Enders Analysis

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  • New
    December 13, 2019

    UK broadband, telephony and pay TV trends Q3 2019: Darkest before [...]

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    Market revenue growth fell in Q3 to below 1%, and may drop below zero next quarter as existing customer pricing comes under more pressure. New customer pricing is however rising, and average pricing should rise much further as ultrafast increases in availability and popularity. Political enthusiasm for full fibre should be welcomed, although some specific plans are likely to do more harm than good if implemented literally
    Sector .
  • New
    December 11, 2019

    UK mobile market Q3 2019: Weathering the storm

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    The UK mobile market suffered its worst performance in six years this quarter as competition heated up and regulation continued to bite. Vodafone’s unlimited tariffs have proven popular, reaching 5% of its contract base in one quarter, helping to drive its outperformance. Some reprieve is in prospect next quarter, before the impact of out-of-contract notifications and automatic discounts from February, although there is the possibility of pre-emptive moves bringing some of the effects forward
    Sector .
  • New
    December 10, 2019

    Pressure on Facebook over political advertising

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    With elections in the UK in December, and in the US in 2020, online political advertising is receiving intense scrutiny. Google has announced limits on targeting, while Twitter has banned politicians from buying ads. Facebook is the big player in online political ads, and it continues to allow targeted political ads, and to carve them out as exempt from fact-checking. Facebook wants to keep Republicans on side and surf the revenue opportunity, but pressure will increase with US elections, and we expect Facebook to bring in restrictions.
  • New
    December 9, 2019

    Prime Video Channels: part of Amazon UK’s bigger picture

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    Amazon Channels’ aggregation of third-party streaming services enhances the consumer appeal of its wider video proposition, provides incremental revenues and increases the stickiness of the Prime shopping service. Content partners range from major players (e.g. Discovery and ITV) to the more niche (e.g. MUBI and Tastemade), who all benefit from a ready-made platform, billing relationships and a receptive subscriber base. But the revenue shares, data costs and lack of direct customer relationships remain too high a price for some. Two and a half years on from its UK launch, opportunities for live, ad-supported and bundled content are diversifying the platform, but Amazon must prioritise discovery within Prime Video to continue to flourish.

  • December 4, 2019

    Virgin Media UK: challenging quarter, but opportunities ahead

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    Virgin Media had a challenging quarter, with its early price rise driving weak subscriber figures and product spin-down, resulting in reduced revenue growth and an accelerated OCF decline. The market environment remains challenging with very competitive pricing on superfast and little push for ultrafast, but superfast pricing is easing and competitors’ ultrafast pushes should accelerate in 2020. Full fibre roll-outs remain a threat and an opportunity in almost equal measure, with Virgin Media’s positioning likely to be clarified as the regulatory mist clears over the next year

  • December 3, 2019

    TalkTalk UK: A discount brand pushing a premium product

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    TalkTalk enjoyed impressive EBITDA growth of 14% in H1 19/20, despite revenue growth pitching down sharply in Q2, and gross margin falling due to the rapid adoption of high speed broadband. The fall in costs was driven by a combination of good expense control and lower subscriber acquisition costs, in part due to improved efficiency, but in part due to a falling subscriber base, which is not a sustainable route to earnings growth. While the current dynamics are challenging, market prices have been firming recently, and should firm further as ultrafast becomes more popular, but TalkTalk needs to move to a more premium pricing position to take full advantage

  • December 2, 2019

    Champions League senses end of growth cycle

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    With pay-TV competition faltering, UEFA is aiming to stimulate demand for 2021-24 TV rights with early auctions, a possible relaunch of FTA broadcasts, and even, unrealistically, by considering an online service of its own. In the recently completed UK auction, facing no major threat from Sky, BT kept the rights at an almost flat price – probably missing a cost saving opportunity. In the upcoming auctions on the Continent, with former buyers such as SFR, Mediaset and Vodafone having cut back on premium sports, the major platforms’ bids will probably be unchallenged

  • November 26, 2019

    Turnaround still elusive at Vodafone Europe

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    Vodafone continues to strike a very shareholder-friendly focus and tone but its operating performance remains decidedly muted, with revenue growth up just a touch but EBITDA growth halved. Vodafone’s drive for convergence is still costing it dearly. German mobile ARPU is down 7% and Liberty Global’s assets disappointed on their first consolidation with cashflow enhancement less than half that expected. Apart from its ill-advised convergence strategy, Vodafone is making many sensible moves and there are indications that its unlimited plans are gaining traction. With leverage tight, pressure is mounting for demonstrable improvements in the financials some time very soon.

