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Viewers shun traditional TV after brief Covid comeback

Ofcom says the “long-term decline” of public service broadcasters has resumed – but advertising revenues are still high
August 19, 2022
  • New ITV streaming service to launch this autumn
  • TV channels struggling to engage young viewers

Ofcom’s latest report on UK viewing habits is not a comfortable read for television stalwarts like ITV (ITV). While the average person watches a whopping five hours and 16 minutes of television and video each day, the communications regulator noted a “long-term trend of decline” among traditional broadcasters. 

They still have a hefty market share: we spent almost three hours a day watching broadcaster content on our TV sets in 2021, including live shows, on-demand programmes and recordings. However, this is 20 minutes fewer than in 2020 and 10 minutes fewer than in 2019, and viewing times continue to tumble. 

Traditional channels are also attracting a smaller pool of people. According to Ofcom, ITV’s weekly reach has fallen from almost 60 per cent in 2016 to 48 per cent in 2021. This trend is particularly pronounced among younger viewers.

Indeed, Ofcom said that TV viewing has declined “much faster for younger people than for older people, with changes ranging from slight growth among the oldest cohorts to successively greater declines for each younger cohort”. While 65 to 74-year-olds watch almost three and a half hours of public service broadcaster channels each day, 16 to 24-year-olds watch just 26 minutes, favouring 'short form' video instead. The regulator found that young adults spend almost an hour every day on TikTok. 

It’s not surprising, therefore, that ITV has had a challenging few years. While the group has steadily grown its sales – revenue is 16 per cent higher than five years ago – operating profit peaked in 2015, and the shares have struggled ever since.

There were signs of improvement in 2021, when pent up demand – combined with the Euro football tournament – helped to generate record monthly advertising revenue. Business has remained strong into 2022, with pre-tax profits jumping by 65 per cent in the six months to 30 June.

ITV wants to keep up the momentum with the launch of ITVX, a ‘freemium’ streaming service with free and subscription tiers. The project makes sense: according to Ofcom, ‘broadcaster video-on-demand’ – think ITV Hub and BBC iPlayer – has bucked the trend of post-pandemic declines.

ITVX has not gone down well with investors, however, with the shares falling by a third shortly after the plan was announced. Their concerns centre around the amount of money it will require. Management intends to fuel £1.2bn into new content in 2022, and £1.35bn in 2023. 

They are right to be wary: ITV’s track record shows that spending more on programmes does not guarantee success. Content costs at ITV have been rising steadily in recent years, but the group’s ‘studios’ business has seen patchy profit growth, with 2021 figures lower than 2016 ones.

The move into paid subscriptions could also prove tricky. Streaming services are having a rocky time of late, with Netflix (US:NFLX) reporting a fall in subscribers after an unbroken decade of increases. Importantly, analysis by the Financial Times suggests that this is not due to poor content but to the cost of living crisis, and viewers cutting back on monthly outgoings. 

It’s not all bad news. In a burst of optimism, Ofcom noted in its media report that advertisers “continue to consider linear broadcast TV the best way to reach a mass audience”. Meanwhile, given how much time we spend in front of a screen, it’s clear that the public still craves something good to watch. The question is where they will find it.