April 2, 2019 Market Outlook, ReportsMarket revenue growth accelerated to 3% in Q4, but it might never reach this level again, being helped by a never-to-be-repeated BT overlapping price rise. With price rises becoming more challenging in general, and superfast pricing under pressure in particular, maintaining/increasing ARPUs is becoming more difficult despite superfast volumes surging. Openreach’s ultrafast roll-out has accelerated, challenging Virgin Media and bringing the prospect of further price premia, but perhaps too late to be of significant benefit in 2019.Market revenue growth accelerated to 3% in Q4, but it might never reach this level again, being helped by a never-to-be-repeated BT overla [...]Sector Telecom.February 4, 2019 Flash Report, ReportsSky’s revenue growth under Comcast appears to have accelerated since it last reported as an independent company, largely driven by sports rights expansion in Italy, which also drove bumper subscriber growth in Q3 2018. Sky UK likely enjoyed a steadier performance, helped by accelerating high speed adoption, a price rise in April, increased international sales, and improving premium channel adoption on third-party platforms. Comcast expects continued acceleration into 2019, with profitability taking a hit from increased sports rights in Italy in H1, but this is more than compensated for by reduced English Premier League rights costs in H2.Sky’s revenue growth under Comcast appears to have accelerated since it last reported as an independent company, largely driven by sports rights expansion in [...]January 10, 2019 Market Outlook, ReportsBroadband market volume growth resumed its downward trend in the September quarter after a blip in the previous quarter that was likely caused by a wholesale transfer distorting the figures. Revenue growth, however, perked up to 1.9% from 1.7% in the previous quarter, an encouraging recovery especially given that it was not primarily driven by the timing of a price increase. ARPU growth improved across all four of the major operators, countering recent trends, with a focus on higher value offerings a common theme. High speed broadband adoption accelerated in the quarter across most operators, encouraged by Openreach’s volume discount offer, although this was partially driven by keener high speed pricing. Revenue growth at Virgin Media, Sky and TalkTalk converged at around 3%, with BT Consumer lagging at -1%. However, excluding the effect of BT’s shrinking telephony-only base and smoothing the sporadic boost of its 9-monthly price rise, BT Consumer’s revenue is in the middle of the pack at 3.0%Broadband market volume growth resumed its downward trend in the September quarter after a blip in the previous quarter that was likely caused by a wholesale tr [...]October 25, 2018 Focus Report, ReportsWith Comcast’s acquisition of Sky confirmed and Disney’s acquisition of 21st Century Fox on the path to regulatory clearance, how will the relationships of the various parties evolve?. Disney is betting on a standalone SVOD service in the US. However, its content deal with Sky in Europe is lucrative, and the performance of DisneyLife in the UK suggests its US strategy may not fit elsewhere. Sky’s relationships with Disney and Fox are crucial to its business. A joint pursuit to maximise returns from IP and distribution in Europe would be economically efficient for both Comcast/Sky and Disney/Fox.With Comcast’s acquisition of Sky confirmed and Disney’s acquisition of 21st Century Fox on the path to regulatory clearance, how will the relationships of [...]October 11, 2018 Focus Report, ReportsDrawn by its rapid growth and enviably youthful audience profile, incumbent broadcasters are paying increased attention to esports and its followers. Viewership of esports on UK broadcasters’ linear channels is low, with consumption on their online platforms likely the same. The market’s fragmented nature and global audience, along with the dominance of Twitch—and to a lesser extent YouTube—makes this unlikely to change. Broadcasters’ low-cost approach has primarily benefited competition organisers and games publishers. For broadcasters to create real revenues, massive upfront investment would be needed, with the risk of failure high.Drawn by its rapid growth and enviably youthful audience profile, incumbent broadcasters are paying increased attention to esports and its followers. Viewership [...]March 16, 2017 ReportsThe latest auction of UEFA Champions League televised UK rights has seen further high inflation (32%) as BT renewed its ownership for the three seasons from 2018/19 for an annual payment of £394 million. Although BT annual payments are to increase by £95 million from 2018/19, the new contract offers added commercial attractions, though we expect BT’s efforts to monetise them will fall some way short of the cost increase. However, BT had to win to cement its position against Sky as a strong number two in UK premium pay TV and we expect weaker future inflation of premium football rights. For Sky followers, the focus is now on the UEFA auctions in Germany and Italy, where the outcome is far from certain.The latest auction of UEFA Champions League televised UK rights has seen further high inflation (32%) as BT renewed its ownership for the three seasons from 201 [...]October 19, 2016 Reports
2017 has started well as group revenues grew by 5% on a like-for-like constant currency basis and operating costs were 2% lower year-on-year. The outlook for continuing strong revenue growth in the coming quarters is very positive in light of the numerous and ongoing product and service synergies in all three Sky markets. Cord-cutting is now a major concern in the US; however, there is no evidence for it with respect to Sky operations in Germany & Austria and Italy, while the evidence from the UK & Ireland is so far inconclusive. We expect some to occur, but not on the scale seen in the US.