  • November 26, 2019

    Local UK media at a crossroads: from incremental to radical innov [...]

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    Local newspapers are often identified as the most disrupted of all media. The impact of declining news media has widespread implications: for the healthy functioning of democracy, community and social cohesion as well as for local business and trade. In this report we look briefly at the existential state of local news media, and spell out a radical new approach that would require a complete rethink of local journalism and its commercial and operating models. We reimagine local media as a start-up would, rather than as incumbents with expensive models to maintain.
    Sector , , .
  • November 25, 2019

    Sky UK Q3 2019 results: balanced, but more to come?

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    While Sky’s overall revenues continue to rise, Q3’s growth was hampered by a significant fall in advertising revenue and to a lesser extent a slowdown in content sales. Underlying EBITDA growth was in the mid-teens. Next quarter, Sky will continue to benefit from lower Premier League rights costs versus last season, and profit appears on track to meet full year guidance. Q3 saw a rare decline in Sky’s total number of customers due to the conclusion of Game of Thrones. Sky clearly understands the value of unique content—recently extending its HBO deal. In our view, this was essential, since without a distribution deal for Disney+ (launching in the UK in March) Sky would lose Disney’s alluring content.

  • November 20, 2019

    Consumer magazine publishing in the UK

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    Long-known market trends have become even more accentuated: circulation decline is -13% (consumer spend decline is c. -3%); print advertising is down -12%, with online advertising spend up a mere 1% (see pages 3, 11)

  • November 18, 2019

    O2 UK doing better than appears in tough times

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    In spite of total revenue growth of 4%, O2’s service revenue growth took another step down to -3% this quarter, consistent with the worsening environment and EE’s results. Its true performance is likely better than reported as IFRS15 has an artificially dampening effect on its service revenue as a consequence of O2’s Custom Plans, and is something of a boost to its impressive 6% EBITDA growth. O2 needs to continue to pedal hard to keep ahead of this challenging environment – with little let-up on the regulatory front, more aggression from Vodafone and H3G, and a potential regulatory hit to its Custom Plans
    Sector .
  • FLASH – SVOD first battle won, but watch the data
    November 18, 2019

    Free video! Apple TV+, Disney+, HBO Max and Peacock in a rush for [...]

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    New SVOD entrants are prioritising reach over revenue in the US with extensive ‘free’ offers, including Apple TV+ (to hardware buyers), Disney+ (to Verizon customers), HBO Max (to HBO subscribers) and Comcast’s Peacock (to basic cable homes). This is the latest development in an unfolding global story of partnerships, continuing on from multiple Netflix and Amazon distribution deals with platforms, bringing benefits to both parties. In Europe, Sky faces price pressure, but it has secured its HBO partnership and can now talk to Disney from a position of strength.
  • Magazine stand
    Magazine stand
    November 12, 2019

    UK’s TI Media goes back to the Future

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    Specialist publisher Future has offered £140m for generalist TI Media’s 41 brands, which will give Future 220 global brands upon expected completion in Spring 2020. The acquisition, which includes wholesaler Marketforce, is contingent upon shareholder and CMA approval. Future is the darling of publisher stocks, pursuing an energetic growth and scale strategy, and diversifying revenues through digital and experience innovation. How Future’s culture of experimentation and optimisation will work with TI Media’s more general portfolio is an open question. Only time will tell if the overall portfolio balance will work.
    Sector , .
  • November 11, 2019

    UK’s BT: Bumps on the road to recovery

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    BT suffered a weak Q2 with revenue and (particularly) EBITDA declines accelerating, but this was mainly down to timing (particularly at Openreach, which will likely recover in Q3), with the company confident in maintaining full year expectations. BT’s fixed broadband business enjoyed some recovery as the pricing environment improves, but will suffer another price timing bump next quarter, and its mobile business is suffering from a tough market environment that is unlikely to improve in the short term. The company is busy re-branding, re-positioning and transforming, but the outlook for football rights costs and fibre roll-out regulation will dominate in the short term, and further bumps (such as the Virgin MVNO contract loss) may emerge.
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  • November 6, 2019

    Champions League rights auction: BT’s cost-cutting opportunity

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    Champions League UK TV rights, at £394m/season, appear to have reached a ceiling, with costs on a per match basis now comparable to the more-desirable Premier League. In the imminent auction, current rightsholder BT is the clear frontrunner. Potential competitors appear reluctant: Sky Sports has thrived since losing the rights in 2015, and no other players can reasonably compete at this spend. This presents BT with a golden opportunity to rein in costs, with a view to moving BT Sport towards breakeven at an important time for the wider business, considering the financial pressure it is facing

