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    August 24, 2016

    Olympics – a winner for broadcasting?

    Australia has always been a nation of avid sports fans, and the Olympics has long captured the attention of the Australian populace. But could our love affair with the Olympics be coming to an end? The Olympics has long been highly lucrative for broadcasters looking to drive strong viewer numbers. As the digital landscape continues to disrupt broadcast TV, the value of the Olympics is brought into question. We discuss the Olympic viewer numbers as well as the return on investment for broadcasters who buy the rights to televise the Olympics, and the anticipated future trends.

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    August 12, 2016

    US and UK: Cord-cutting-shaving-nevering

    Cord-cutting has become a major headache for US pay-TV operators in the last three years, while cable network channels face further erosion due to cord-shaving and we now see a rapidly growing population of cord-nevering households that have never taken a pay-TV subscription. Should we expect it to be only a matter of time for the UK to follow the US? The short answer is no, due to major differences in the pay-TV market infrastructures of the two countries, which leave the UK much less exposed. However, downward pressures from the online space do exist in both countries, while the big cord-cutting-shaving-nevering threat we now see in the UK has most of all to do with the chill Brexit winds on the economy.

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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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    August 2, 2016

    Steady progress: ITV H1 2016 results

    ITV H1 2016 revenues and EBITA showed double-digit growth year on year, though the greater share came from ITV Studios acquisitions of independent producers and H1 2016 was sequentially down on H2 2015, with ITV Studios accounting for most of the decrease. ITV Family NAR was flat year on year. Though Brexit has led to growing fears of a sharp downturn, ITV appears relatively well placed to handle such an outcome: ITV Main channel 7% uptick in H1 viewing share; £25 million targeted cost efficiencies in 2017; healthy balance sheet. ITV Studios revenues have doubled in scale since 2011 following 15 acquisitions of independent production companies; yet just how well the underlying business is performing organically is hard to assess due to the bumpiness of short term trends.

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    July 22, 2016

    Mid-form video: Beyond the long and the short of it

    Video content is crudely defined. If something is not very short (<10 minutes) then it tends to be considered long-form. But there is a middle ground - one which displays a distinctive combination of characteristics in terms of production, broadcasting and viewing. Mid-form video (between 10 and 20 minutes) has the ability to carry the narrative arcs normally associated with long-form programming, whilst also retaining the snackable and shareable attributes of short-form. The footprint of mid-form is, so far, small. However, it is growing, as its unique qualities, such as excellent ad completion, become more readily recognised.

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    June 27, 2016

    Parents and their children online

    Cinema, TV and VOD services share the same ratings regime in the UK, giving parents confidence they can discern content unsuitable for their children. Risks to children of being exposed to unsuitable content and advertising multiply on the ‘open’ internet.
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    June 16, 2016

    TV genres and viewing trends over time

    TV viewing has one reliable, long term trend: programme genres are watched by consumers at predictable life stages and ages. At a high level, there has been little manipulation of the balance of genres being broadcast. But amongst the sub-genres, editorial optimisation has resulted in an uptick in actual viewing. As the core viewing age of linear television rises, there is an opportunity for broadcasters to leverage this to create the most desirable schedule for their available audience by daypart; with genres that transcend demographics when younger viewers tune in.
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    June 14, 2016

    Sky plays long term with Bundesliga

    The award of the match packages in the 2017-21 domestic football rights auction in Germany is probably optimal for Sky (within the “no single buyer” constraint): it will broadcast about eight out of nine weekly fixtures including the top picks, while Eurosport’s package is complementary to Sky’s rather than substitutional. Sky will, however, pay a hefty price, with the new contract costing 80% more than the current one – although the new Bundesliga rights value is not out of line with other Continental leagues. We expect Sky’s German operations to briefly break even in fiscal 2017 before falling back into losses with a return to profit if other costs are kept under control. Management has made a bold statement of self-confidence: building scale is the priority.
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    June 1, 2016

    New VOD rules in the EU Digital Single Market

    The Commission proposes to require VOD services to implement a 20% share of EU works in catalogues, which Netflix already largely meets. More impactful is the EU’s proposal for OTT SVOD services to provide access to the home service when subscribers travel in the EU, benefitting the UK’s 14 million subscribers. TV broadcasters, which observe a 50% EU works threshold in their linear programming served on TV platforms and online players, will be able to opt-in to portability.
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    May 5, 2016

