TF1's advertising performance is better than anticipated. TF1 channel NAR - which makes up near 60 per cent of total group revenue - decreased 2.6 per cent in Q1 and a continued decline was expected for Q2. TF1 channel NAR instead grew by 0.7 per cent in the quarter. Nevertheless, this slight increase fails to reverse the overall downward trend in H1 2011 brought on by two key factors: an unfavourable comparison with the same period last year when advertisers bolstered their budgets ahead of the FIFA football world cup (+11 per cent rise in TF1 channel NAR in H1 2010), as well as a difficult macroeconomic context leading to more cautious advertiser spending.
However, a drastic 107 per cent rise in TF1 domestic multichannel NAR counterbalanced TF1 channel's decline in H1. Thanks to the full consolidation of revenues from free-to-air digital channels TMC and NT1 since the beginning of July 2010 (TF1 used to own 40 per cent stake in TMC without consolidating any of its revenues; NT1 is a new acquisition), total group domestic TV NAR grew 5.4 per cent in H1.
Whilst this bolstered advertising revenues, the integration of the new digital channels into the TF1 portfolio did not counter total audience share loss for the group. TF1 group audience share went down from 24.5 per cent in H1 2010 to 23.8 in the same period this year. And this is including the first-time additions of NT1 and TMC, which contributed 1.8 and 3.5 per cent respectively to group audience. Whilst the rollout of the analogue switch-off programme in France is benefiting profitability for the group thanks to lower transmission costs, the ensuing audience fragmentation will continue to negatively impact TF1 channel audience in particular. The national switch-off deadline is in November 2011.
TF1 core channel NAR in H2 will also be impacted by a return to the typically quiet summer months in France, further exacerbating pressure on prices. A 10 per cent NAR yoy growth in Q3 2010 thanks to the Football World Cup will continue to have an unfavourable comparative effect. IHS Screen Digest forecasts TF1 channel NAR to decline by one per cent in Q3. We expect FY 2011 for TF1 channel at a slight 0.2 per cent decrease, roughly in line with a near flat national TV ad market in France.
Looking at TF1 Group, H2 will no longer benefit from the double (and triple) -digit domestic multichannel yoy growth rates stemming from the consolidation of TMC and NT1 (since it started in H2 2010). As a result, multichannel NAR is forecast to increase by 2.3 per cent only in H2 2011, bringing full year multichannel growth rate to 40 per cent yoy. FY 2011 domestic TV advertising revenue for TF1 group is thus expected to reach 2.9 per cent.