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Monday, 25 June, 2001, 18:39 GMT 19:39 UK
ITV loses 'licence to print money'
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By the BBC's Media Correspondent, Torin Douglas

These are dark days for ITV, and the latest advertising forecast can only make life gloomier.

The two biggest ITV companies - Carlton and Granada - have both slipped into the red in recent weeks and the Zenith report suggests that if there's light at the end of the tunnel it must be the headlight of an oncoming train.

Zenith's prediction of an 8.9% fall at ITV is unheard of in an industry that has known only growth since the recession of the early 1990s.

Last year was particularly good for TV advertising, thanks to the boom, which saw dozens of unknown companies throw money at the box in the hope of the building their names and their businesses.

Part of ITV's current problem is that the rush of new money put up the prices for its existing advertisers.

With airtime strictly limited, a rise in demand puts up the cost of advertising - so big companies such as Unilever, Procter & Gamble and Nestle Rowntree have looked elsewhere to find better value.

Money has switched from ITV to other TV networks, such as Channel 4, Channel 5 and BSkyB.

More worrying for ITV, though, is the switch into other media, such as radio and posters.

The biggest advertisers - who once thought there was no real alternative to television - have discovered they can better results by combining television with other media.

The TV audience is fragmenting as the number of channels goes up, and many viewers now use the commercial break to find out what is on other channels, instead of watching the advertisements.

That has reduced TV's impact. And although the drop in demand has also brought down the cost of airtime again, it is too late for most advertisers to switch back this year.

Given all that, and the downturn in the US economy, things now look gloomier for ITV than at any time since the 1960s, when it was first described as "a licence to print money".

To add to their woes, Carlton and Granada are having to invest millions of pounds in establishing their digital platform - ONdigital, soon to be renamed ITV Digital - in the teeth of fierce competition from BSkyB and the cable companies.

No wonder the Granada chairman has written to Tony Blair for help.

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See also:

25 Jun 01 | Business
ITV faces worst ever ad slump
13 Jun 01 | Business
Granada reveals 10% ad slump
23 May 01 | Business
Carlton profits slide
13 Jun 01 | Business
ITV to seek bids from news providers
25 Apr 01 | Business
Will ITV website capture the net?
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