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May 20, 2019Disney gets the final piece of Hulu
Flash Report, ReportsDisney announced that it would acquire Comcast’s 33% share of Hulu in a put/call agreement that can be enacted by either party from January 2024, while taking full operational control of the vehicle immediately. Under the agreement Disney will pay Comcast a minimum of $9 billion for its current stake, provided Comcast fulfils agreed capital calls, which going forward would be just over $500 million/year. Disney secured the continued licensing of NBCUniversal content for Hulu, contributing about 30% of Hulu’s library, but Comcast can loosen obligations to Hulu for the launch of its own SVOD service in 2020.
May 13, 2019Sky UK Q1 2019 results: weak ARPU hits bottom line
Market Outlook, ReportsSky made a surprisingly weak start to 2019, with revenue growth decelerating to 1.9% (the first time below 4% since the European businesses merged in 2015), due to weaker ARPU trends. However, Sky expects improvement to follow, blaming one-off factors in the quarter. The ARPU weakness drove EBITDA down 11.3%, but this should bounce back across the rest of 2019 as football rights costs turn from a drag to a positive. Comcast highlighted collaborations with Sky across tech, advertising, content distribution and even news, stating it is on track to achieve the anticipated $500 million in annual synergies over the next couple of years
February 22, 2019Time to create an addressable UK TV market
Flash Report, ReportsAddressable linear TV advertising, where precision-targeted ads overlay default linear ads, could enhance the TV proposition for advertisers, agencies and viewers, benefiting all broadcasters. In the context of dwindling linear viewing and rocketing online video ad spends, the adoption of Sky AdSmart and similar services on YouView and Freeview could take addressable TV ads from a sideshow to a pillar of revenue. Addressable linear is a bigger and more strategic prize for broadcasters than BVOD ads. Sky holds the key to wider adoption of its AdSmart platform if it can find a way – or a price – to bring ITV Sales and/or 4 Sales on board.February 11, 2019UK TV set viewing trends: linear audiences tumble in 2018
Market Outlook, Reports2018 was another bad year for traditional TV set viewing of broadcast channels, with a 5% decline year-on-year—its steepest since 2011. The decline accelerated among most demographics, but particularly for 16-34s, down 13% YOY from their already relatively low levels of TV viewing. Unmatched use, which includes viewing to Netflix, Amazon and YouTube, continues to grow, up 16% YOY, with both linear viewing and unmatched use becoming increasingly solitary activities. While heavier linear TV viewers are accounting for a greater proportion of linear TV viewing, it is the lighter TV viewers that are accounting for a greater proportion of unmatched use. Within the broadcast ecosystem, ITV had the strongest 2018 thanks to the FIFA World Cup, more Coronation Street, and Love Island. Most other broadcasters struggled in terms of viewing share, but the maturity of the market means major shifts continue to be rare.
February 6, 2019New Zealand Mobile Market Outlook
Market Outlook, ReportsThe New Zealand mobile market had been traditionally characterised as an oligopoly that is dominated by the prepaid segment with high prices, lack of product differentiation and low usage. However, this market is about to see a rise in competitive intensity driven by 2degrees’ move to gain share in the lucrative postpaid and business mobile segments. We believe Vodafone NZ is most at risk and could lose approximately 3% of its subscriber market share by 2022. The emergence of utility companies offering mobile products will also increase competition and create more “sticky” consumers. We forecast the mobile market will remain the largest segment in the telco market with NZ$3.2bn revenue by 2022.
February 4, 2019Sky UK Q4 2018 results: accelerating growth
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.
January 11, 2019Scandinavian video
Market Outlook, ReportsThe Scandinavian markets sit at the cutting edge of the TV industry’s evolution—a product of tech-savvy citizens, superb connectivity, and generally high incomes. Take-up of SVOD is high, yet while this has had a pronounced effect on viewing, pay-TV subscription numbers have proved surprisingly resilient. Traditionally dominant public service broadcasters are under greater financial and political pressures, with the licence fee scrapped in both Denmark and Sweden.
December 19, 2018DAZN: lofty ambitions in OTT sports
Flash Report, ReportsWith sport at the heart of the pay-TV ecosystem, dedicated online-only streaming services could emerge as a threat to leading players like Sky. The liveliest newcomer, DAZN, launched in 2016 with mostly second-tier sports. Now in seven markets and counting, it has recently made bold moves into top-flight competitions, notably in Italy, albeit as a secondary player. History has not been kind to those challenging pay-TV incumbents by selling sports unbundled—particularly in Europe, as Setanta, ESPN, beIN SPORTS and Mediaset can testify. If DAZN can stick to secondary positions in premium rights, or simply less-expensive sports, perhaps it will fare better.December 12, 2018UK TV advertising and consumer health check in Q4 2018
Flash Report, ReportsDespite the consumer's confidence having been shaken since the referendum vote for Brexit in June 2016, monthly retail sales, especially online, managed to grow above the private consumption trend until this October, a turning point that could mark the start of a retail recession extending into 2019. Since mid-2016, TV advertising and retailing have lost their historical covariance, with TV advertising's recession briefly interrupted in the first half of the year due to sunny weather and the FIFA World Cup. After a flat Q3, we predict a resumption of TV advertising's decline, expected to be down 3-4% in Q4 2018 year-on-year. 2018 will be flat for total TV advertising, still better than 2017. However, the medium's weakness will persist in the first half of 2019, with hopes for a recovery only in the second half, assuming an orderly withdrawal from the EU starts in March 2019.December 11, 2018Hulu casts a spell
Flash Report, ReportsWhen its acquisition of 21st Century Fox closes, Disney will own 60% of Hulu. If it bought Comcast’s 30% stake (and WarnerMedia’s 10%), it could fully leverage the platform for its US direct-to-consumer strategy. Comcast’s Hulu stake has little strategic value to it. We argue it should sell to Disney in exchange for long-term supply deals for ESPN, as well as for the upcoming Disney+ and Hulu, similar to its recent pacts with Amazon Prime and Netflix. This could naturally be extended to Sky in Europe depending on whether Disney decides to launch all direct-to-consumer or sticks with pay-TV in certain markets.