    Video Entertainment Market Outlook

    The Australian Video Entertainment market has now shrunk by over $600m (11% nominal) from its peak in 2009. The OTT revolution continues to reshape the Video Entertainment marketplace.
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    April 20, 2016

    Sky’s German breakeven hangs on Bundesliga auction

    At present, Sky exclusively holds all pay-TV domestic live rights to Germany’s top football league. The 2017-2021 rights auction will conclude in early June. It contains a new soft ‘no single buyer’ clause referring solely to online rights. Sky’s real threat comes from potential bids for the main TV packages by deep-pocketed telecom or digital platforms. This could see Sky losing games and shouldering significant cost increases. We think Sky’s German operations will break even by fiscal 2017. Beyond this, profitability is heavily dependent on the auction’s outcome. If it were to retain all live rights, Sky could afford to increase Bundesliga costs by up to 40% over the four-year period. Anything beyond this would lead to Sky making losses.

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    April 18, 2016

    Vivendi, Mediaset and the Latin strategy

    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. 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.
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    April 14, 2016

    Away from home: The online challenge for PSBs

    On TV, UK public service broadcasters (PSBs) have operated within a privileged ecosystem; a guaranteed electronic programme guide (EPG) prominence placing their channels at the forefront, helping sustain their market share and spawning digital families. But technological changes within the TV set are eroding this prominence, and on devices, such structural advantages are non-existent. To confront dramatically falling mobile engagement, despite consistently excellent content, the PSBs need to collaborate and replicate their privileged linear position or they will struggle against the major SVOD players.
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    April 7, 2016

    OTT Home Entertainment in the UK

    Netflix gained 1.8 million accounts in the course of 2015 (+37%) to 5.2 million, surpassing the 1.3 million VOD-enabled homes added by fixed line telcos Sky (including NowTV), Virgin Media, BT and TalkTalk. SVOD homes overlap with pay-TV accounts, and are topping up content for family members, not cord-cutting. Amazon Prime Instant Video, bundled into Prime, looks set to balloon from 1.6 million users in Q4 2015 on the back of the marketing of Jeremy Clarkson's motoring show, cementing its position in home entertainment by serving a family-friendly eco-system of devices and media, leveraging its mammoth 25% share of UK e-commerce. Free-to-the-user YouTube remains the heavyweight with 35 million monthly unique users in the UK, although skewing strongly to Millennials, while those 55+ will take longer to move beyond catch-up TV to embrace a wider range of VOD options.

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    April 7, 2016

    UK broadband, telephony and pay TV trends Q4 2015: Diversified gr [...]

    The UK residential communications market maintained strong growth of 6% in Q4, helped by overlapping price increases at BT and TalkTalk, albeit mitigated by weaker volume growth as a result of the TalkTalk cyber-attack.

    This strong growth level benefits from multiple factors, including continually growing broadband adoption, broadband ARPU being boosted by the shift to superfast, price increases across line rental, calls and premium pay TV, and additional pay TV adoption at the lower end.

    We expect a modest dip in market revenue growth moving into 2016 as various one-off boosts drop out, but the underlying drivers of growth are sufficiently diversified to give us confidence that further downside is limited.

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    April 1, 2016

    Sky’s originals: seeking iconic differentiation

    Sky is steadily expanding its output of scripted content – now almost at the same volume as HBO’s. It is an attempt to strengthen the Sky brand in a more competitive market, the ultimate prize being exclusive association with ‘iconic’ content. So far so good: in the UK most originals deliver higher audiences than average and than US imports. Emergence of an iconic hit may be just a matter of time. Sky’s Italian productions are closer to the domestic hit status, but harder to sell to British viewers. The challenge for Sky is to stay in the global series budget race through US co-production and sales without compromising editorial sharpness. Continental European platforms increase Sky’s financial clout, but will require distinct content.
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    March 10, 2016

    The sleeping giant wakes into DisneyLife

    Disney surprised few with the launch of the SVOD service DisneyLife in the UK in November 2015, unlike its subsequent push into China. This could be seen as a mitigating strategy in face of partner streaming services beginning to invest increasingly in original content. But it also provides Disney with a streaming presence from which to build, or add spice to future licensing negotiations. Despite finding itself behind in the SVOD audience race, global affection for Disney, a typically handsome platform and a targeted roll-out should see success.

