British broadcaster ITV saw profits fall in 2017 as advertising revenue fell by five percent, its steepest drop in almost a decade. The company, which announced its full year results for 2017 today, blamed falling ad revenue on economic uncertainty, and expects a stronger 2018.
ITV’s net advertising revenue, which accounts for over half of its total earnings, fell by £81 million overall to £1,591. Digital ad revenue remained strong, with earnings from video on-demand achieving double-digital growth, but this was not enough to offset the drop in linear TV ad income.
Despite falling ad revenue, total external revenue actually grew by two percent, reaching £3.1 billion. This has been fuelled partly by strong revenue growth for ITV Studios, which saw earnings shoot up 13 percent to £1.5 billiom. However costs have been high as ITV has invested in big-budget original productions, resulting in pre-tax profits falling over ten percent compared to 2016.
ITV’s chief executive Carolyn McCall, who joined from easyJet earlier this year, remained upbeat about the results. “There is no doubt that ITV’s operational performance in 2017 in a challenging environment was strong. ITV delivered a great viewing performance on-screen and online and double-digit revenue growth in video on demand advertising and ITV Studios. This gives us a solid foundation to build on for the next phase of ITV’s development,” she said.
The broadcaster is framing the results as something of an outlier, echoing the likes of WPP’s Martin Sorrell, Interpublic’s Michael Roth and Omnicom’s John Wren who have all blamed economic uncertainty for making brands cautious of investing in advertising. ITV expects better economic conditions, and this year’s FIFA World Cup (for which it hold broadcasting rights), to restore ad revenue to positive growth.
McCall said in an investors call that Comcast’s bid for Sky yesterday demonstrates how content businesses and broadcasters are still extremely valuable, but acknowledged that their strategies have to adapt.
“We are focused on our strategic refresh. This will enable us to define a clear strategy and priorities that will highlight the opportunities and address the challenges that we face in an increasingly competitive media landscape,” she said.
While the company hasn’t given many details of what this “strategic refresh” involves, its ad business could be bolstered by the launch of its own addressable TV advertising offering later this year. ITV announced a partnership with Sorenson Media last November to power a linear addressable offering, which is expected to go live in Q2 this year.