Advertisers unwilling to pay the money of six months ago
Granada's fortunes are heavily dependent on the health of the advertising market and the success of OnDigital, according to Peter Wilton, UK Select Growth fund manager at Threadneedle.
He said: 'Advertising is very sensitive to economic downturns. At the moment, the industry is going through a normal cyclical decline of the kind seen several times in the 1990s.
'Advertisers have pulled back and are no longer willing to pay the kind of money they were six months ago. Granada has a set amount of airtime to sell. This has to be sold otherwise it's dead airtime, so they're selling it for whatever they can get.'
Everyone appears to be trying to work out how long the cycle is going to be. All the indicators seem to point towards the slump continuing into next year, he said.
The company, along with Carlton, has also invested heavily in OnDigital, now known as ITVDigital. At the moment, the venture is losing a subscription war with Sky and this is impacting heavily on share value, Wilton said.
ITVDigital needs two million subscribers to break even and currently has about half of that.
The project has also been plagued by complaints of poor customer service and picture quality. Content has also been an issue, with its most popular channels having to be bought at significant cost from Sky.
'The basic problem here is that Granada has not convinced the City that ITVDigital is going to be a success. At the moment, there is a feeling that Granada are just throwing money down the drain,' he said.
'Over the short term, prospects for growth are poor. In the medium term, advertising revenues will pick up, although the ITVDigital expenditure remains a concern.'
Granada produces TV programmes, feature films and TV movies, which it distributes to ITV, the UK's national commercial network, and international broadcasters in some 120 countries. Its broadband division offers pay TV, internet business and educational services. Granada also owns 50% interests in both OnDigital, a digital TV company, and Box Clever, an electronics chain.
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