Broadcast TV

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    August 17, 2015

    FLASH – Nine NRL rights deal – diamonds or stones?

    Has Nine stolen a jump on its rivals with its NRL rights deal? At A$925m only time will tell if there is a return on its investment. What we can say is: this underpins the value of sports to delivering live audiences and it reinforces that broadcasters will remain the key rights holders for the next rights cycle at least.

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    August 6, 2015

    Sky plc growing synergies – Q4 2015 results

    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.

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    August 4, 2015

    BT Q1 2015-16 results – Solid all round

    BT had a solid all round Q1, with broadband share robust, fibre growth still strong, revenue growth bouncing up a little on the business side and cost control robust.

    BT Sport Europe launches this quarter, and will boost revenues but raise costs by more; we continue to believe that the extra net costs can easily be covered by group-wide costs savings to allow group EBITDA to continue growing over the full financial year.

    The broadband market is increasingly characterised by high headline pricing coupled with heavy promotional discounting, and BT’s early headline price rise scheduled for September continues this trend.

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    July 30, 2015

    BBC Green Paper: red alert on funding

    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.

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    July 29, 2015

    SVOD and NZ telcos – Bro’s or Foes?

    Video is critical for NZ telcos growth prospects. While there is an attractive opportunity for a direct strategy, we believe telcos best strategy is to be an enabler of video by partnering with video operators whether OTT and increasingly traditional. We view Spark as the exception to a partner strategy, but can it get scale?

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    July 15, 2015

    BBC to pay for the over-75s

    The recently elected Conservative government took less than a week to negotiate a licence fee settlement with the BBC immediately prior to Charter Renewal in which it will offload the government’s over-75s licence fee subsidy on to the BBC in return for various financial benefits. But, there are strings attached to a financially poor settlement, making it very difficult for the BBC to protest in the run-up to a charter that promises a major diminution in its ability to contribute to the UK creative economy. The only possible gainers are the commercial media, though the benefits may prove much less than some anticipate, however pleased the newspaper publishers may be by the Chancellor’s criticism of the BBC’s “imperial ambitions” in online news. Much more to be feared is the likely negative impact on the UK TV production sector.

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    July 13, 2015

    The plight of the BBC post-intervention

    Last Monday’s (6 July) announcement by the Secretary of State marks the second major direct intervention by government without recourse to public consultation in the financing of the BBC throughout the corporation’s history. The previous occasion was 2010. As in 2010, the government has interfered by top-slicing the BBC’s licence fee revenues. We estimate the current annual top-slicing component that will appear in the annual accounts for 2014/15 (BBC year running from April to March) to be in the region of £525 million, including funding the BBC World Service for the first time (est. circa £245 million). By the time the BBC fully absorbs the over-75 subsidy (worth £608 million) in 2020/21, we are looking at a total revenue impact of circa £750 million; that is without taking inflation into account.

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    July 1, 2015

    A new Fox bid for Sky: when, not if

    News Corp’s original bid for full ownership of BSkyB was withdrawn because of the phone hacking scandal. It was never blocked by regulators. Had it not been for the scandal, the bid would almost certainly have been approved. With the phone hacking scandal fallout largely over and the election of a friendly government, the climate is now much more favourable to a renewed bid. With undertakings, we believe it would be approved by regulators. The increasingly global scale of TV and film distribution means the commercial case for the bid is, if anything, stronger now than in 2010. The questions are simply whether the right price can be agreed, and how high up it is on James Murdoch’s list of priorities.

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    June 30, 2015

    SVOD and telco – Frenemies or Foes?

    Video is critical for Australian telco’s growth prospects but a standalone strategy is fraught with difficulty. We believe telco’s best strategy is to be an enabler of video by partnering with video operators whether OTT and increasingly traditional (FTA offers a real opportunity as it evolves its multi-screen proposition).

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    June 30, 2015

    BT Sport – the Champions?

    BT will soon for the first time charge the majority of viewers for their own channels with the launch of the BT Sport Pack. The Pack includes BT Sport Europe, home to UEFA’s European football tournaments from this August, the rights to which BT are paying £299 million a year. Viewing figures for the big European tournaments are not as high as one might expect given their prominence. Consumer demand for the new channel will also be highly dependent on the success of British teams, notably lacking in recent seasons. We therefore do not expect a dramatic impact on BT Sport (or BT broadband) subscribers, and the widening losses will put pressure on BT’s margin squeeze test regulation, although they are easily absorbable at BT Group level.

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    June 29, 2015

    FLASH – SVOD first battle won, but watch the data

    The launch of SVOD continues to make headlines with recent data declaring Netflix the clear winner. Unless there is a dramatic change in the market, it looks like the other players are fighting for a distant second place, given that Netflix is likely to accelerate its Australian investment as a consequence of its success. So what does this mean for the TV / video ecosystem and how do the incumbents respond?

  • June 24, 2015

    UK broadband, telephony and pay TV trends Q1 2015: Weak ARPU, str [...]

