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  • TV platform forecasts to 2026: DTT and pay-lite set to grow
    TV platform forecasts to 2026: DTT and pay-lite set to grow
    June 6, 2018

    Football embraces Chinese ‚Äėhot‚Äô money ‚Äď at a risk

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    In a display of chutzpah, Mediapro acquired the Ligue 1 domestic broadcasting rights from 2020-24 in what is the most disruptive shock to the French broadcasting industry in a generation; one that is likely to accelerate Canal+‚Äôs decline, force a review of the outdated regulatory framework, and possibly spur an M&A spree. The Mediapro move only makes sense as a highly speculative bid to resell the rights, or a dedicated channel, to French platforms in 2020. The odds are high that the broker ultimately fails to fulfil the contract, as just happened in Italy, where Sky is now expected to get the Serie A licence. Precedents of new entrants acquiring domestic top-flight rights bode poorly for Mediapro, and for the league. The Ligue 1 may live to regret the introduction of a ‚Äėre-sell right‚Äô into its licensing terms.  
  • May 31, 2018

    French, Spanish and Italian telcos won’t bankroll further footb [...]

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    The rights auction for France‚Äôs Ligue 1 will be held on 29 May. With Altice‚Äôs struggling subsidiary SFR unlikely to bid, Canal+ and BeIN Sports may not offer enough to meet reserve prices, triggering a postponement of the auction. In Spain, stiff fixed-line competition is shifting battlegrounds from football to scripted content. The Champions League has yet to sign up a platform for next season, while the upcoming 2019-22 La Liga rights auction may well fail to increase domestic revenues. With just 12 weeks before next season kicks off, Italy‚Äôs Serie A is also yet to secure a broadcaster, although we expect the league to back down and settle with Sky. In this deflationary environment, top clubs are eyeing a new Club Word Cup as an extra revenue stream ‚Äď running the risk of further widening the financial chasm between themselves and smaller clubs.    
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  • Spotify‚Äôs freemium model gains traction
    Spotify’s freemium model gains traction
    May 17, 2018

    Wall St Shuffle: Spotify’s non-IPO

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    Spotify is now the world‚Äôs first publicly listed on-demand music streaming service. Its global footprint generated ‚ā¨4 billion in 2017 from over 70 million paying subscribers and 90 million ad-funded users across 65 countries. As it expands, the service is steadily but surely moving ever closer to profitability, with a 2019 operating profit a very real prospect. So far and for the near future, Spotify‚Äôs global pre-eminence versus competition from Apple, Amazon and Google proves remarkably resilient. Plans to build upon its differentiating features will become ever more decisive as the tech titans will continue to wield their resources and ecosystems against the comparatively undiversified company.      
  • September 15, 2017

    Global recorded music forecasts 2017-21

    For the second consecutive year, the global recorded music industry body IFPI reported rising trade revenues, growing 5.9% to reach $15.6 billion in 2016. Our forecasts supplement IFPI’s trade revenue data with richer national-level consumer expenditure data from local bodies in core markets, and project CAGR of 2.3% to 2021, tapering off as streaming approaches maturity. This fairly modest topline growth for global recorded music streaming trade revenues is the product of our judgement that the marketplace remains awash with free music. Streaming trade revenue growth could be higher still if the industry finds a solution to piracy through technological or regulatory means, obviating the need for the ad-funded compromise.
  • TV platform forecasts to 2026: DTT and pay-lite set to grow
    TV platform forecasts to 2026: DTT and pay-lite set to grow
    July 26, 2017

    European subscription and pay-TV monitor

    Across Europe, markets are becoming more competitive. Incumbent pay-TV paltforms (e.g. Sky or Canal+) face increasing threats from both internet-based services (e.g. Netflix and Amazon), and telecoms operators.Telecoms providers are proving the most potent challengers as they enter the premium football rights market to create attractive triple and quad play bundles¬†‚Äď examples include BT, SFR and Telef√≥nica.¬†The latter is now the main pay-TV operator in Spain whereas France‚Äôs Canal+ has entered into a strategic alliance with Orange. Across¬†the top five markets (UK, France, Germany, Spain, and Italy), Sky remains the leading operator with an estimated 21.5m video subscribers, twice as many as Netflix
  • European scripted content - Rising demand and consolidation
    European scripted content - Rising demand and consolidation
    July 11, 2017

