CHART OF THE WEEK

Google revenue breakdown, $USB

Global advertising platforms playing a long game in retail, payments, and logistics

 Amazon revenue segment breakdown (2018 & 2019, US$B)

The Google and Facebook duopoly in digital advertising will remain strong for now, and is based on their scale, extensive personal data bases, and platform assets. We have also noted the rise of Amazon advertising in previous reports. We expect Amazon’s growth which will come largely at the expense of non-duopoly players, piling pressure onto other digital advertisers. But these global digital advertising (DA) platforms also have long term ambitions along the value chain in areas like finance, logistics and commerce. Amazon is furthest along the track to a comprehensive offer incorporating advertising, distribution, and payments. Investment in new platform-enhancing technologies like artificial intelligence is key to the strategies of all three of these players.

In the advertising sector, traditional media are responding by shifting to addressable media, building their own platforms, and striking up alliances to build scale. In the longer run, we expect these alliances to expand to include major retailers, financial service providers and logistics companies as the scope of the platform threat becomes apparent.  Despite their strength, the global platforms face some rising threats. These include an increasingly hostile regulatory environment, commercial and regulatory pressure for more access to Google and Facebook’s customer data, and new kinds of competitors. Click here to read our new report.

Foxtel Ups and Downs

Foxtel’s ARPUs have been falling (2014-2019, A$ per month)

On 8th May, 2020,  Telstra announced it expects to take a non-cash impairment charge on its 35% stake in Foxtel from AU$750 million to AU$450 million. Telstra’s decision follows the recently announced write down by New Corp of close to US$1 billion. Telstra and New Corp highlighted the changes to ongoing industry disruption, the impact of COVID-19 on sports and advertising revenues. Due to the cancellation of live sports, Kayo recorded a significant drop of subscribers from 408,000 on 31st March to 272,000 subscribers as of 2nd May. On the positive side, Foxtel has reached a content deal with WarnerMedia which confirms that Foxtel will continue to broadcast Warner Bros’ TV and movies library including HBO.  Our previous report highlighted the ongoing issues and risks for Foxtel as it transitions from a traditional Pay-TV model to an OTT model – click to read our report.

UK TV set viewing trends

The UK lockdown since mid-March has boosted TV time to levels not seen since 2014, with broadcast TV and online video each growing by nearly 40 minutes/person/day. While trends vary significantly by demographic, news consumption has been a common catalyst for linear TV’s growth, benefitting the BBC above all. Although Sky News has also flourished, Sky’s portfolio has been seriously impacted by the lack of live sport. 2019 extended many of the long-running trends of the last decade, but, notably, online video’s growth rate appeared to slow among youngsters, in contrast to older demographics. 35-54-year-olds watching more VOD will have significant implications for linear broadcasters down the line. For more details, click to read a report from our UK research partner, Enders Analysis.

COVID-19 games industry update

Spend on digital games worldwide ($m)

Consumer demand for games and consoles has surged during lockdown. Sales are on track for the best year ever, while games production has been resilient, with studios and platforms adapting quickly to distancing and working from home. New consoles will still launch in 2020, but Sony and Microsoft will need to replace tradition with creativity and smarts for this launch cycle. Games have entered the new decade as a pillar of home entertainment, far more quickly than anybody anticipated. Many entertainment companies, particularly Disney, which has ignored games for the last decade, will be rueing their choices in the medium. For more details, click to read a report from our UK research partner, Enders Analysis.

UK ITV Q1 2020 results

ITV recorded total advertising Q1 revenues up 2% year-on-year (£426 million) and in line with their 6 March (pre-lockdown) guidance, on the back of a strong February performance of +8%. March ended up flat despite being the first month impacted by the COVID-19 crisis, with deferral and cancellation of advertising expenditure. In sharp contrast, April was down 42%, although we believe ITV has outperformed the market, aided by large audiences with 22 programmes with viewing above seven million, double the number over the same period in 2019. For more details, click to read a report from our UK research partner, Enders Analysis.