Broadcast TV

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    December 18, 2015

    Channel 4: sustainability and privatisation

    The newly elected Conservative government is exploring all the options for privatising Channel 4, but faces a complex legislative pathway. The privatisation case would be made easier if the current model were unsustainable. Only, Channel 4 is delivering its remit with great success, is commercially sustainable, and promises both to remain highly sustainable and grow its PSB contribution through its current licence ending in 2024. Channel 4 privatisation offers small returns to the Treasury as long as the remit, IP ownership restrictions and ban on vertical integration remain in place.

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    December 11, 2015

    Canal+: things will get worse before they get better

    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.

  • November 27, 2015

    US entertainment groups and consolidation

    US entertainment groups have enjoyed strong revenue growth thanks to pay-TV, subscription video-on-demand and international sales, despite headwinds on the advertising market and downward pressures on retail pay-TV prices. Media merger and acquisitions have mainly failed, but strengthening the hand of the content producers in relation to distribution channels remains relevant and arguably even more important due to the sheer financial and audience size of digital operators, although the studios' pricing power remains unchallenged. 21st Century Fox could then justify a new bid for Time Warner, although it will struggle to address TW's objections to the previous offer without taking on a huge pile of debt.

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    November 20, 2015

    Retransmission fees: a Pandora’s box

    The government is expected to announce a Digital Bill in Q1 2016 that will propose profound changes to the structure and funding of the public service broadcasters (PSBs) in television, one of its aims being to enable them to extract retransmission fees from pay-TV platforms, valued at £200 million a year or more for the commercial PSBs. So far the government has only committed itself in its March 2015 consultation paper to the repeal of Section 73 of the Copyright, Designs and Patent Act (CDPA 1988), which in isolation will adversely impact only the Virgin Media cable platform. Now its ambitions appear to go far beyond introducing retransmission fees towards dismantling the entire UK PSB TV regulatory infrastructure of privileges and obligations and paving the way towards vacation of the DTT spectrum.

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    November 20, 2015

    The rise of the YouTube economy

    In this report, we examine how YouTube and in particular Multichannel Networks (MCNs) have emerged within the Digital video market, their key growth drivers, revenue model, challenges and the impact on traditional TV.

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    November 5, 2015

    BT Q2 2015/16 results: Sport distorts, but underlying results str [...]

    The launch of BT Sport Europe pushed up BT’s revenue and pushed down EBITDA in its Q2 results, but underlying revenue growth was strong across all divisions and cost control continued, with the company well on track for its full year guidance. BT Sport itself is being executed well, both in terms of viewers and direct revenue earned, but is not having a discernable impact on broadband figures, nor a game-changing impact on BT’s modest pay TV base, despite its very considerable net cost. On the regulatory side, BT has secured a strong result with the EE merger being provisionally approved without remedies, but debates over the future of Openreach continue, with the related issue of ultrafast roll-out regulation of particular import.

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    November 4, 2015

    Watching TV and video in 2025

    Television has seen massive change and it has held up remarkably well since the era of satellite and cable dawned in the US in the mid-seventies; but now there is a sense of transformation in the air as broadcast TV gives ground to limitless video on multiple screens. Viewing habits are changing very rapidly indeed among the under-35s due to a combination of cohort and life stage factors, although we are also seeing change among older age groups. In spite of all the change that is now taking place, our latest long term forecasts point to the broadcast sector as continuing to account for the greater share of viewing for many years to come absent government intervention, which cannot be ruled out.

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    October 29, 2015

    BT’s away game

    The investment in rights is not just about achieving good viewing figures - BT’s entry into televised sports is as much about supporting its broadband and pay-TV business in the face of increasing competition from Sky and others. BT has reported results for the September quarter with record-setting TV net adds and steady broadband net adds, confirming that while Sky arguably won the broadband battle, BT won TV, and neither really lost in either category.

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    October 27, 2015

    Sky Q1 2016 results: positive start to the year

    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.

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    October 26, 2015

    ITV acquires UTV TV – where next?

    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.

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    October 20, 2015

    FLASH – Netflix 3Q Content will drive growth

    Netflix’s 3Q results reflect that while original content will continue to drive take-up, competitive pressure is increasing with new entrants (telcos and broadcasters) emerging. The recent price hikes demonstrate Netflix’s pricing power which should help finance its investment in new genres and local content.

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    October 12, 2015

    Turnbull takes the reins

    Media reform may not be quite as near as many believe in light of Malcom Turnbull’s elevation to PM. The NBN is likely to become even more of a political football (if such a thing is possible), while government policy is likely to support innovation, start-ups and digital transformation.

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    October 9, 2015

    Sky’s cost discipline in Italy close to being vindicated

    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.

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    October 5, 2015

    Amazon’s Prime Directive

    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.

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    October 2, 2015

    Pay-TV Market Outlook – the growing importance of Pay-lite

    We forecast Premium Pay-TV to decline at a 4% CAGR to A$2.6b revenue by FY20. This reflects some cord cutting and shaving as dollars migrate to xVOD services. But the impact to Foxtel is mitigated to some extent by its participation in these very markets. This report provides a deep dive into our Pay-TV forecasts and assesses the outlook for Premium Pay-TV versus Pay-lite services.

  • October 1, 2015

    PSB at risk in the world

    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.

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    September 30, 2015

    Video Market Outlook – Physical makes way for Digital

    We don’t expect the overall size of the video entertainment market to change materially but we do expect the platform share to change dramatically over the next five years. We expect xVOD services to represent 20% of the overall market from around 5% currently (replacing Physical Media and Premium Pay-TV).

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    September 16, 2015

    BBC TV airwaves beyond 2026?

    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.

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    September 16, 2015

    Apple battles for control

    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.

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    September 16, 2015

    FLASH – Foxtel-Ten…content is king and the #1 issue for the A [...]

    The ACCC has issued a Statement of Issues citing three principle competition issues. We believe the acquisition of content is the key issue and believe it is serious enough to alter the nature of the proposed acquisitions.

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    September 10, 2015

    BBC TV – impact on investment in UK content

    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.

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    September 8, 2015

    SVOD Market Outlook – the new kid on the block can approach $1b

    We forecast SVOD to grow at a 33% CAGR to reach A$848m revenue by 2020. We forecast Netflix to dominate with >50% of the market but highlight Fetch’s share as one that might surprise (at 18%). These forecasts imply total SVOD content investment of A$400-500m pa, certainly well below the broadcasters.

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    August 25, 2015

    The BBC, the press and online news

    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”.

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    August 21, 2015

    UK broadband, telephony and pay TV trends Q2 2015: ARPU dips, but [...]

    UK residential communications market revenue growth accelerated to 5.8% in Q3, from 5.0% in the previous quarter, helped by an overlapping price rise at BT, and supported by firm pricing and accelerating high speed adoption elsewhere. In contrast, volume growth in the core three products continues to slow, with little sign that this will ever re-accelerate. In the longer term we cannot see ARPU growth acceleration continuing to fully compensate, and market revenue growth might also have peaked. With Virgin Media’s continuing network extension and improving pay TV service putting pressure on the other operators, Sky and TalkTalk are protecting themselves by aggressively marketing high speed broadband. Correspondingly, this quarter marks the first time that Openreach’s high speed net adds were mostly derived outside of BT’s retail divisions.