Admitting its surprise at the success of Freeview (the BBC/BSkyB/Crown Castle digital TV joint venture) investment bank Morgan Stanley has warned ITV Network’s controlling shareholders Carlton Communications and Granada Media that the platform’s success could hit their revenues.

Translating its words into action, the bank cut its earnings forecasts for the two ITV companies on the basis that the surprise popularity of the new digital terrestrial service could accelerate ITV's loss of audience share.

Said Morgan's note to investors: “Following the collapse of ITV Digital last year, we had assumed Freeview would have a less than spectacular start to life. However, early sales data and conversations with retailers suggest the platform is doing better than we had expected. Overall, we see the success of Freeview as hastening ITV's loss of share.”

It continued: “Although ITV2 is taking 3.5 percentage points more audience in Freeview homes than it does in cable/satellite homes, ITV1 is only adding one point of audience share. The overall mix effect will still be negative for ITV, in our view.”

According to the latest BARB (Broadcasters' Audience Research Board) data, the lion’s share of Freeview’s success has been creamed by the BBC, its channels grabbing 43.2% share of viewing in homes receiving the platform.

In view of Freeview’s success and the initial ITV share-of-viewing data, Morgan Stanley has dramatically slashed its long term estimate of the latter’s revenue growth from 2.75% to 1.2%. It has also reduced its 2004 and 2005 estimates for Carlton and Granada by 15% and 17%.

However, another investment bank, USB Warburg (which also acts as Carlton's broker) calls Morgan Stanley’s concerns “overstated”.

Ripostes the white knight: “We believe ... ITV’s share within Freeview homes is, and will be, higher than that seen in cable and satellite homes and is higher than that suggested by initial – and what we see as potentially misleading – data. Furthermore, we contend that ITV's share of commercial viewing on Freeview, which is what drives advertising share, is substantially higher than the headline data will suggest.”

Carlton too begged to differ with Morgan Stanley: “Our analysis of ITV's performance in Freeview homes shows the opposite. All our commercial indicators show ITV is performing significantly better in Freeview than in multichannel homes.”

As a folksy sage once advised: “Be wary of numbers from folk playing with numbers whose daily bread is playing with numbers.”

Data sourced from:; additional content by WARC staff