It has been a bad year for ITV (LSE: ITV). Coronavirus and lockdown have stopped the production of some of its most popular shows. But as another of its top hits starts again this week, I am wondering if ‘I’m a Celebrity’ will be enough to bolster its share price.
Popular shows translate to advertising revenue
As a viewing public, we may have been disappointed when TV’s top hits were cancelled in 2020, but for ITV it is far worse. Popular shows bring in massive advertising revenue. At the risk of stating the obvious, making less money hurts a company’s share price.
During the summer months, when viewer-favourite ‘Love Island’ would usually have been on, ITV reported revenues falling about 7%. ‘The X Factor’ was also cancelled this year – yet another hit to its advertising cash flow.
Interestingly, ITV has also been seeing less revenue from the holiday industry. As early as April this year the company was warning about the suspension and postponement of advertising campaigns from the industry. At present, this still remains an unknown factor going forward.
On a more positive note, ITV’s latest figures show advertising spending in November is up around 6% so far. This gives it an optimistic view for Q4, suggesting the quarter may end “slightly up year on year”. Its share price has climbed 35% since the begging of this month.
ITV did warn however that these positive projections assumed that “current Covid restrictions in England end as planned on 2 December”. Taking an uncharacteristically positive view, I think this seems a reasonable assumption at the moment.
Vaccines and I’m a Celebrity
As with many industries this past week, those that were suffering on the back of coronavirus have seen a boost on positive vaccine news. The ITV share price is no different – up about 6% over the past week.
As the first episode of ‘I’m a Celebrity…Get Me Out of Here!’ aired on Sunday night though, ITV has another reason to celebrate. The show that usually sees various famous people spending time in the Australian jungle is another major hit for the company. Despite some concerns it may not be same set in a Welsh castle, it has already assuaged these fears.
Its popularity should translate to more advertising revenue for Q4. The last quarter of the year is particularly important for broadcasters, making up much of their annual revenue. For ITV, Q4 accounted for almost 30% of its full-year advertising revenue in 2019.
Can it help the ITV share price long term?
Personally, though I think ITV’s Q4 numbers will help, it may not be enough to support the share price in the long term. In my opinion the company has a number of headwinds its needs to face.
The main one of these for me is the increase in digital streaming. This was already a trend before Covid-19. Lockdown has seen this increase. ITV said that during summer, while total viewing hours climbed 2%, its share fell 4%.
Personally, its attempts to hit back with BritBox seem too little, too late. It’s hard to see it competing with Netflix and Amazon. Though coronavirus concerns do seem to be waning, I think it may have been the catalyst that set terrestrial TV’s decline on the fast track.
Karl has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.