid the uncertainty brought on by the virus crisis, as well as scrapped bonuses and cut executives' salaries to preserve cash. It previously said its cost savings unveiled at that time would help boost its cash reserves by more than 300 million pounds ($350 million), giving it more financial flexibility.

ITV recently also said that it plans to restructure its broadcast business "to better reflect and serve changing viewing habits" amid the rise of streaming. It said it would create a new media and entertainment division with two new business units - broadcast and on-demand.  The divisions will "be supported by leaner central support services," a sign of job cuts. "The restructure will drive improvements in efficiency and reduce cost,” concluded the company, which didn't give details for the expected number of job cuts and savings. It said though that the process of restructuring "has now started and will be fully complete by the end of March 2021."