British commercial television network ITV has been warned by stockbroker Merrill Lynch to brace itself for a fall in ad revenues “far worse than expected”.

In the latest prophecy of TV advertising woe, Merrill forecasts a 15% to 20% year-on-year fall in ad revenue for April, with an 11.7% drop in the first half and a 1% decrease for 2001 as a whole.

“ITV advertising is taking another turn for the worse,” warned the firm. Part of the blame seems to lie with the cutback in adspend by car and telecoms companies. However, darker forces may also be at work. “More sinister,” opines the broker, “is the evidence that major US packaged goods advertisers are sitting on their hands, attempting to warehouse profits, and watching to see what happens to their domestic US market.”

For the twelve months to September – when the two biggest ITV companies Granada Media and Carlton Communications end their financial years – Merrill has inflated its previous forecast of a 1.5% fall in ad revenue to 5%–6%. This is in line with the 5% fall predicted by Credit Suisse First Boston over the same period.

Ironically, the downturn in advertising coincides with a healthy few months in terms of ratings. ITV has strengthened its lead over publicly owned rival BBC1 with shows such as Who Wants to be a Millionaire and Popstars.

However, there is some light at the end of the tunnel for ITV, which should see a recovery in the second half. “August onwards will be strengthened by the move of Premier League [soccer] highlights from the BBC to ITV,” forecast the seer.

In the meantime, advertisers could find the cost of ad space falling dramatically. “There is double-digit deflation in the cost of airtime on ITV at the moment,” enthused MediaVest chief executive Jim Marshall, “so there’s good value to be found.”

News source: Financial Times