2017 has started well as group revenues grew by 5% on a like-for-like constant currency basis and operating costs were 2% lower yea [...]September 1, 2016 Reports
The UK retail market for digital movies has shown steady growth, but has not offset the decline in physical sales. While iTunes remains the UK market leader, Sky is clearly driving the growth with its Buy & Keep offering, backed up with the reassurance of physical product. However, a move away from the collector mentality alongside the growth of a subscription mentality will affect long term prospects. This is not helped by the consumer proposition for digital retail, which remains disjointed, lacks inter-device operability and a clear consumer benefit. Without co-ordinated efforts and investment from the studios, content owners and retailers to resolve these issues, we believe the opportunity for digital video retail in the UK is limited. Even with that, the EST market may never be as profitable as the DVD home video market.
The UK retail market for digital movies has shown steady growth, but has not offset the decline in physical sales. While iTunes rem [...]December 5, 2014 Reports
Market revenue growth in the UK residential communications sector dipped down to 4.5% in Q3, from 5.4% in the previous quarter, but underlying revenue growth actually rose a touch by our estimates. In an intensely competitive quarter, BT lost ground relatively in broadband, with its net adds dropping compared to growth at the others, but BT still had the highest net adds in absolute terms, and continued to lead the way in revenue growth. With BT's mooted bid for a mobile operator and quad play moves being highlighted by several operators, in this report we re-examine the evidence for consumer demand for quad play and find it still wanting. In the UK since 2001 there have been eight attempts at cross-selling between fixed and mobile, with five outright failures (three of which were from BT), two attempts that lost market share after an acquisition but are now growing modestly, and one attempt which has successfully gained modest share. The UK fixed business has better growth and far better margins than the mobile business. BT alone makes more cashflow in the UK than the entire mobile industry put together the grass may always seem greener on the other side, but in this case it definitely is greener in fixed. The fixed operators have far more to lose than to gain, and for this reason alone they should perhaps be wary in their approach to quad play.
Market revenue growth in the UK residential communications sector dipped down to 4.5% in Q3, from 5.4% in the previous quarter, but [...]October 20, 2014 Reports
Q1 2015 results show steady underlying revenue growth in retail subscription and increases in other segments, along with the continuing extraction of cost efficiencies, resulting in an 11% year-on-year increase in Q1 operating profits.Quarter-on-quarter, Q1 2015 retail subscription revenues and ARPU were flat in spite of the strong uptake and growing use of connected products. Main causes appeared temporary - a mixture of seasonal factors and the launch of Sky Sports 5 with its two-year free broadband offer - while underlying growth remains firmly positive.Meanwhile, Sky's accelerated investment in connectivity during 2014 is bearing fruit. Eyes may be focused on the formation of the new Sky (on schedule for November) and the long awaited Premier League auction, yet other developments such as Sky Store and Sky AdSmart also deserve full attention.
Q1 2015 results show steady underlying revenue growth in retail subscription and increases in other s [...]October 14, 2014 ReportsITV and Channel 4 have asked the regulatory authorities to review the case for legislation that would for the first time allow the commercial PSBs to charge carriage fees for their main free-to-air channels on the pay-TV platforms. To this end, ITV has presented a detailed analysis showing the great contribution to the US creative economy due to the introduction of Retransmission Consent Compensation for free-to-air broadcasters in the US, but without setting this against the very different market structure in the UK, where the commercial PSBs enjoy significant privileges. Any change to UK rules will require primary legislation and is not expected until after the May 2015 General Election. Should action be taken, the choice appears to lie between regulation (adding must carry rules) and deregulation of commercial PSB privileges, where the end result might not be what the PSBs wished.ITV and Channel 4 have asked the regulatory authorities to review the case for legislation that would for the first time allow the commercial PSBs to charge car [...]October 5, 2014 Reports
Virgin Media's request for Ofcom to open a formal investigation into the auction mechanism of live televised Premier League rights is a timely reminder of the need to consider the consumer as the auction draws ever closer with all eyes focused on the battle of BT versus Sky. When the EC last intervened before the 2006 auction, its remedy focused on the need for more than one winner for the sake of a more competitive downstream market, but without considering other variables affecting the outcome, to which Virgin Media has drawn attention. As the European country with much the highest rights fees per game, much the fewest televised top league games, highest package prices and by far the biggest outlay on player wages, the current PL auction mechanism gives the UK consumer little cause for cheer.
