By Paul Sandle
LONDON (Reuters) -ITV said slowing demand from British and international broadcasters for its content would impact its studios business in the fourth quarter and result in lower-than-expected growth for the unit in 2023, sending its shares down 7%.
Britain's biggest free-to-air commercial broadcaster has been expanding its Studios production unit, the maker of "Love Island", and its ITVX streaming service to counter volatility in advertising demand.
It said the strategy had delivered in the first nine months, when it grew total revenue by 1% to 2.98 billion pounds ($3.65 billion) despite ad revenue falling 7%.
" ITV (LON:ITV) continues to make good strategic progress despite the challenging macro environment which is impacting the advertising market and also the demand for content from free-to-air broadcasters in the UK and internationally," Chief Executive Carolyn McCall said on Wednesday.
The tough ad market, combined with the U.S. writers' and actors' strike, was hitting other broadcasters' budgets, it said, as it forecast a sharp slowdown in Studios in the fourth quarter and the deferral of revenue from 2024 to 2025.
The company, which shifted 10 million pounds of its own content spend to next year, reduced its growth forecast for Studios to 3% this year from its previous mid-single digit target.
ITV, which recently broadcast the Rugby World Cup, said ad demand would be weak in November and December compared to last year, when it was boosted by the soccer World Cup.
But its revamped streaming service ITVX, launched a year ago, was performing strongly, it said, with digital revenue up 23% and streaming hours up 27% in the nine months.
Analysts at Citi said that while group revenue was better than expected, the outlook for both advertising and Studios, and limited flexibility on costs, would likely lead to 5-7% downgrades to earnings consensus.
($1 = 0.8151 pounds)