June 6, 2018 Focus Report, ReportsIn 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French broadcasting industry in a generation; one that is likely to accelerate Canal+’s decline, force a review of the outdated regulatory framework, and possibly spur an M&A spree.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 ‘re-sell right’ into its licensing terms.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 broadcastin [...]
May 31, 2018 Focus Report, ReportsThe rights auction for France’s Ligue 1 will be held on 29 May. With Altice’s 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’s 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 – running the risk of further widening the financial chasm between themselves and smaller clubs.The rights auction for France’s Ligue 1 will be held on 29 May. With Altice’s struggling subsidiary SFR unlikely to bid, Canal+ and BeIN Sports may not offe [...]
May 17, 2018 Focus Report, ReportsSpotify is now the world’s first publicly listed on-demand music streaming service. Its global footprint generated €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’s 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.Spotify is now the world’s first publicly listed on-demand music streaming service. Its global footprint generated €4 billion in 2017 from over 70 million p [...]
September 15, 2017 ReportsFor 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.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 f [...]
July 26, 2017 ReportsAcross 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 – examples include BT, SFR and Telefónica. The latter is now the main pay-TV operator in Spain whereas France’s 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 NetflixAcross Europe, markets are becoming more competitive. Incumbent pay-TV paltforms (e.g. Sky or Canal+) face increasing threats from both internet-based services [...]
July 11, 2017 Reports
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—with 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’s edgy originals, Telefónica’s giant leap into Spanish dramas, and the continuation of Britain as an export powerhouse.
The US scripted content boom is spilling over into Europe: Free-to-air TV drama ratings have proven resilient but as costs and audi [...]
June 13, 2017 Reports
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’s announced retreat. We doubt that telecom or digital operators will be tempted by the €200m minimum price for the two internet-only packages with patchy regional coverage – a bad idea mandated by the regulator. However irrational behaviour at auctions should never be ruled out.
Domestic championship and Champions League rights for 2018-21 are auctioned almost simultaneously. The main uncertainties are the e [...]
January 13, 2017 Reports
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.
Streaming is now mainstream and we predict 113% growth in expenditure on subscriptions for 2015-18 in the top four markets (US, UK, [...]
November 25, 2016 Reports
France’s 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 – 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’s political influence – which may be needed as massive job cuts are planned.
France’s number two telecoms operator has suffered extensive damage since the 2014 takeover by Altice, which engaged in a slash-a [...]
August 8, 2016 Reports
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.
FY 2016 has been an excellent year, with all three Sky markets showing improved performance as Sky delivered 7% revenue growth (5% [...]
June 28, 2016 Reports
Music publishing revenues are trending up in a broad sustainable manner across the US, Europe and Japan, underpinned by longstanding music rights regimes.
Music publishing revenues are trending up in a broad sustainable manner across the US, Europe and Japan, underpinned by longstandin [...]
April 18, 2016 ReportsVivendi is to acquire the main pay-TV division of Italy’s Mediaset in an all-share transaction, creating a ‘strategic alliance’ 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 €640 million revenue in 2015. However, EBIT losses amounted to €115 million and are likely to more than double through 2016 and beyond. The deal has no discernible impact on Premium’s bigger rival Sky. Vivendi and Mediaset will also jointly operate a ‘global’ online video platform and collectively develop content production and distribution. The pair’s respective assets are sizeable but domestically focused with little demonstrable international synergy.Vivendi is to acquire the main pay-TV division of Italy’s Mediaset in an all-share transaction, creating a ‘strategic alliance’ between the two groups. Ea [...]
December 18, 2015 Reports
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.
The Copyright Royalty Board (CRB) delivered its Web IV ruling on statutory SoundExchange licensing rates for webcasters for 2016-20 [...]
December 11, 2015 Reports
Booming sales in Africa offset the steady decline of the Canal+/CanalSat subscriber base in France, delivering low but positive group revenue growth. Canal+’s management, now firmly under Vincent Bolloré’s control, is committed to reversing the French decline by investing €2 billion in new set top boxes and content – but production of original series is hampered by corporatist regulation and the market for sports rights is increasingly competitive. Earnings are slipping – 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.
Booming sales in Africa offset the steady decline of the Canal+/CanalSat subscriber base in France, delivering low but positive gro [...]