Virgin Media's request for Ofcom to open a formal investigation into the auction mechanism of live te [...]August 19, 2014 Reports
Market revenue growth in the UK residential communications sector continued to be robust in Q2 2014 at 5.4%, a slight increase on the previous quarter, with continued volume growth and firm pricing countering weak call volumes and the negative impact of a VAT legislation change hitting Virgin Media and TalkTalk. BT was the fastest growing out of the big four' in revenue terms in Q2 even after the direct revenue impact of BT Sport is excluded, a remarkable turnaround after being in last place a year ago, driven by both volume and ARPU growth continuing to accelerate, with fibre helping both. Since the end of Q2, promotional activity has already intensified, particularly from BT and Sky around the start of the new football season, and churn is likely to be under more pressure at all of the operators, although the disruption is likely to be less severe than that experienced around the launch of BT Sport last year, and we expect all of the major players to continue to grow in net terms.
Market revenue growth in the UK residential communications sector continued to be robust in Q2 2014 a [...]July 29, 2014 Reports
2014 saw a fall in profits as BSkyB absorbed the £217 million step-up in the annual cost of PL rights and invested £60-70 million in accelerating growth in its connected offerings, but with strong underlying revenue growth pointing to a resurgence of profits in 2015. The annual results release was over-shadowed by the news of BSkyB's proposal to create Sky Europe through the acquisition of 21C's shares in Sky Deutschland and Sky Italia, where it sees great opportunities for revenue growth and cost synergies. Taking on a large increase in debt to finance the acquisitions when the next PL auction is about to strike sends out the message that BSkyB management is confident about the state of its business, has a clear view about the value of PL rights, and will not be side-tracked from the pursuit of its broader strategic objectives.
2014 saw a fall in profits as BSkyB absorbed the £217 million step-up in the annual cost of PL right [...]July 23, 2014 Reports
The commercial non-PSB sector saw strong growth in share of total TV viewing of close to 40% as the multichannel TV homes universe doubled in the 10 years between the launch of Freeview in October 2002 and completion of digital switchover in October 2012, and even higher 50% growth in SOCI (share of commercial impact) thanks to the higher commercial airtime quotas of the non-main PSB channels. Even during the growth years, non-PSB channels that were present in 2003 felt a squeeze on viewing share and suffered losses as result of numerous channel launches that added to the long tail (Squeeze 1), and strong growth in the PSB families (Squeeze 2), which saw the total PSB share among the Top 25 channels in multichannel TV homes rise from less than 80% to over 90% between January 2003 and January 2014. Today, both the PSB and non- PSB commercial channel groups face the challenge of internet connectivity and increasing population of portable screens (Squeeze 3), and they are experiencing similar rates of decline. Yet, even if overall trends look the same, non-PSB viewing trends show significant variation by channel group and genre, to be explored further in Part 2.
The commercial non-PSB sector saw strong growth in share of total TV viewing of close to 40% as the m [...]Sector FTA TV.June 19, 2014 Reports
Ofcom's fibre margin squeeze test's initial indicative assessment concludes that BT's current wholesale/retail pricing is close to the boundary' of creating a squeeze on its competitors. While BT can take comfort that it is at least close to passing the test, its DSL competitors (Sky, TalkTalk et al) can take comfort that BT cannot make life materially more difficult for them without failing it. Crucially, the costs of BT Sport are included in the test, so BT is now heavily dis-incentivised from further aggressive bids for sports rights, which is positive news for the prospective cashflows of both Sky and indeed BT itself.
Ofcom's fibre margin squeeze test's initial indicative assessment concludes that BT's current wholesa [...]June 8, 2014 Reports
Market revenue growth in the UK residential communications sector was surprisingly robust in Q1 2014, rising a touch to over 5% (or around 4% excluding the direct impact of BT Sport) from just under 5% the previous quarter, despite facing a number of headwinds. Revenue growth at the top four operators has converged to around 4% for all, which marks a major long term turnaround for BT and TalkTalk, who back in 2012 were both experiencing firmly declining revenue well below market growth, and have since done much to stabilise their subscriber bases and sustain ARPU growth. Looking forward, we expect that BT will continue to do well in the June quarter given Sky's continued focus on TV products, but thereafter its focus may change, and whether BT's recent competitive boost from fibre will continue growing is uncertain. Having said this, any likely market share shifts are relatively minor in the context of the market, with the general theme likely to remain that the rising tide is lifting all boats.
Market revenue growth in the UK residential communications sector was surprisingly robust in Q1 2014, [...]June 4, 2014 Reports
Strong growth in the UK economy has created a very positive short term outlook for display advertising, with TV Net Advertising Revenues (NAR) expected to increase by 5% in 2014. That bright prospect is nonetheless overshadowed by online video advertising, where 2014 is expected to add almost £200 million to the estimated £300 million spent in 2013. YouTube is leading the way, but the TV broadcasters also stand to benefit. All the indicators point to yet more rapid growth in online video advertising over the next three to five years. So far it has had little apparent impact on TV NAR, but this should change from 2015 as TV and online video become more closely meshed.