  • November 4, 2019

    Peak football revenues and post-boom scenarios

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    Broadcast licensing revenues for football are likely to be ex-growth in the top five markets in Europe, with some limited upside from sponsorship and out-of-Europe rights. The broadcast revenue boom stoked the rise of super clubs with global fan bases, feeding player transfer valuations, and a potential downturn of the latter could magnify the impact of the revenue decline. The leagues in Italy, France and Spain are more exposed to the risks of broadcast licensing revenue decline, while the Premier League’s model looks robust

  • October 28, 2019

    UK SVOD subscriber trends: who is buying and how many subs

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    With a raft of new streaming services about to hit, there remains a question as to the appetite for multiple subscriptions. Pay-TV subscribers continue to be more likely to take SVOD services—especially when they are distributed on their set-top boxes—however the average number of services per household is well below one. Greater variety and quality of services will likely increase the average number of subscriptions but given the siloing nature of these services, Netflix’s incumbency, library and distribution are its strength; new entrants will battle for a supplementary role
    Sector , .
  • October 23, 2019

    UK Telecoms sector returns: Money’s too tight to mention

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    Mobile sector returns are low, particularly for smaller-scale operators, with H3G earning less than its cost of capital. Regulatory initiatives, spectrum auctions and 5G look set to worsen this picture as H3G strives to gain viable scale. Back-book pricing is crucial to the returns of fixed challengers. Regulatory intervention is likely to lead to a waterbed effect in the fixed sector and exacerbate challenges in mobile. New entrant business case in full fibre is limited to de facto monopoly opportunities. There is the potential for BT’s returns to increase markedly if it gets full fibre right but new entrants’ inferior economics are unlikely to offer sufficient investor appeal
    Sector .
  • October 14, 2019

    Women’s sport: inching towards the UK media mainstream

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    Media coverage of women’s sport escalated this summer thanks to the 2019 FIFA Women’s World Cup, which ignited national interest. The Lionesses attracted an exceptional peak TV audience of 11.8 million for England’s semi-final match against the USA. Still, coverage of women's sport remains minimal outside of major events: only 4% of printed sports articles reference female athletes. Quality press are leading the way—the launch of Telegraph Women’s Sport being the prime example—but the popular press are yet to follow. Freely-accessible coverage will generate greater interest and audiences for women’s sport, but continuous investment from all media will be needed to fulfil its potential.
  • October 10, 2019

    UK BVOD advertising: on-demand in demand

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    Broadcaster video on demand (BVOD) advertising is in demand with an £89m rise in 2018 spend to £391m, and is predicted to double within the next six years. The rise of on-demand viewing has created a scaled advertising proposition with a strong 16-34 profile – a relief for both broadcasters and advertisers, given the long-term decline in linear TV impacts for younger audiences. Big challenges remain: linear TV ad loads look excessive in on-demand, BVOD CPTs can be off-puttingly high, and measurement is still unresolved. BVOD is a welcome bright spot which faces online video competition head-on, but it won’t be able to turn broadcasters’ fortunes around alone
  • September 30, 2019

    Time to liberalise UK TV advertising minutage

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    The UK TV advertising market, in decline since mid-2016, could benefit from a liberalisation of advertising minutage if Ofcom reviews COSTA and decides to make changes. Broadcasters could gain from the flexibility to devote up to 20% of peaktime minutes to advertising under the EU’s revised Audiovisual Media Services Directive (AVMSD). Ofcom could also level the playing field between PSB and non-PSB channels, although more minutes of advertising on TV is unlikely to inverse the medium’s decline.
  • September 24, 2019

    Amazon’s pivot to Marketplace

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    Amazon, the gatekeeper to 100 million Prime members, is increasingly reliant for growth on Marketplace, where third-party sellers compete with first-party products. Amazon’s multi-channel platform strategy delivers choice and low prices to customers, but third-party sellers have increasingly complained that their playing field is not level. After Amazon’s seller agreements were modified in August to implement a competition ruling in Germany, the European Commission is now investigating the data layer.
  • September 23, 2019

    European mobile in Q2 2019: No real let-up

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    European mobile revenue trends are not yet improving. Italy is still flat-lining at almost -10%, Spain worsened again, and the UK deteriorated sharply. France is the only good news story. 5G rollouts seem somewhat tentative. Indications from the UK that it is leading to a more competitive environment may discourage European operators from exacerbating already challenging markets. Prior year comparables for Southern Europe will be more flattering in the second half of this year although a doubling in the drag from intra EU calls will dampen any recovery