    European scripted content

    The US scripted content boom is spilling over into Europe: Free-to-air TV drama ratings have proven resilient but as costs and audience expectations have risen budgets are under pressure, necessitating flexible co-financing arrangements with American broadcasters, and Netflix and Amazon. Pay channels have boosted output‚ÄĒwith uneven results.¬†Long-term IP control is a key factor behind independent production consolidation, led by broadcasters seeking a secure stream of content and diversification away from advertising.¬†Notable developments include the new wave of Berlin-based, internationally-financed series, the rise of domestic French content and Sky Italia‚Äôs edgy originals, Telef√≥nica‚Äôs giant leap into Spanish dramas, and the continuation of Britain as an export powerhouse.

  • June 13, 2017

    Sky is favourite in twin (and odd) Italian football auctions

    Domestic championship and Champions League rights for 2018-21 are auctioned almost simultaneously. The main uncertainties are the extent to which Sky will increase its exclusive coverage of Serie A, and whether it will try to win the Champions League auction to take advantage of rival Mediaset Premium‚Äôs announced retreat. We doubt that telecom or digital operators will be tempted by the ‚ā¨200m minimum price for the two internet-only packages with patchy regional coverage ‚Äď a bad idea mandated by the regulator. However irrational behaviour at auctions should never be ruled out.

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    January 13, 2017

    Music subscription streaming 2017

    Streaming is now mainstream and we predict 113% growth in expenditure on subscriptions for 2015-18 in the top four markets (US, UK, Germany and France).

    Free vs paid-for streaming is the central question for the music ecosystem: free yields fractions of pennies, making subscription the only credible business model.

    Market leader Spotify is facing competition from tech giants Amazon, Apple and Google, with deep pockets, for whom content is a pawn in a larger game.

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    November 25, 2016

    SFR and the downsides of the LBO model

    France‚Äôs number two telecoms operator has suffered extensive damage since the 2014 takeover by Altice, which engaged in a slash-and-burn leveraged buy-out. Market share loss has triggered a revenue decline, with uncertainty of when this might stabilise. Increased investments will barely allow SFR to stand still in the competitive race for 4G and fibre deployment. Cash flow, while in decline, is sufficient to meet high debt payments ‚Äď but rising bond yields could pressure P&L. SFR aims to appeal to subscribers through enlarged bundles of content sourced mainly from Altice investments in media, but execution seems geared to achieve VAT optimisation and augment the group‚Äôs political influence ‚Äď which may be needed as massive job cuts are planned.

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    August 8, 2016

    Sky firing on all cylinders: FY 2016 results

    FY 2016 has been an excellent year, with all three Sky markets showing improved performance as Sky delivered 7% revenue growth (5% after adjusting for 2016 being a 53-week year) and 12% increase in operating profit. The success reflects Sky’s commitment to product and service innovation and diversification in an increasingly fragmented marketplace combined with tight control of back office costs and focus on synergies. As a measure of its success, Sky has set new cost synergy targets of £400 million annual run-rate by FY 2020 and is aiming for continuing middle to high single digit growth in revenues, which should let it comfortably absorb the rising costs of Premier League and Bundesliga live televised rights under the next contracts.

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    June 28, 2016

    Global music publishing 2016

    Music publishing revenues are trending up in a broad sustainable manner across the US, Europe and Japan, underpinned by longstanding music rights regimes.

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    April 18, 2016

    Vivendi, Mediaset and the Latin strategy

    Vivendi is to acquire the main pay-TV division of Italy‚Äôs Mediaset in an all-share transaction, creating a ‚Äėstrategic alliance‚Äô between the two groups. Each partner will own a 3.5% stake in the other. The deal is positive for Mediaset but the benefits for Vivendi can only accrue long term.¬†Mediaset Premium claims two million subscribers and recorded ‚ā¨640 million revenue in 2015. However, EBIT losses amounted to ‚ā¨115 million and are likely to more than double through 2016 and beyond. The deal has no discernible impact on Premium‚Äôs bigger rival Sky.¬†Vivendi and Mediaset will also jointly operate a ‚Äėglobal‚Äô online video platform and collectively develop content production and distribution. The pair‚Äôs respective assets are sizeable but domestically focused with little demonstrable international synergy.
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    December 18, 2015

    Pandora’s 2016 music royalties to rise 12%

    The Copyright Royalty Board (CRB) delivered its Web IV ruling on statutory SoundExchange licensing rates for webcasters for 2016-20, raising Pandora’s total music royalty costs by a forecast 12% in 2016. Had the CRB sided with SoundExchange, rates for Pandora’s non-subscription tier would have shot up 79%, leaving the company floundering in a sea of red ink. Nevertheless, these increased licensing costs for Pandora over 2016-20 will postpone the moment when the company attains net profitability.

