October 27, 2015 Reports
Sky has got off to a good start in 2016, as Q1 group revenues grew by 6% and operating profits by 10% year-on-year, while churn stayed low across all three operations, and product net additions of close to one million pointed to continuing strong underlying growth. The Q1 results have softened concerns about the impact of loss of Champions League live televised rights in the UK and Italy, which have so far shown very little effect in spite of intense competitive pressures from BT and Mediaset. Although Sky UK & Ireland has accounted for the entire year-on-year increase in Q1 operating profits, strong subscriber growth in Germany & Austria over the last two years, and signs that economic conditions in Italy are on the mend, provide a positive outlook for the year ahead.
Sky has got off to a good start in 2016, as Q1 group revenues grew by 6% and operating profits by 10% year-on-year, while churn sta [...]
October 26, 2015 Reports
The launch of UTV Ireland in the Republic has proved less than successful for UTV Media and has led to its divestment and that of its Channel 3 licence in Northern Ireland. ITV has bought UTV Television for £100m cash and will own 13 of the 15 regional Channel 3 licences, though we do not see a play for STV in the medium term. UTV Media is now able to fully focus on its main profit centre – its growing radio business in the UK and Ireland.
The launch of UTV Ireland in the Republic has proved less than successful for UTV Media and has led to its divestment and that of i [...]
October 14, 2015 Reports
Non-subscribers can download this report in full - alongside all our other coverage of the BBC during the Charter Review process - from the 'BBC Charter Review' page of our site. BBC proposals for local media set out on 7 September offer solutions to an alleged market failure, without much evidence, contained in February’s Future of News report. There is no dispute that local commercial print and online media operations have suffered heavy revenue losses since their peak a decade ago – the industry is, however, still profitable, innovation and online growth are helping to stabilise the top-line, and new enterprises are emerging. Local media publishers prefer a turbo-charged BBC policy of linking to their sites to the proposal for a local media digital hub fed by publishers and 100 BBC journalists.
Non-subscribers can download this report in full - alongside all our other coverage of the BBC during the Charter Review process - [...]
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 [...]
October 9, 2015 Reports
In Italy, pay coverage of the Champions League shifted from Sky to Mediaset Premium this season. Alongside a new Serie A contract, this adds an extra €300 million to Mediaset Premium’s cost base. The first results indicate that Mediaset is unlikely to meet its subscriber growth target. On current trends we expect cumulative EBIT losses of over €400 million by 2018. Mounting losses may force Mediaset to close or sell Premium, but fear of Sky may slow decision-making. Sky was probably right not to overbid for the Champions League and the savings should more than offset minor subscriber losses.
In Italy, pay coverage of the Champions League shifted from Sky to Mediaset Premium this season. Alongside a new Serie A contract, [...]
October 8, 2015 Reports
We are seeing a proliferation of news distribution services on social media and technology platforms, as companies like Apple and Facebook look to capture the value of longform professional content. Facebook’s Instant articles will likely be the most significant distribution mechanism for publishers, allowing Facebook to further position itself as a provider of quality, rather than just user-generated, content. This is best seen as a trade: news providers’ engaging content for Facebook’s audience reach and data. While concerns about reliance on Facebook and content commoditisation are understandable, these are the inevitable results of user behaviour.
We are seeing a proliferation of news distribution services on social media and technology platforms, as companies like Apple and F [...]
October 6, 2015 ReportsThe push for accelerated subscriber acquisition has stalled Sky Deutschland’s underlying growth in profits as promotions have undermined ARPU. After being artificially suppressed by the introduction of two-year contracts, churn is poised to rise. Sky could maintain subscriber growth only through increased marketing and discounting – but this is unlikely. We expect EBIT breakeven before the end of the current Bundesliga contract in 2017. But sustained profitability depends on the outcome of the rights auction to be held next spring.The push for accelerated subscriber acquisition has stalled Sky Deutschland’s underlying growth in profits as promotions have undermined ARPU. After being ar [...]
