ITV shares tumble as Hollywood strikes proceed to harm studios arm

ITV shares slumped on Thursday morning after the broadcaster revealed that sales at its production arm had plummeted by a fifth in the first nine months of the year.

Turnover at ITV Studios, maker of the hit show Mr Bates vs The Post Office, plunged by almost £300million to £1.2billion in the nine months to 30 September, as the unit continued to suffer the impact of last year’s strikes in Hollywood. 

Despite solid growth in digital advertising revenues, ITV’s total sales still declined by 8 per cent to £2.7billion over the period.

Production: Toby Jones as Alan Bates in the ITV Studios series Mr Bates vs The Post Office

ITV shares were 7.8 per cent, or 5.65p, down at 66.7p by 11am, making them the FTSE 250 Index’s second worst-performer behind oilfield services firm John Wood Group. 

The company has been heavily impacted by last year’s strikes in the American film and television industry when actors and screenwriters walked out in a dispute over concerns about pay and artificial intelligence.

Production of many shows and movies was halted for over six months before agreements with the main entertainment unions – SAG-AFTRA and the Writers’ Guild of America – were finalised.

As a result, ITV believes around £80milion of turnover will be delayed from this year to 2025.

The London-based business has also been hit by weaker short-term demand from European free-to-air broadcasters.

But while ITV anticipates revenues at its production division falling by a mid-single-digit percentage in 2024, the firm does expect to deliver adjusted earnings before nasties within the 13 to 15 per cent range.

Carolyn McCall, its chief executive, said the segment ‘has had an excellent start’ to the fourth quarter, ‘which will ensure it achieves record profits in 2024’.

ITV envisages releasing ‘an unusually high number’ of productions between October and December, including crime dramas Grace and Shetland, and the Rob Brydon-hosted adventure series Destination X.

And though it forecasts ad sales to be about 6 to 7 per cent lower during the period due to last year’s Rugby World Cup and uncertainty preceding the Budget, the company said its full-year ad revenues are set to be around 2.5 per cent greater.

McCall additionally announced that ITV would make a further £20million in cost savings this year, divided roughly equally between content and non-content costs.

‘Coupled with our strategic delivery and revenue outlook, this continues to give us the confidence that we will deliver an increase in group profit this year,’ she said.

Richard Hunter, head of markets at Interactive Investor, said: ‘In investment terms, ITV remains a tough watch, weighed down by the endlessly deep pockets of some of its competitors in the streaming space, as well as still feeling the after-effects of the previous writers’ and actors’ strike in Hollywood.’

He added: ‘Investors remain skittish on prospects, as evidenced by an initial share price reaction which reflects the broader and more obvious concerns around general advertising revenues.’