ITV warns of 'softening' in ad sales with 3% drop before Christmas

'Increasingly uncertain economic environment' is to blame.

ITV: McCall has stopped disclosing NAR figures
ITV: McCall has stopped disclosing NAR figures

ITV has warned of a "softening" in the ad market and expects a 3% decline in ad sales in the final three months of the year.

The broadcaster of The X Factor and Love Island blamed "an increasingly uncertain economic environment".

Industry sources believe worries over Brexit and traditional retailers facing a tough time because of ecommerce are two key factors pushing down revenues.

ITV said October ad sales dropped 3%, while November is up 2% and December could be down 6-8%.

It still expects ad revenue for the year to be flat, after a 2% rise in the first nine months of the year, thanks to a 43% jump in online ad sales.

The football World Cup and Love Island gave ITV a good start to the summer. July was up 10%, but August was down 6% and September fell 2%.

ITV said in its trading statement that it has seen a "softening" in NAR, the revenue from traditional ad spots sold during commercial breaks, but new chief executive Dame Carolyn McCall has stopped disclosing that figure.

ITV only reports a total figure for all advertising revenue, including NAR, sponsorship and video-on-demand on ITV Hub.

Numis Securities had previously pencilled in 1% growth in ITV ad sales in 2018 and in 2019, but it now expects a flat figure for next year, following the trading statement, and ITV's shares slipped on the news.

Britain’s biggest commercial broadcaster by ad revenue maintains that it is continuing to attract audiences.

"Our strong on-screen and online viewing performance has continued with ITV total viewing, which measures our viewing across the ITV Family and the ITV Hub, up 5%, driven by a 4% increase in total minutes viewed across the ITV Family and a 37% increase in the time spent viewing online on the ITV Hub," ITV said.

The Christmas quarter is important because a lot of brands use TV during this period.

ITV said at the Palooza, its annual presentation to advertisers, in October that John Lewis and Waitrose were using the broadcaster to launch their 2018 Christmas TV campaign.

Sir Martin Sorrell, executive chairman of S4 Capital, gave an early indication that ITV was facing Brexit-related softness in the run-up to Christmas when he spoke at Campaign’s breakfast briefing, "Back to the Future: When Sorrell Met MediaMonks", in association with Results International on 1 November.

Another sign that the UK economy is slowing came from the Chartered Institute of Procurement & Supply, which reported the outlook for growth in October was the slowest since March. 

ITV's group turnover rose 6% as programme-making arm ITV Studios grew 10% in the first nine months of the year.

McCall plans to announce details of her new online strategy in February 2019.