October 5, 2015 Reports
Despite dropping the Fire Phone, Amazon has upped the ante in its battle for digital media consumers, upgrading its Fire TV devices and rolling out a new range of low price and robust tablets, starting from £50/$50, squarely aimed at the mass market. As with all Amazon devices aside from the failed phone, they are conduits for the company’s media and retail services, aimed at increasing purchases and forcing other platform operators to include them. Although shrinking as a share of Amazon’s business, media remains crucial, both for direct revenue and to attract customers to Prime, its membership programme, which by some estimates now accounts for the majority of its US sales.
Despite dropping the Fire Phone, Amazon has upped the ante in its battle for digital media consumers, upgrading its Fire TV devices [...]
October 1, 2015 Reports
Australia’s ABC and Canada’s CBC/Radio Canada have each suffered severe budget cuts imposed by governments without public or political debate and in spite of strong audience support. These cuts have impaired the international reach of ABC and CBC, as well as their investment in news and locally originated content. The UK’s reputation and standing in the world relies on the BBC’s services, its online presence, channels and its programming sales. And, just as in Canada and Australia, this valuable national soft power is and will be diminished by current government policy.
Australia’s ABC and Canada’s CBC/Radio Canada have each suffered severe budget cuts imposed by governments without public or po [...]
September 16, 2015 Reports
The DCMS Green Paper on Charter Renewal does not mention the DTT spectrum, but the question of its future is never far away, in particular where it refers to the recent explosion of choice and poses questions about universality. The former 470-862 MHz band reserved for broadcast TV will already have shrunk to 470-694 MHz by 2022 following intense international pressure from the mobile sector. Absent a strong defence case, we cannot rule out total clearance from the mid-twenties. As things stand, replacement of the DTT spectrum by the internet will have devastating consequences for the entire TV broadcast ecosystem. Most importantly, examination of viewing trends leads us to conclude that the UK public will not be ready for at least another 20 years.
The DCMS Green Paper on Charter Renewal does not mention the DTT spectrum, but the question of its future is never far away, in par [...]
September 16, 2015 Reports
New ‘s’ versions of the iPhone 6 and 6Plus will help to maintain Apple’s grip on the high-end smartphone market. A notebook-sized iPad Pro and revamped Apple TV round out this year’s iOS device upgrade. iPhone sales may be further boosted by a new leasing plan, initially US-only, allowing users to upgrade handsets each year more easily, which also should enable the company to take a share of the used iPhone market, and could even be a precursor to an Apple MVNO. While the new iPad and Apple TV are unlikely to have a material impact on profits in the near term, they should be seen in the context of the wider battle for control of the connected office and home.
New ‘s’ versions of the iPhone 6 and 6Plus will help to maintain Apple’s grip on the high-end smartphone market. A notebook-s [...]
September 10, 2015 Reports
Responding to the Green Paper’s question on the BBC’s market impact, this report finds that the UK’s creative economy would suffer a 25-50% decline of investment in new UK content “if BBC TV did not exist at all”. Advertising-supported broadcasters would gain little, if any, extra revenue from expanded commercial audiences. ITV, Channel 4, Channel 5 and non-PSB multichannel broadcasters would be unable to fill the gap in investment left by the BBC. Pay-TV platforms could gain significant revenues although the loss of BBC TV programming, with 30% viewing share, would increase costs. Pay-TV platforms invest <10p on the £ of revenue in new UK content excluding sport so they, too, would not fill the gap left by the BBC.
Responding to the Green Paper’s question on the BBC’s market impact, this report finds that the UK’s creative economy would s [...]
September 3, 2015 Reports
The UK’s love affair with the smartphone continued in Q2: 85% of adults under 55 and a third of over-55s now have smartphones, which are becoming the primary method of accessing the internet, accounting for over 40% of time online. Among teens and younger adults internet usage is now higher than TV viewing, though this is still offset overall by the massed ranks of older viewers who remain glued to their TV sets. Commercial revenues derived from mobile devices still trail their share of internet usage but the gap is closing fast: in Q2, smartphones and tablets generated nearly half of consumer e-commerce transactions, while mobile ads represented 34% of internet search and display advertising.