    The UK broadband market remained strong in Q1 2015, backed up by healthy volumes, with a modest weakness in ARPU causing revenue growth to slow to 4.5% from 5.7% in the previous quarter. ARPU growth was particularly weak at BT and Virgin Media, with part of this due to one-off factors, but part due to the dilutive effect of increased promotional activity. Broadband volumes continued to modestly accelerate, pay TV volumes modestly decelerated and line rental growth levelled off. The highlight was high speed broadband, with market net adds continuing to rise, driven by increased marketing and BT’s roll-out reaching more rural areas where the speed improvement is more marked. Since the end of the quarter, Vodafone launched a new consumer dual play product. Launch pricing is at the bottom end of the current price curve, but not well below it, suggesting that it is wisely imitating EE’s approach of cross-selling a profitable product as opposed to deep discounting on broadband to build mobile market share

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    June 18, 2015

    FLASH – Ten Network gains a big brother in Foxtel

    While the capital raising (including Foxtel’s investment) provides some breathing space, it does not provide enough capacity to compete with Nine and Seven. The bigger benefit potentially comes from partnering with Foxtel for content coupled with merging the sales function with MCN. On the former, we believe the ACCC will have serious concerns.

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    June 11, 2015

    Amazon Prime and the video market

    DVDs are a core Amazon product, of which it is one of the largest retailers – the challenge is to sustain this position throughout the on-going transition to digital formats. Amazon Prime Instant Video’s first purpose is to help the transition by building Amazon’s digital video retail ecosystem. As part of the loss leader Prime bundle it also supports increased customer retail expenditure and stickiness. Despite strong headline growth in Prime membership and some high profile content, the streaming service has yet to generate significant consumer interest. Prime’s net cost is likely to rise as Amazon must finance content to meet rising consumer expectation while suffering competitive price pressures on the bundle.

  • May 7, 2015

    US and UK TV ad markets – apples and pears

    The US is seeing steep decline in measured TV viewing by younger age-groups and rapid increase in digital media adspend, prompting fears about the future of TV ad revenues across the major broadcasters and cable networks. The UK has seen similar trends, prompting suggestions that it will see similar effects. However, comparison of US and UK TV ad revenue trends since 2000 shows big differences in the underlying growth rates after taking economic factors into account. These undermine the inference that the decline in viewing and rise in digital adspend will have similar effects on either side of the Atlantic. Examination of the US and UK TV ad markets further points to big differences across a raft of major variables relating to supply and airtime trading practice, such as can be expected to yield very different outcomes with respect to TV ad revenue growth.

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    March 10, 2015

    YouTube and its MCNs: growth and variety

    YouTube remains the dominant online video site globally, although competition for the viewer is growing from OTT video and other popular apps. Reach and consumption appear to be slowing in the US and the UK, but YouTube reports strong growth in global watch time as smartphone adoption proceeds. The number and variety of Multi-Channel Networks (MCNs) on YouTube continues to grow. Music video MCN Vevo has so far been the largest single presence on YouTube, but it is being overtaken by the combined Disney/Maker Studios MCN. In contrast to the aggregator MCNs with tens of thousands of channels, studio MCNs have much smaller network sizes and a higher share of owned channels. Their focus on content curation and creation has allowed some to build global audiences of repeat viewers, a unique strength and of significant appeal for advertisers.
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    January 28, 2015

    Sky and Mediaset Premium: to live and let die

    Speculation has arisen about a possible acquisition by Sky of Mediaset Premium, the DTT competitor to Sky Italia. The unprofitable platform faces a 50% cost increase this summer due to the start of new football broadcast contracts. Getting rid of competition would allow Sky to raise prices, but also burden it with the new contracts. At best, if it kept the Premium subscribers on DTT to limit churn, Sky would have a small revenue upside. But the regulatory risk looks substantial, including mandated third-party access to the platform and wholesale of content. On balance, we believe that it would be better for Sky to let the situation play out.

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    January 26, 2015

    End of Netflix tightrope just in sight

    In marked contrast to its Q3 2014 results release, Netflix reported a strong Q4 with respect to paid subscriptions that was ahead of company guidance and consensus expectations. The positive news about subscriber numbers, which saw a sharp jump in share price immediately after the results, was heavily reinforced by Netflix’s announcement of its aim to expand its global base from 50 to 200 countries over the next two years and generate a material profit from 2017.

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    January 15, 2015

    Multichannel TV facing the squeeze – Part 2

    For the second year running, 2014 has seen a steep year-on-year decline in total daily average viewing time, which fell by almost 5%, and was again, as in 2013, greatest among younger age demos, especially among children aged 4-15 where the decline reached double figures. Connectivity and the rapidly growing population of smartphones and tablets appear the main, though not the only, causes of a decline that appears general across the main PSB, PSB family and non-PSB channel groups. The decline nevertheless varies by channel genre, with the more youth oriented, such as Children and Music, feeling the connectivity squeeze the most. Whilst the great majority of non-PSB channels are only available on the pay-TV platforms, the DTT platform provides a significant audience and advertising contribution (ballpark estimate of £150-200 million per annum) to the relatively small group of leading free-to-air non-PSB channels, which are also less constrained in developing their online initiatives than the mixed advertising/subscription non-PSB channels on the pay-TV platforms.