ITV hailed the success of its streaming arm as digital revenue grew by a better-than-expected 24%, but profits plunged as it poured more money into the division.
Revenue was close to flat for the first half of the year, despite a decline in traditional advertising as streaming service ITVX and the growth of ITV’s studio arm made up for those linear ad declines. Studios know make up more than half of ITV’s revenue.
But profits were down by 61%, as costs rocketed. ITV spent an extra £43 million on new programming to try to bring people to ITVX, plus an extra £8 million in tech costs to support the platform. It has added programmes such as A Spy Among Friends as streaming exclusives at a time when many market-leading streamers like Netflix have been cutting back on content.
CEO Carolyn McCall said digital spending would peak this year and start to come down in 2024.
She added: “The continued momentum behind ITV’s strategic transformation delivered strong growth in Studios and Digital revenues in the first half of the year, largely offsetting the expected weakness in the UK advertising market - with total revenue declining just 1% in H1, even in a very tough advertising market.”
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “ITV’s advertising revenue fell 11% in the first half as it grapples with an increasingly difficult backdrop for linear TV ads.
“With economic uncertainty mounting and marketers clutching purses tightly to their chest, this was always going to be a difficult time. Away from the short-term bumps, there’s a structural decline happening in the TV space – broadcast ads simply don’t pack the same punch they used to, thanks to the rise of streaming and the fact many of us spend our evenings glued to our phones too.
To that end, it’s encouraging to see the Studios business picking up the pace – making content for the new binge-watching culture is a good place to be. ITV are up against stiff competition here too though and we’re still some way off from ITV being solely reliant on this more lucrative revenue stream. The dividend’s been held which will please investors, but shareholder returns could be fickle in the future if cash needs to be funnelled at new ventures.”