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    March 7, 2016

    Closing in on 50/50 the right way: ITV FY 2015 results

    ITV has delivered double-digit growth in adjusted EBITA for the sixth year running, marked by big increases in both TV NAR (Net Advertising Revenue) and non-TV NAR revenues, which now make up nearly 50% of the total. The outlook for 2016 is promising. We expect continuing real growth in ITV family NAR in line with the market average, and further substantial increases in both Online, Pay & Interactive and ITV Studios. The big question is how ITV can sustain all it has achieved with the international expansion of ITV Studios and use its growing scale to support growth in its Online, Pay & Interactive revenues abroad as well as in the UK.

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    February 16, 2016

    Millennials, mobile and traditional media

    Millennials are the mobile generation, and their preoccupation with mobile erodes time spent with other media, but also offers new opportunities for traditional media brands. Millennials have a different relationship with traditional media; mobile has provided them with control over what they consume and the convenience to access content where and how they like. New content forms such as very short videos have added to the mobile experience, creating social discovery opportunities for media to reach millennials.
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    February 4, 2016

    Sky Q2 2016 results: innovation, service and bonding

    Europe’s biggest pay-TV service provider Sky has delivered another strong quarter, which saw H1 adjusted operating profits across the group rise by 12% year-on-year on a like for like basis at a constant Euro exchange rate, and the upward trend clearly has a lot of mileage left in it. Although Sky UK & Ireland now generates almost all the current operating profits, the performances of Sky Germany & Austria and Sky Italy give cause for optimism and testify to the group’s deep commitment to top of the class innovation and customer service. In a converging online, telco and TV space, the appointment of James Murdoch as non-executive Chairman and entry of Showtime into the Sky Atlantic partnership of Sky and HBO send out a clear message from the TV side about the importance of global scale and ties between its members.

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    February 1, 2016

    China OTT and SVOD

    China holds tremendous appeal to studios and OTT video services, boasting an audience of 460 million online video users in mid-2015 (69% of internet users), which could exceed 900 million by 2020 by our estimate.

    China’s OTT video marketplace generated estimated revenues of $5 billion in 2015, of which two-thirds was due to ad-supported streaming and the rest to paid video streaming.

    Netflix recently pledged to enter China, although the current regulatory environment presents substantial, perhaps insurmountable, challenges to a direct-to-consumer offering

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    January 29, 2016

    All together now – Why aggregation is the future of TV

    The recent evolution in TV has been marked by the ‘app-ification’ of services (i.e. many discrete content services, such as Netflix). We believe audiences will gravitate back to aggregated platforms that deliver multiple services through a single user interface (with search and content as key differentiators). This bodes well for Telstra and Optus and we expect them to ramp up their TV efforts during 2016.

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    January 15, 2016

    Will the young of today ever turn to trad TV?

    The steep year-on-year decline in TV viewing among younger age groups has continued in 2015, with reported TV viewing by children 4-15 and adults 16-24 approaching 30% down on the peak of 2010. The downward trends notwithstanding, there are good grounds for believing that some of the new media consumption behaviours will fall away as today’s millennials move-up the lifestage ladder. In addition, half-yearly comparisons reveal a big slow-down in the rate of decline during H2 2015, suggesting that the explosive impact of smartphones, tablets, apps and social networks has almost reached its limits, while further change will occur at a much slower pace.

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    January 5, 2016

    Channel 4 market impact

    Channel 4 is a key pillar of the UK’s audio-visual economy. Its unique commissioning model fosters a hotbed of new creative UK talent, an ecosystem of independent producers, many micro. Channel 4 commissions a greater share of its budget than any other broadcaster, public or private, also fostering the creative economy outside the M25, and 9% of commissions will be to the Nations by 2020. The future success of the stand-alone independent production companies is not in the hands of ITV and Channel 5, but of Channel 4 and the BBC – the pure PSBs.