Strong growth in the UK economy has created a very positive short term outlook for display advertisin [...]June 3, 2014 Reports
The latest vision of Sky Europe under discussion between 21st Century Fox and BSkyB has 21st Century Fox maintaining its share in BSkyB at 39%, while BSkyB buys out 21st Century Fox's interests in Sky Deutschland and Sky Italia. Agreeing the right price will be complicated by the contrasting fortunes of Sky Deutschland, which is enjoying a sustainable boom, and Sky Italia, which, although well run, is holding on to marginal profits in Europe's most inflated football rights market and in a structurally stagnant and weak economic climate. Today, there appear only modest operating efficiencies to be gained from bonding the three Skys into Sky Europe; however, centralised content and service strategies may become much more important in coming years in an increasingly scale-driven European marketplace.
The latest vision of Sky Europe under discussion between 21st Century Fox and BSkyB has 21st Century [...]May 5, 2014 Reports
Q3 2014 saw adjusted revenues up by 7% across the first nine months of fiscal 2014, helping to offset the large cost increases due to the new Premier League contract and investment in accelerating take-up and usage of connected services. In line with strengthening the online offer, retail subscription revenues were well up in the quarter, which saw further strong growth in NOW TV and Sky Go Extra subscriptions, while bad weather and losses due to the final integration of O2 customers temporarily subdued broadband growth. Continuing expansion of the total paid for multi-product subscription base and launch of new transactional and adjacent revenue streams appear the key drivers of future revenue and profit growth, while the next and looming Premier League auction remains the joker in the pack.
Q3 2014 saw adjusted revenues up by 7% across the first nine months of fiscal 2014, helping to offset [...]April 15, 2014 Reports
Sky and TalkTalk are rolling out fibre in a small part of York, using a model that they could potentially extend to cover 10-15% of UK households. The economics of greenfield fibre build are still terrible in general, with even building in cherry-picked areas very hard to justify under current conditions, although the economics will improve over time as demand for speed increases. Moreover, once it is built it is built, and BT loses the wholesale revenue forever. Taking the hint and offering more reasonable wholesale fibre pricing may not be a bad option if Sky and TalkTalk persist.
Sky and TalkTalk are rolling out fibre in a small part of York, using a model that they could potenti [...]Sector Fixed Line (Internet and Voice).March 5, 2014 Reports
Enders Analysis co-hosted its annual conference, in conjunction with BNP Paribas and Deloitte, in London on 4 March 2014. The event featured talks by 13 of the most influential figures in media and telecoms, and was chaired by Sir Peter Bazalgette. This report provides edited transcripts of the talks given by six of those speakers: Sir Martin Sorrell, WPP; Gavin Patterson, BT; Andrew Griffith, BSkyB; Thomas Rabe, Bertelsmann; David Dyson, Three UK; David Abraham, Channel 4.
Enders Analysis co-hosted its annual conference, in conjunction with BNP Paribas and Deloitte, in Lon [...]March 3, 2014 Reports
The UK residential communications sector maintained strong revenue growth of 5% in Q4 on a reported basis, or 4% underlying, bolstered by strong volumes and solid pricing, with recent price increase implementations supporting the latter going forward. It is still hard to see a very significant competitive impact from BT Sport, with BT's broadband net adds up by only 20k-30k on a year earlier, but the impact on costs is very clear, with increased sports rights costs, increased marketing costs and pay TV box/device subsidies driving up the cost base of all operators. Looking forward, in the short term market volumes are likely to be suppressed by recent bad weather lengthening provisioning times, and the detailed timings of price increases will suppress ARPU growth. In the medium term the outlook is much stronger, although the prospect of increased competitive activity around the next Premier League rights auction still casts a shadow.
The UK residential communications sector maintained strong revenue growth of 5% in Q4 on a reported b [...]February 3, 2014 Reports
Operating profits took a dip in H1 2014 as Sky absorbed the £110 million hike in Premier League (PL) football rights, saw marketing spend rise as a result of strong product growth and invested £40 million in its connected TV services. Growth has stayed positive across the range of TV and home communications products, while the new User Interface due to launch in the next few months promises to unlock significant incremental revenues as well as underline the quality of Sky offerings in movies and entertainment. Sky has no time to lose in building on its strengths in content, service quality and customer loyalty as the next PL auction looms towards the end of calendar 2014/first half of 2015, but the strategy appears sound with strong revenue and upside potential.
Operating profits took a dip in H1 2014 as Sky absorbed the £110 million hike in Premier League (PL) [...]