ZenithOptimedia slashes TV ad revenue prediction

Lack of consumer confidence and no major sporting event to blame, agency says.

TV ad revenue is set to grow by just 1.5 per cent in the UK this year, according to ZenithOptimedia's latest forecast.

The agency downgraded its earlier prediction of 5.2 per cent growth for 2005 after a woeful second quarter, which saw TV ad revenues decline by 6 per cent.

ZenithOptimedia blamed the downturn on the lack of a major sporting event, and the fall in retail sales and declining consumer confidence. It said it expects TV revenues to grow by 4.3 per cent in 2006 because of the football World Cup and a predicted revival.

However, it warned the internet and cinema were growing far more strongly.

Adam Smith, the head of knowledge management at ZenithOptimedia, said: "Ringtones were the only salvation. All TV is really doing is growing at the rate of the display market."

Total TV ad revenue is set to hit £3.4 billion this year, rising to £3.6 billion in 2006 and £4.2 billion by 2010. The report highlights the need for ITV to grow revenues from its multi-channel offering. It predicts ad revenue for ITV1 will fall by 4.9 per cent this year to £1.6 billion and will drop to £1.5 billion by 2010, with Channel 4 and multichannel expected to be the main beneficiaries.

The report predicts there will be deflation in TV this year as growth in commercial impacts, predicted at 2.5 per cent, outstrips revenue. Prices will be stable for the next five years, rising at about the rate of general inflation, but prices at Channel 4 and five are likely to outstrip inflation.

ZenithOptimedia said annual TV ad growth would average between 4 per cent and 5 per cent from 2007 to 2010, with the threat of personal video recorders offset by the boost in commercial viewing provided by greater digital TV penetration.

NET ADVERTISING EXPENDITURE IN CURRENT PRICES 2000 2001 2002 2003 2004 2005 TV pounds m 3,327 3,008 3,144 3,173 3,392 3,443 Press pounds m 5,987 5,857 5,684 5,710 5,988 6,054 Radio pounds m 453 414 419 445 462 457 Cinema pounds m 109 139 154 153 162 169 Outdoor pounds m 592 575 587 648 720 770 Internet pounds m 132 141 162 300 508 655 Total pounds m 10,600 10,135 10,150 10,429 11,232 11,549 2006 2007 2008 2009 2010 TV pounds m 3,591 3,727 3,899 4,051 4,241 Press pounds m 6,205 6,360 6,570 6,787 7,011 Radio pounds m 475 490 507 518 529 Cinema pounds m 174 180 185 190 197 Outdoor pounds m 824 890 944 991 1,050 Internet pounds m 727 807 870 930 991 Total pounds m 11,997 12,455 12,974 13,468 14,020 Source: ZenithOptimedia.