Weakness in the Spanish market led Berenberg to cut its advertising market growth estimate from 3.9% to 2.1% for this year and from 5% to 4% for next year.
The analysts said that while Mediaset España has responded to the slower growth by tightening cost control, the business remains highly geared.
Berenberg cited a media buyer source who contended that pricing for ad slots in Spain was too high, with marketers resisting recent increases in pricing demanded by broadcasters. According to Berenberg’s source, Spanish advertisers are not prepared to pay higher prices per gross rating point while linear TV viewing faces long-term decline. With desirable younger audiences younger audiences moving away from TV, the problem seems set to persist, even if advertising expenditure is not moving from TV to online in a significant way at present.
Berenberg noted that robust growth in the Spanish economy and next year’s World Cup promised an uptick, but nevertheless reduced its earnings per share estimate.
Earlier, Berenberg released another downbeat note on ITV, arguing that it faces a number of challenges and uncertainty about future advertising income amidst unease about the direction of the UK economy, despite beating expectations regarding its first-half EBITA.
Giving the UK commercial broadcaster’s stock a ‘hold’ rating, despite the company’s better-than-expected £403 million EBITA, Berenberg said that ITV remained “heavily geared towards the UK economy in its broadcast business”. It noted that the group’s net advertising revenue fell 8.2% in the first half of the year.
The analysts said, given their belief that “consumers are becoming more cautious, with advertisers likely to follow a similar approach”, that they expected net advertising revenue to decline by an estimated 6.9% for the full year. However, it cautioned that “visibility on September and Q4 is exceptionally limited at present”.
Berenberg said that ITV’s production arm, ITV Studios, experienced flat revenue in the first half, with third-party business outside of ITV itself shrinking.
Noting that “the economic direction of the UK is unknown amid Brexit negotiations”, Berenberg said that it saw “more stability in the likes of ProSiebenSat.1” among ITV’s European peers.