October 12, 2015 Reports
Germany remains the second largest market in Europe for the exploitation of composition rights by their authors, with €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 “better balance for authors” in their contracts with music publishers, by allowing the composer to “re-tender” 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 €225 million to €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.
Germany remains the second largest market in Europe for the exploitation of composition rights by their authors, with €382 millio [...]
May 11, 2015 Reports
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.
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 pe [...]
April 20, 2015 Reports
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 – 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.
Prospects for European free-to-air commercial broadcasters are clouded by a weak advertising recovery, decline in TV set viewing by [...]
February 18, 2015 Reports
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.
Consumer expenditure on recorded music continued its decline in 2014 by about 6% to $18 billion, as purchasing of download-to-own ( [...]
December 19, 2013 Reports
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.
2013 has seen yet another year of strong growth in consumer adoption of mobile devices and screens ad [...]
November 28, 2013 Reports
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 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.
France's Canal+ faces an increasingly challenging domestic market, due to IPTV expansion, competition [...]
November 13, 2013 Reports
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.
The Vivendi empire is shrinking in revenues, cash flow and also in debt: Activision Blizzard and Maro [...]
October 25, 2012 Reports
Keen to reposition itself as a media conglomerate, Vivendi is considering merging SFR with private equity-owned Numericable and its B2B sister Completel, while reducing its stake in the new entity to below 50%. Sizeable savings would come from migrating SFR's fixed line subscribers in urban areas from Orange's copper network to Numericable's coax and FTTB, and from eliminating Completel's LLU network and Numericable's marketing spend. In the short term, execution would be challenging and require sizeable capex. In the longer run, coax is a much cheaper alternative to investing in FTTH. The merger would put pressure on the other two altnets, Iliad and Bouygues, to consider consolidation scenarios.
Keen to reposition itself as a media conglomerate, Vivendi is considering merging SFR with private eq [...]
July 23, 2012 Reports
This report contains our annual assessment and forecasts for recorded music, in the context, as always, of the implacable physical-to-digital transition in music consumption and purchase, which continues to drain the topline of the recorded music industry. Although 2011 was another year of decline in global recorded music retail sales, these fell just 4% in 2011 compared to 10% in the previous year, on a strong year for the album in the top markets, notably Adele's 21 album. Globally, the CD remains the recorded music industry's leading sales format accounting for the majority of retail sales in 2011. Despite brisk retail sales of download to own (DTO) tracks and albums, and encouraging sales of subscriptions in 2011, sales of mobile formats (ringtones, ringbacks, tracks) have been in decline since the peak in 2008. This gives urgency to the industry's successful transition to digital music purchase in their top markets. Much of the consumption of recorded music is free-to-the user, whether licensed, already purchased or pirated. Live streaming is the top music behaviour, shifting from the computer to the handset via adoption of smartphones and the free apps offered on the iTunes and Google Play storefronts, amongst others. Pandora is the emblematic supplier of smart radio', and dominates this segment in the US. Smartphone adoption is also driving subscriptions to the premium mobile tier of Spotify, Rhapsody and similar services. The centre of digital music purchase remains the download-to-own (DTO) track or album, which we estimate accounted for $4.8 billion of retail sales in 2011, roughly 10 times the level of subscription revenues. Apple has built an unassailable lead on the DTO segment, leveraging the ecosystem created for its devices. It is well known that piracy drains the creative industries of retail sales, although the precise interaction between piracy and foregone sales is difficult to pin down. Anti-piracy regimes are being established to combat digital piracy of cultural goods, including music, but effective implementation is slow. Our forecasts for recorded music sales do not factor in any uplift to retail sales from successful anti-piracy action. We expect retail sales of digital formats to surpass the CD by 2015, more or less stabilising the market's topline revenues. However, sales of around $16.5 billion by that time would be just a fraction of their 2005 level of $30 billion.
This report contains our annual assessment and forecasts for recorded music, in the context, as alway [...]Sector Music and Radio.
April 24, 2012 ReportsUS 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 scan and match' cloud locker services, such as Apple's iTunes Match, provides incremental revenues to music publishers; the unlicensed storage' cloud locker services are not concerned. ASCAP's agreement on US radio performance royalties will however reduce music publisher revenues.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 expan [...]Sector Music and Radio.