It’s really not been a good month for the ITV (LSE: ITV) share price, which is still down more than 60% on its peak back in August 2016. The company reported its full year results last week amid concerns about the impact of the coronavirus on advertising revenues.
We have written about ITV before, and our main prognosis is that the company is still heavily based on a business model that is looking more and more out of date in the era of Netflix. I’m personally trying hard to remember the last time I watched anything on ITV (probably the Rugby World Cup).
ITV’s share price is heading down again
ITV shares have not had a good month of it, peaking at 136.00 before slumping to 102.3. It is now precipitately down from its six month high of 156. You can blame Brexit. You can blame the coronavirus, but this stock still looks like a dog, no matter how you dress it up. We’d be calling it a short if there weren’t so many other possibilities in the market right now – the entire travel sector for example.
ITV beat analysts’ estimates last week, with many investors focused on the revenue growth of its ITV Studios division. The impact of the coronavirus on 2020 ad revenues remains the big worry for longer term investors, although total ad revenues were reported down 1.5%. ITV needs to break out of its rut.
Advertising is the Achilles heel for ITV and much of the selling in ITV shares we have seen over the past week has been driven by worries about the impact on ITV’s advertising revenues from the travel sector. Travel companies, which usually at this time of year are bombarding British television viewers with the prospect of fun in the sun, are now wondering whether the entire holiday season is going to go up in smoke.
ITV needs to wean itself off the old business model it pursued when terrestrial television was king.
Can BritBox save ITV?
Enter the BritBox, ITV’s online streaming service. ITV needed a response to the inevitable march of Netflix and others, and it looks like CEO Carolyn McCall is pinning her hopes on this: “digitally led” are the words she wants analysts to hear.
“There has been a lot of talk in the ITV updates about Brexit uncertainty but you have to look at the broader economy and say that’s just been a smokescreen, and one that maybe helps the structural decline in traditional media spend,” explained Neil Wilson, an analyst with Markets.com. “ITV is investing in content and can rely less on ads in the future – it will need to.”
Last week’s results demonstrated the clear negative impact on ITV’s advertising revenues from the coronavirus. Early indications suggest that ITV will take a 10% hit to revenues in April as a result of the virus with plenty of travel advertising deferments in the pipeline. ITV’s management told analysts that at this stage it is too difficult to assess the further implications of the coronavirus but Q1 ad revenues are still likely to be up by 2%.
ITV also sold its famous, nay iconic, London headquarters, London Television Centre, for 145 million pounds in November, generating a useful pile of cash. ITV’s total external revenues rose 3%.
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