The UK’s love affair with the smartphone continued in Q2: 85% of adults under 55 and a third of over-55s now have smartphones, wh [...]
September 2, 2015 Reports
Ten months after the acquisition of France’s SFR by Numericable, cost cutting targets appear likely to be exceeded, but the promised resumption of revenue growth may still take time to materialise as downward price pressures persist and the subscriber base has yet to stabilise. Profitability has increased faster than expected, while debt ratios look sustainable and set to decline. The challenge is to relaunch marketing while achieving the guided ambitious EBITDA margin growth. Investments, even if lower than planned, may be enough to sustain network competitiveness. The rationale for consolidation between Numericable, Bouygues and/or Iliad remains strong. But Numericable’s model looks sustainable without this. Side investments in media may at best bring political clout. The main risk stands with parent company’s Altice’s debt-finance expansion.
Ten months after the acquisition of France’s SFR by Numericable, cost cutting targets appear likely to be exceeded, but the promi [...]
August 27, 2015 Reports
The UK is now a smartphone society: by the end of this year smartphone users will exceed the PC internet audience and by 2020 we project penetration will reach 83%. The average smartphone user now spends an hour and three quarters a day online, significantly more than the equivalent for PC and tablet, and phones already account for nearly half of all time online. We are positive on tablet user numbers, and think PCs will be resilient, especially for work users. All in all we expect connected time in 2020 to be 21 billion hours higher than in 2015, up over 35%. Commercial revenues via smartphones and tablets still lag their share of internet usage, but the monetisation gap versus the PC is closing fast: the newer devices accounted for 27% of internet search and display advertising last year, up 8ppts versus 2013, and 36% of e-commerce transactions, up from a quarter a year earlier. Consumers are already thinking mobile-first; businesses will have to follow.
The UK is now a smartphone society: by the end of this year smartphone users will exceed the PC internet audien [...]August 25, 2015 Reports
The Government’s Green Paper on Charter Renewal asks whether BBC News is “crowding out” commercial news suppliers and, if so, whether this is justified. Our research shows that UK newspaper publishers have been damaged by the internet. They face inherent challenges in monetising online audiences, in common with other news publishers. To be blunt, the BBC plays no role in exacerbating these challenges. Scaling back BBC News will damage the UK’s sole source of impartial, quality and trusted news, whose independence is valued by users in the UK and around the world, risking the UK’s global “soft power”.
The Government’s Green Paper on Charter Renewal asks whether BBC News is “crowding out” commercial news suppliers and, if so, [...]August 24, 2015 Reports
The UK is the top music publishing market in Europe, at £428 million in 2014, despite being second to France and Germany for collections, because mechanical royalties for the reproduction rights (CDs, vinyl, digital) flow only to music publishers, while performance royalties are shared with writers. Thanks to the recovery of the UK economy that started in 2013, royalties from performance on radio, TV and in public have risen more strongly in recent years than in the difficult period of the recession 2008-10, providing a more promising context for sustained growth of the performance component of music publisher revenues. For online royalties, which accounted for 12% of music publisher revenues in 2014, the withdrawal by major music publishers of their rights to Anglo-American repertoire has shifted licensing to SOLAR, a joint venture of PRS for Music, STIM, and GEMA, also offering an aggregated repertoire and copyright administration services. This makes PRS for Music a leader in the development of multi-territory licensing of digital music services.
The UK is the top music publishing market in Europe, at £428 million in 2014, despite being second to France a [...]August 14, 2015 Reports
In this extensive report on the UK magazine market we review demand for print magazines, the advertising marketplace and the transition to digital. We detail the major publishers’ print and digital activities and provide advertising forecasts for print and digital spend to 2018.
In this extensive report on the UK magazine market we review demand for print magazines, the advertising marketplace and the transi [...]August 13, 2015 Reports
UK advertising is having a bumper year – some of the strongest growth for two decades – but print is receiving none of this upside. The year started soft then plummeted in the weeks immediately before and since the General Election, with increasingly serious implications for the sector. A reasonably steady UK economy and explosive TV and digital spend evidence a structural decline for print media display, though specific factors also point to some cyclical effects. We forecast a slowing of the rate of decline in H2 2015 and 2016, but we believe sooner or later the industry will have to work closely with agencies and brands to establish new terms of engagement for print media.
