1st Jul 2022 14:40
(Alliance News) - The potential for ITV PLC to generate higher revenue from more frequent television advertising appears to have gone unnoticed by the market, as Ofcom conducts a review of broadcasting rules.
The stock was down 0.4% at 65.00 pence on Friday afternoon and has halved in value over the past year.
The UK broadcaster's closely-watched advertising revenue had a record performance in 2021, up 24% to GBP1.96 billion from GBP1.58 billion in 2020, including a 41% increase from video-on-demand revenue.
Ofcom has said it may extend the time and frequency permitted for advertising breaks on UK television as part of a review of broadcasting rules.
The regulator said it would consider changing current advertising regulations amid market developments, including the increasing influence of online streaming services.
UK broadcasters are facing growing competition from streaming giants such as Netflix, Amazon Prime Video and Disney+ in terms of viewing figures and programme commissions.
In a report looking at the re-licensing of ITV and Channel 5, Ofcom said the expanded choice of entertainment was "generally positive" for audiences but "put pressure on broadcasters, squeezing revenues, and made it harder for them to maintain their current offer".
Current regulations mean public broadcasting channels are limited to an average of seven minutes of advertising per hour across the day, while private channels are allowed nine minutes for advertising and an extra three for teleshopping.
Ad breaks must not exceed three minutes and 50 seconds. In programmes that last between 21 and 44 minutes, there can only be one break.
Ofcom said it expected to give more details about the potential changes to advertising later in the summer.
AJ Bell's Russ Mould highlighted that ITV's advertising revenue in 2021 was just under GBP2 billion so having longer commercial breaks "could certainly move the dial for its earnings".
"The market doesn't seem to have cottoned on to the potential for ITV to earn a lot more money in advertising revenue," said Mould.
"Previously it was considered that having longer ad breaks, and more of them, would be disruptive to the viewer. But now more people are watching programmes and films via streaming and less via live TV, so changing the advertising rules might not be so dramatic," Mould added.
By Arvind Bhunjun; [email protected]
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