X Factor ratings slump could cost ITV £10m in ad revenue

http://www.guardian.co.uk/media/2012/nov/06/x-factor-ratings-slump-cost

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Declining audiences for Simon Cowell's The X Factor could cost ITV as much as £10m in TV advertising revenue.

The ITV1 show has suffered falling ratings for two years. Saturday's episode was down more than 2 million viewers on the same weekend in 2011, and the series as a whole is down by well over 1 million viewers an episode on average compared with last year.

Last year ITV charged roughly £120,000 for a 30-second TV ad during The X Factor, adding up to about £3m an episode and more than £95m for the series.

This includes the premium-priced semi-final and final but excludes sponsorship – a three-year deal with TalkTalk struck in 2010 has been valued at up to £20m.

However, the audience slump this year means that ITV has not been able to charge the same level for a 30-second spot. On average the price has come down by about 10% to £110,000, according to media buyers.

This means that if the audience levels fail to recover, ITV will make about £85m from the series this year.

In 2010, a bumper year for The X Factor's viewing figures, ITV made well over £100m from the show.

An ITV spokeswoman said: "Demand from advertisers for this year's series of The X Factor is as high as ever because the show continues to attract an incredibly important audience in very big numbers."

While the price of a commercial has fallen by 10%, the actual performance of the show has been much worse in audience terms.

Viewing of commercials among the key demographic of 16- to 34-year-olds is down almost 19% comparing the same number of The X Factor episodes year on year between 18 August and 18 October, according to media-buying industry figures.

Commercial viewing by other demographics carved up to sell to advertisers, including adults and what is known as "housewives and children", were down over 16% year on year.

The BBC's Olympics coverage has made for a tough second half of the year for viewing on commercial television generally.

Nevertheless, a look at the overall performance of the ITV1 channel – which is down about 16.5% for the same August to October period in 2011 – shows The X Factor is performing worse than the market.

Rival commercial channels still have nothing that comes close to the audiences delivered by The X Factor. However, the decline in performance only serves to highlight ITV's reliance on the franchise and make the broadcaster's search for new entertainment formats that can deliver big ratings more urgent.

The X Factor accounts for almost 14% of ITV1's total revenues between August and December, and across a year almost 6% of total revenues, according to media-buying agency figures.

This is excluding the amount made from spin-off shows, such as The Xtra Factor on ITV2, and repeats.

ITV's X Factor deal has one more year to run and is expected to be renegotiated in the first half of 2013.

Advertisers have annual TV airtime deals negotiated on their behalf with ITV by media buying agencies towards the end of each year.

The underperformance of The X Factor is likely to put pressure on ITV during negotiations for 2013 advertising airtime deals, which will start shortly.

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