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LONDON – As Simon Cowell-created music competition show X Factor continues to draw weaker ratings for U.K. network ITV1, parent company ITV could lose out on around $16 million in advertising revenue, according to a Wednesday report.
Analysts say that wouldn’t be a major drag on the company’s financials, but could affect some investors’ confidence in the stock.
After falling ratings last year, the show has remained one of the highest-rated shows on U.K. television this season, but has continued to lose viewers. Saturday’s episode was down more than 2 million viewers from the same weekend in 2011, and the season as a whole is currently down by more than 1 million viewers per episode on average compared with last year, according to the Guardian. It cited media buyers as saying that this could cost ITV as much as $16 million.
Last year, ITV charged roughly $192,000 for a 30-second ad spot during The X Factor, adding up to about $4.8 million (£3 million) an episode and more than $152 million (£95 million) for the whole season. This includes the premium-priced semi-final and final, but excludes sponsorship money, particularly a three-year deal with telecom firm TalkTalk struck in 2010 that has been valued at up to $32 million.
The continued audience slump this year means that ITV has not been able to charge the same prices for a 30-second spot, according to the Guardian‘s media buying sources. On average, the price has come down by about 10 percent, it said. If these trends continue, ITV will make about $136 million (£85 million) from the show this year, it concluded.
In 2010, a banner year for The X Factor‘s viewing figures, ITV had made well over $160 million (£100 million) from the show, the Guardian reported.
The X Factor accounts for almost 14 percent of ITV1’s total revenue between August and December and almost 6 percent of total annual revenue, according to media buyers cited by the Guardian.
One financial analyst estimated that ITV will record total advertising revenue of around $2.41 billion (£1.51 billion). That would mean the lost ad revenue from X Factor would amount to only 0.7 percent of the total.
Peel Hunt analyst Patrick Yau told THR that he expects the lower ratings to have only a “marginal impact” on ITV’s financials. But they are “more important for [investor] sentiment,” he said. “And this opens a wider question of how long ITV will [continue] X Factor or whether there will be any format innovation/panel changes,” the analyst added.
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