There’s no doubt that more television has been getting watched while we have all been locked in the house. Unfortunately for ITV (LSE: ITV), this doesn’t translate to more money.
The company reported revenues falling 42% in April, and said it was unable to provide guidance for the second quarter, because things are just too uncertain.
Double trouble
The coronavirus crisis has hit ITV on two fronts. Firstly, and one already seen, is that businesses are spending a lot less money. A lot of this, it seems, is being cut from ITV add spending.
This makes sense. All the advertising in the world won’t allow people to go to the pub, for example, or bring about demand for new clothes when you can’t leave the house. Why spend the cash?
On the other hand, the company is also able to produce fewer programmes due to social distancing. This may range from a few less episodes of viewer staples like Coronation Street, to the cancelation of ITV’s biggest earners like Love Island and The X Factor.
This could be a bigger problem for the company’s finances. There is a natural lag for filming and production for these big shows, which means we have already passed the point they can be made.
I suspect by the end of the year ITV will be making efforts to counter the hit somewhat (Winter Love Island, for example), but we may already be at a point where the year can not be saved.
However it is not the show cancelations that worry me long term, but the advertising revenue. ITV needs companies to start spending their money on ITV again, and I think there is real potential that wont be the case.
Dying industry
The problem for ITV is that, as everyone knows, online and streaming media is in full force. For a younger generation, the idea of watching a specific programme at a particular time and day is ridiculous.
It seems highly likely to me that businesses will just not go back to their previous advertising spending without further consideration. It may turn out for many that ad buys on ITV are just not worth it.
The areas where ITV does stand out for many people are the big hit shows that are no longer likely to be on this year. If it turns out that ITV advertisements don’t bring in as much revenue for businesses as they previously thought, we may be seeing the start of a fundamental shift in the industry.
Love Island is a prime example. Already having a large social media presence, the young audience is the perfect example of those more likely to be engaged online. Television ads are expensive, and it may turn out, no longer worth it.