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    December 11, 2015

    Canal+: things will get worse before they get better

    Booming sales in Africa offset the steady decline of the Canal+/CanalSat subscriber base in France, delivering low but positive group revenue growth.¬†Canal+‚Äôs management, now firmly under Vincent Bollor√©‚Äôs control, is committed to reversing the French decline by investing ‚ā¨2 billion in new set top boxes and content ‚Äď but production of original series is hampered by corporatist regulation and the market for sports rights is increasingly competitive.¬†Earnings are slipping ‚Äď under a high fixed cost model any revenue decline depresses profit margin. The trend will worsen under the weight of the increase in domestic football costs next year as well as the planned extra spend on content and set-top boxes.

  • October 12, 2015

    Music publishing in Germany 2014-17

    Germany remains the second largest market in Europe for the exploitation of composition rights by their authors, with ‚ā¨382 million paid out to them in 2014, up 8% on 2013 (63% share of distributions on average). The German Government intends to secure an even ‚Äúbetter balance for authors‚ÄĚ in their contracts with music publishers, by allowing the composer to ‚Äúre-tender‚ÄĚ their contracts after five years to secure a better deal. GEMA, the collecting society, has a strong position in Germany and is poised to lead the development of the digital single market for online music services. Together with PRS for Music (UK) and STIM (Sweden), GEMA has formed a joint venture (JV) to offer multi-territory licensing and copyright administration services to services, music publishers and other CMOs, cleared by the EU Commission. Music publisher revenues from domestic collections could rise from ‚ā¨225 million to ‚ā¨247 million from 2014 to 2017, due to a moderate rise in broadcast revenues on the back of the economic recovery, a boost to public performance revenues from a higher live music tariff and flat royalties from recorded music expenditure, as the decline of physical mechanicals is offset by the rise of online royalties.

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    May 11, 2015

    US music publishing 2014-17

    The US music publishing market, worth $2.2 billion in 2013, is poised for moderate CAGR of 2.5% in the period 2014-17, thanks to performance royalty growth from broadcast and new media uses, offsetting flat mechanicals as the physical-to-digital transition in recorded music continues to place pressure on this revenue line. ASCAP and BMI, the performance rights organisations, have been engaged in an intense period of litigation against Pandora, the popular ad-supported streaming service with around 80 million users, in which Pandora has prevailed. ASCAP and BMI have also sought to loosen the consent decree regime in place since 1941 and overseen by the Department of Justice in order to enable "market-driven" rates, but this effort also looks set to fail in light of the firm opposition of all classes of licensees.

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    April 20, 2015

    Free-to-air TV business models

    Prospects for European free-to-air commercial broadcasters are clouded by a weak advertising recovery, decline in TV set viewing by younger age groups and increased competition from pay-TV and international operators.¬†Growth opportunities are nevertheless to be found in fine tuning families of channels to sustain audience shares, increased production of differentiating original content, wider HD and catch-up programmes distribution and smart pay-TV developments ‚Äď broadcasters must focus on strengthening the quality gap between the TV set experience and online entertainment.¬†ITV has shown the greatest increase in profitability, benefitting from its global production strategy. RTL and ProSiebenSat.1 have a modest upside from carriage fees for HD channels but production and pay-TV initiatives have yet to pay off. TF1 and M6 have withdrawn from pay-TV and face regulatory obstacles to launching channels and production investments. Mediaset in Italy should benefit from the ad market stabilising, but risks large pay-TV losses. In Spain, Mediaset and Atresmedia enjoy an ad boom.

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    February 18, 2015

    Global recorded music 2015: Purchasing past its peak

    Consumer expenditure on recorded music continued its decline in 2014 by about 6% to $18 billion, as purchasing of download-to-own (DTO) albums and singles passed its peak in 2013, adding to the ongoing decline in total sales of CDs that started a decade ago Streaming is now the only growth story left for the industry, and it has a global footprint, being embraced by developed and emerging markets alike, unlike purchasing The US phenomenon of rapidly rising revenues from ad-supported audio streaming services such as Pandora and music video streaming on YouTube is quite unique as other markets currently lack the potential for online advertising.

