Brexit uncertainty may be a unique opportunity
The continued uncertainty as to how the referendum vote will play out for the UK economy is also evident in the TV market. Both ITV and Sky floated in to the vote on healthy profits from the previous 12 month trading period, and although initially the market was confident that the second half of 2016 wouldn’t see any significant decline it appears as though the country’s largest commercial broadcaster is taking action to bolster profits. ITV’s Adam Crozier announced: “Against a backdrop of wider economic uncertainty following the EU referendum, we have put in place a robust plan to allow us to meet the opportunities and challenges ahead”. With that in mind they are looking to cut £25 million in overheads to cover the drop in revenues for the second half of the year.
All Response Media Viewpoint
It is fair to say that ITV’s drop in revenue for the second half of this year is not due to Brexit alone as many advertisers might have brought H2 budgets forward to support the Euros in June.
Sky raises an interesting counter view. On the back of a 12% increase in operating profit against tough competition from Netflix and Amazon, they are more optimistic about H2 of 2016. Their view that consumers regress to the home in times of uncertainty is an interesting take on the issue and, if true, one that paints a positive picture for businesses looking to use TV to drive performance.
The TV market has seen significant increases in advertising costs: higher costs-per-thousand (CpTs) over the last 12-18 months as demand has significantly outstripped the slight decline in supply. Market indicators would suggest that the market in H2 will be much softer than it has been and that, coupled with Sky’s ‘stay at home’ theory could represent a big opportunity to take advantage of as we move towards the Christmas period. A good measure of this is the sponsorship market where we have seen a softening of long term sentiment due to a drop in demand due to that uncertainty. It would certainly appear as though there is hay to be made.