October 26, 2018Video Entertainment Market Outlook: The overall Video Entertainme [...]
Market Outlook, ReportsWe anticipate the Australian video market to marginally decline from A$5.48bn in 2018 to A$5.33bn in 2023 driven by a deflationary shift from traditional to digital platforms. While we don’t expect the overall size of the video entertainment market to decline materially, we do expect platform share to change dramatically over the next five years. Pay-TV will remain under pressure as the way video is consumed and paid for changes. Foxtel will offset some of this pressure by its participation in the xVOD market albeit this market will be heavily contested with multiple new players emerging.October 3, 2018What Sky means for Comcast
Focus Report, ReportsComcast’s £30.6 billion acquisition of Sky brings to an end the long-running ownership battle since Disney agreed to tender Fox’s 39% stake to Comcast, also ending the Murdoch Family Trust’s interest in Sky. Comcast’s US domestic cable and global NBCU media businesses complement Sky’s European operation. Sky’s telecoms business is likely to expand, while the TV side should benefit from NBCU’s global distribution might, with greater revenues generated by its original content. Fox’s long-running battle with UK regulators over the public interest dimensions of the proposed Sky acquisition has also ended. Plurality of media is preserved by Comcast’s undertakings to support Sky News for 10 years.
September 17, 2018UK Broadcast TV is growing very old, very quickly
Market Outlook, ReportsUK mobile market service revenue grew by 1.7% in Q2, up from 1.3% in the previous quarter, a disappointing result in the context of boosts from both IFRS 15 accounting and the annual price rises in the quarter. O2 was the star performer this quarter, with its service revenue growth leaping ahead to claim the top spot. BT/EE’s service revenue growth declined on an underlying basis, with weak contract net adds over the last six months catching up with it, and H3G and Vodafone were slightly improved and steady respectively excluding some one-off effects. Next quarter, the impact from the EU roaming cuts will annualise out, providing a substantial fillip to all operators. Ceteris paribus, this would put market growth in the vicinity of 4%, a figure not reached for years.
September 11, 2018UK mobile market Q2 2018: Disappointment before dawn
Market Outlook, ReportsUK mobile market service revenue grew by 1.7% in Q2, up from 1.3% in the previous quarter, a disappointing result in the context of boosts from both IFRS 15 accounting and the annual price rises in the quarter. O2 was the star performer this quarter, with its service revenue growth leaping ahead to claim the top spot. BT/EE’s service revenue growth declined on an underlying basis, with weak contract net adds over the last six months catching up with it, and H3G and Vodafone were slightly improved and steady respectively excluding some one-off effects. Next quarter, the impact from the EU roaming cuts will annualise out, providing a substantial fillip to all operators. Ceteris paribus, this would put market growth in the vicinity of 4%, a figure not reached for years.
September 3, 2018UK Commercial TV impact trends: better than viewing trends, worse [...]
Focus Report, ReportsThere has been no shortage of attention paid to declining TV viewing over recent years, but much of it focuses on overall viewing time rather than advertising delivery. This is to overlook the engine driving most of the UK’s television industry. Commercial impact delivery has held up well relative to overall viewing, and is strong for certain key demographics. Nonetheless there are generational and behavioural changes afoot which are exerting downward pressures on impacts, especially for younger audiences. An archipelago of Love Islands is needed (Stranger Things have happened).
August 29, 2018UK broadband, telephony and pay TV trends Q2 2018: Great volume, [...]