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  • December 19, 2013

    2013 round up and topics for next year

    2013 has seen yet another year of strong growth in consumer adoption of mobile devices and screens adding to the challenges facing traditional media. Press and radio have long been affected, but television is now starting to feel the heat. BT and Sky's contest for premium pay-TV sports rights has intensified. August saw the launch of BT Sport, while BT's acquisition of the European football rights in November was a clear statement of intent, spending half of Channel 4's total programming budget on approx. 200 hours of content. The UK has seen buoyant advertising growth of around 4% in 2013, with similar growth expected in 2014, in the context of the strongest economic recovery in Europe.

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    November 28, 2013

    Canal+’s options to revive domestic growth

    France's Canal+ faces an increasingly challenging domestic market, due to IPTV expansion, competition from Al-Jazeera's beIN Sport and the threat of a Netflix launch ¬Ė on top of sluggish consumer demand in a dull economy. Inflated promotional activity has brought rising churn and failed to stop subscriber base erosion, while denting profitability. Headline revenue growth comes from international channels, film production and FTA TV. Anxious to avoid interference from its owner Vivendi, Canal+ has followed a conservative investment policy that may have undermined growth. The spin-off of SFR and possible dissolution of the conglomerate would leave Canal+ free to contemplate more aggressive moves, in IPTV, set-top boxes and possibly through acquisitions.

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    November 13, 2013

    Vivendi 3.0: Back to square one?

    The Vivendi empire is shrinking in revenues, cash flow and also in debt: Activision Blizzard and Maroc Télécom were sold in 2013, SFR will be spun off. We expect SFR's topline revenue decline to halt in H1 2014, ending the pain from the disruptive launch of Free Mobile in 2012. With SFR and Bouygues Telecom intending to conclude a network-sharing agreement outside urban areas by the end of 2013, SFR should have a more positive story to tell investors when it comes to the Paris stock market in late 2014. With SFR spun off, Vivendi 3.0 will own just Canal+, Universal Music Group (UMG) and GVT (telecoms operator in Brazil), three companies without visible synergies. The end point appears to be the full dissolution of the Vivendi conglomerate.

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    April 24, 2012

    US music publishers reach royalty agreements

    US music publishers have reached agreement on rolling over the mechanical royalties due on sales of digital and physical music formats for 2013-17. The expanded scope of the statute to cover ¬Ďscan and match' cloud locker services, such as Apple's iTunes Match, provides incremental revenues to music publishers; the unlicensed ¬Ďstorage' cloud locker services are not concerned. ASCAP's agreement on US radio performance royalties will however reduce music publisher revenues.
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    September 15, 2011

    Canal+ bursts into free TV

    Advancing its free-to-air TV project, France's Canal+ is to buy Bollor√© TV's national channels for ¬Ä465 million to gain (scarce) licences for FTA terrestrial broadcast. Canal+ plans to leverage its library of original programming to attract upscale audiences, neglected by commercial rivals. However, the Vivendi investment case of a 9% return on capital is built on incompatible assumptions about profit margins and market share ¬Ė to grow the latter in a mature market, a channel needs to sacrifice the former.

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    June 30, 2011

    Recorded Music and Music Publishing 2011

    This report provides our annual assessment and forecasts for recorded music sales and music publishing revenues, which engage all four of the ¬Ďmajors' ¬Ė Universal Music Group (UMG), EMI, Sony and Warner Music Group (WMG). In the context of the ongoing physical-to-digital transition of music consumption, retailing and buying, documented in the report, we estimate a 10% decline in recorded music sales to $18.4 billion in 2010, the sixth consecutive year of decline. We also project further overall declines in our forecast period to 2015. The recorded music sales decline has fed into music publisher revenues via mechanicals, and will continue to do so. In addition, the recession of 2008-09 continues to feed through to music publisher revenues via the lagged distribution of royalties. Thus, for 2010, we estimate that the global total fell by 3.1% in 2010 to $5.6 billion, and project an overall return to modest growth in 2012. Together, our analysis of recorded music and music publishing provides an industry-level context to evaluate the likely development of the majors themselves, bearing in mind that shifts in market share and currency movements will continue to differentiate their relative performances.