UK advertising is having a bumper year – some of the strongest growth for two decades – but print is receiving none of this ups [...]August 10, 2015 Reports
The end of ITV’s five year transformation plan leaves it a different company to the one that had only just emerged from the recession and advertising collapse of 2008/9, with total external revenues up 37% on H1 2010 and EBITA more than doubling from £165m to £400m across the same time period. This turnaround comes off the back of a resurgent TV advertising market, with ITV NAR revenues up 15% since H1 2010, but ITV has also expanded its Studios division, investing an initial £760m in international production companies over the last three years. However, there are some areas of concern, particularly ITV’s 7.7% drop in share of viewing since H1 2010, the biggest among the main broadcasters. There are also doubts about the longevity of the Studios acquisitions – what happens when key hits dry up? Or top talent leaves at the end of the buyout period?.
The end of ITV’s five year transformation plan leaves it a different company to the one that had only just emerged from the reces [...]August 6, 2015 Reports
The first set of annual results to include all three Sky pay-TV operations in Europe shows Sky plc to be off to a very good start: subscriber growth up by 5%, churn everywhere below 10%, adjusted group revenues up 5% and operating profit up 18%. Excellent though the start has been, each of the pay-TV operations faces its own specific challenges – be they to do with ARPU growth in Germany & Austria, subscriber growth in Italy, or football in some shape or form across all three markets and nowhere more so than in UK & Ireland. Most importantly for the Sky European merger, the latest results indicate that Sky is well on course with its target annual run-rate of £200 million in synergies by 2017; but with the UK model to act as a template, it is the fast-growing connected space that catches the eye.
The first set of annual results to include all three Sky pay-TV operations in Europe shows Sky plc to be off to a very good start: [...]July 30, 2015 Reports
The DCMS Green Paper on BBC Charter Review promises a nit-picking examination of all the BBC does, where the focus will be on how to redefine its mission as well as reform and/or improve BBC services in the internet age. A central theme is the scale of the BBC. The Green Paper underlines the “dramatic” expansion of BBC services in the last 20 years, and questions whether there is still a need for the current breadth and universality of the BBC’s offering in the online world of greatly expanded choice. Among the future BBC funding options laid out in the Green Paper, the suggestion of a mixed public funding and subscription model raises serious concerns with regard to its potential negative impact on the commercial television sector.
The DCMS Green Paper on BBC Charter Review promises a nit-picking examination of all the BBC does, where the focus will be on how t [...]July 28, 2015 Reports
Consumer ebook sales exploded after Amazon launched its Kindle in the UK in 2010, but growth rapidly slowed, and disruption was limited by genre, creating parallel ebook and physical book markets. Compared to the relentless downward spiral of music purchasing, these trends have been heartening for publishers and booksellers, but there are signs that slower, more complicated and insidious disruption is emerging. Decades of steady, albeit slow, growth in total book sales have been reversed, as consumers spend more time on a variety of mobile-delivered services, including some in classic content categories for books.
Consumer ebook sales exploded after Amazon launched its Kindle in the UK in 2010, but growth rapidly slowed, and disruption was lim [...]July 24, 2015 Reports
Apple delivered strong results in Q3 2015, selling a record number of iPhones for the June quarter, though iPad sales slid dramatically as consumers switch to ‘phablets’ and the company did not provide any detail on early sales of Watch, its biggest product launch since 2010. We remain bullish both on the iPhone and the Watch’s long term potential, though the latter remains a work in progress and, like many of Apple’s existing customers, we await the next iteration with interest; by contrast the iPad may have peaked already. Rising revenue from App Store, up 24% year-on-year, as well as new products like Apple Music and Apple Pay, should continue to boost the contribution from Services, and we expect this to evolve into a more material part of the business, but ultimately it’s still all about the iPhone.
Apple delivered strong results in Q3 2015, selling a record number of iPhones for the June quarter, though iPad sales slid dramatic [...]