Market Outlook, ReportsThe UK broadband subscription market re-accelerated in the June quarter, bucking a consistent downwards trend that has been established for over three years, with line rental and pay TV subscriptions also accelerating having both also experienced a more general downwards shift over the last few years. The broadband acceleration may be short-lived, with line rental only a little more sustainable. Pay TV is perhaps the most robust recovery given that the over-the-top new entrants (primarily Netflix and Amazon) are now firmly establishing themselves as add-ons not substitutes.Revenue growth however took a more familiar path, dipping to 1.6% from 2.8% in the previous quarter, as BT’s overlapping price increase predictably dropped out, partially mitigated by an improvement in ARPU growth at TalkTalk caused by an improved (i.e. slightly less damaging) mix effect.August 20, 2018Sky UK 2017/18 full year results: Winning the game of content
Focus Report, ReportsSky maintained strong revenue growth of 5% in 2017/18, with EBITDA and operating profit both bouncing back into strong positive territory after the UK Premier League rights hit of 2016/17. The UK grew revenue well and profits better; Italy performed well and should improve much further given the retreat of its principal competitor; Germany is more challenged, but extra content investment may aid sustained growth. Sky is proving adept at managing content costs and revenue in a changing environment, with investment, cost control and monetisation all being put to effective use as the content type demands it.
July 24, 2018AV ad measurement: meretricious metrics
Focus Report, ReportsRigour and consistency in AV ad metrics is proving elusive. A 10-second ad on YouTube, ITV1, All4, MailOnline, Sky AdSmart or Facebook is measured in as many different ways, often indifferently. It is tricky, costly or impossible for agencies/advertisers to comprehend the overall picture. By 2020 JIC-based BVOD ad impressions should be available from BARB all being well, giving BVOD a clear advantage over other premium online video measurement. Google/YouTube seems to be ‘getting’ JIC co-operation now and has begun to galvanise video ad measurement, but forceful advertiser intervention is needed to extend and improve standards. Otherwise, advertisers are simply funding a JIC-free jamboree, and they (with content media) will lose the most.Sector Media.
July 13, 2018UK TV platform forecasts to 2022: stability rules
Focus Report, ReportsDespite significant changes in people’s video viewing habits over the last few years, the TV platform landscape has appeared to reach an equilibrium. We expect pay-TV to retain its utility status for most existing customers. At the margins, movement from Sky and Virgin Media to free-to-air or pay-lite services will be mitigated by population growth. The excitable growth phases for Netflix and Amazon are likely to be over, but they have carved out prominent positions in the market. Meanwhile, the uncomplicated allure of free TV remains strong for half the UK.June 29, 2018Is CRR still critical to protect advertisers from ITV?
Focus Report, ReportsThe workings of the TV advertising market are a mystery to most. Overlaying an arcane ‘share of broadcast spend’ trading mechanism is regulation in the form of CRR, which has prevented anti-competitive activity by ITV since 2003. CRR will protect advertisers ‘for as long as needed’. Most advertisers we canvassed believe it should stay in place, but the sell-side and auditors say CRR has passed its ‘Best before’ date and is heading towards its ‘Use by’ date. We propose a review of CRR by the Competition and Markets Authority (CMA) to determine whether it is now helping or hindering the TV advertising ecosystem to become fit-for-purpose for the digital age.June 26, 2018Sky finally renews Serie A rights until 2021
Market Outlook, ReportsItaly’s top football league awarded Sky the broadcasting rights to seven games per week from August 2018 until May 2021 for €780 million per year, up €208 million. UK-based Perform will carry three games for €193 million. Mediaset exits the market, freeing Sky from price competition. Besides Serie A, Sky added Mediaset’s Hollywood series and films to its content line up in May and will include the Champions League from August. We expect costs to rise by up to €500 million per year, which could be recouped by cuts in content and by recruiting Mediaset subscribers, notably on Sky’s new DTT feed. The best model for Perform would be to wholesale its new DAZN service to Sky, but even if a deal is found we doubt it could break even within the rights cycle.
June 19, 2018Advertising after the turning point: When offline is the exceptio [...]
Market Outlook, ReportsOnline advertising became the majority of all UK ad spend last year, in step with China but ahead of all other major markets. Direct response has further increased its share to 54% of UK ad spend, fuelled by the self-serve platforms of Google, Facebook and Amazon, while content media nets just 11% of the online advertising pot. We estimate that all online-delivered channels - including "pure play" online properties, broadcaster VOD, digital out-of-home and online radio - could account for well over 60% of UK ad spend by 2020, but only with improved commitment to industry governance.
June 14, 2018UK broadband, telephony and pay TV trends Q1 2018: Diverging stra [...]
Market Outlook, ReportsUK residential communications market revenue growth strengthened in Q1, but this was entirely driven by an overlapping price increase from BT, and the decline in market volume growth continues. Continued pressure on both subscriber volume growth and ARPU has led to diverging strategies, with most operators focused on sustaining ARPU, but TalkTalk chasing volumes at the low end, with the former approach currently proving more successful. Looking forward, the benefit of BT’s price rise will fall away completely next quarter and market revenue growth will likely resume its downward trend, but the nadir may be within sight if the flight to quality persists at most operatorsJune 11, 2018Disruption in Premier League football? 2018 auction finally over
Focus Report, ReportsThe latest auction of live Premier League broadcast rights commencing in 2019/20 has concluded at last, with three different winners for the first time. The total sum has not been confirmed, but it looks to be down c. 10% from the previous auction at £1.55 billion per season—still substantial, and not far off the BBC’s entire TV content budget. As we predicted, Sky and BT remain dominant, winning 180 of the 200 games per season, whilst new entrant Amazon picked up one of the leftover packages at what looks to be a very low price.
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