Terror: ITV ad gloom deepens

By Tom Mcghie
Updated: 19:00 EDT, 22 September 2001

INDEPENDENT television has rushed to claim that it was an immediate beneficiary of the terrorist attacks in America. Within a day of the attacks on New York and Washington, ITN boasted that more people watched its news than turned to the BBC's 10pm bulletin.

But analysis by BARB, the independent audience monitor, showed that after 24 hours, the BBC resumed its role of being the station the nation turns to in times of crisis.

But no matter what ITV claims about the attractions of its news output, advertising is drying up. Advertisers are not keen to see their products being promoted on screen, sandwiched between images of death and destruction.

The economic slowdown on both sides of the Atlantic had already persuaded advertising agencies to think twice about big campaigns.

Advertising as a whole is suffering, and the prospect of war can only make matters worse. All big airlines pulled their adverts in the immediate aftermath of the attacks.

This is the traditional response to a disaster, but, more worryingly, British Airways, which spends £20m a year on advertising - most of it on ITV - is reviewing its advertising strategy. 'We are looking at a number of strategic decisions and the direction we take in our advertising will be part of that,' said a spokesman.

But for ITV, there is a further problem unconnected to the slowdown or the attacks. ITV's audience share has been declining, so its attraction to advertisers has diminished. There is still no consensus about the long-term impact of the attacks on advertising spending.

Sir Martin Sorrell, chief executive of WPP, the world's biggest advertising agency, said: 'It is too early to judge whether we are looking at a long-term trend. Don't forget, we believed there was a recession in the industry before the attacks.'

WPP believes the problems are the result of a long-term decline in the number of ITV viewers. In 1987, it had a share of almost 45% of the TV market. By 2010, this could be nearer 25%, according to Granada's broker ABN Amro. ITV is losing advertising to Channel 4 and Channel 5, popular with affluent younger viewers.

Granada and Carlton, which dominate ITV, acknowledge that there will be a price to pay for the adverts that were pulled due to the continuous news coverage of the tragedy.

But a senior source at Carlton said it was too early to say what the long-term effect of the attacks would be. 'We only have a visibility of about six to eight weeks - we cannot predict any further,' he said.

But media agencies are expecting a huge fall in revenue over the next three months. There is growing speculation that ITV revenues will plunge to about £120m - more than double the drop predicted by the industry before September 11.

ABN Amro predicted last week that ITV revenues for the financial year to this month would fall by 11.8%. ABN also downgraded its 2002 forecast for ITV advertising revenue, predicting a 5.6% decline.

Analysts acknowledge that the golden days of ITV advertising will not return. Instead, investors are being asked to pin their hopes on a merger between Granada and Carlton, which would bring cost savings.

And, of course, there is a growing hope that England will do well in the finals of the World Cup in Japan and South Korea next year. The tournament is being screened by ITV.

The share prices of Carlton and Granada fell last week after a series of analysts' notes warning of the sharp downturn in TV advertising.

Carlton was hit particularly badly and its shares closed on Friday at 156p - a 10-year low. Over the past month, the value of the company has been halved to £1.1bn. Granada has fared a little better. Shares closed at 112p, a drop of 30% in the past month.