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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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    March 16, 2016

    Blocking in the free world: the threat of online ad blocking

    Currently at a manageable level, ad blocking has the potential to fatally undermine the business models of media owners that depend on advertising, as well as restricting advertisers’ ability to reach audiences online. To head off this threat, publishers, agencies and advertisers need to understand the diverse things that users do not like about digital advertising, fix them, and communicate this change of behaviour to audiences. The move from desktop to mobile, from banner to native and from web to apps provides advertisers and publishers with the opportunity to provide an acceptable advertising experience, ensuring that blocking of these new formats and properties never reaches the threatening levels currently on desktop.

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    March 1, 2016

    Native advertising in Europe to 2020

    Native advertising is growing sharply as a result of the shift in digital audiences and consumption to mobile devices, where limited screen size and usage modes favour formats that mirror the form or function of the platform and media.¬†Publishers and advertisers are moving rapidly to exploit the opportunity. Publishers see unique native formats as a way to distinguish their ad offering in a highly commoditised internet advertising space, while advertisers and their agencies hope to get more bang for their buck.¬†Between 2015 and 2020, we expect native advertising spend across Western Europe to grow by 156% to ‚ā¨13 billion, representing 52% of internet display and three quarters of net growth in internet display.
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    February 5, 2016

    BT Q3 2015/16 results: Fibre-driven accelerating revenue

    BT Group’s revenue growth accelerated to 4.7% in Q3; while this was helped by some beneficial one-offs, including the TalkTalk cyber-attack, the underlying trends also looked strong across all divisions. Fibre adoption had a record quarter, with growth particularly apparent at BT’s DSL competitors, helping to drive Openreach’s external revenue growth to 7%. BT completed the purchase of EE at the end of January, and BT will keep EE separate for consumer but fully integrate for business. We are sceptical of consumer-side revenue synergies, but the business side and cost synergies will significantly benefit going forward.
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    December 18, 2015

    Pandora’s 2016 music royalties to rise 12%

    The Copyright Royalty Board (CRB) delivered its Web IV ruling on statutory SoundExchange licensing rates for webcasters for 2016-20, raising Pandora’s total music royalty costs by a forecast 12% in 2016. Had the CRB sided with SoundExchange, rates for Pandora’s non-subscription tier would have shot up 79%, leaving the company floundering in a sea of red ink. Nevertheless, these increased licensing costs for Pandora over 2016-20 will postpone the moment when the company attains net profitability.

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    December 17, 2015

    Property marketing outlook: Rightmove tightens its grip

    This is the second of our three reports in our annual review of vertical marketplaces (classifieds), focused on property, and follows Vertical marketplaces overview and recruitment outlook [2015-115]. Zoopla Property Group (ZPG) has been hit by new entrant OnTheMarket, and has diversified its publishing and revenue models. But OnTheMarket is a red herring in the marketplace, delivering the same charging model more expensively for estate agents than leading portals Rightmove and ZPG. Property marketing expenditure has been resilient this year, and we expect it to be roughly flat (a little down in real terms) over the next two to three years, largely a result of the print-to-digital transition depressing spend, but also because estate agents are feeling squeezed. Local newspaper print decline will roughly offset increases at the property portals and elsewhere, though print spend at the top of the market ‚Äď brands such as Country Life, the FT and the Telegraph ‚Äď remains robust, despite deep declining volumes of ¬£1.5m homes.
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    December 16, 2015

    Vertical marketplaces overview and recruitment category outlook

    The recruitment market is buoyant (up 10%), so portals, specialists and intermediaries are generally doing well, while local newspapers have lost some market share. Linkedin (professional social media, which has diversified into skills and training) and Indeed (freemium jobs aggregator, which provides performance charging and will introduce new services in 2016) are the key influences in the marketplace, and both are growing very strongly. The value chain in recruitment is being slowly restructured. Recruiter demand for highly skilled, specialist candidates does not have the labour supply to support it, sustaining marketing expenditure, though print spend continues to decline.

  • December 8, 2015

    Mobile-first, mobile-foremost Smartphones to be 50% of online con [...]

    Smartphones will deliver half of all time spent online in 2016, and online time on smartphones will grow a further 50% by 2020. They are increasingly replacing the TV’s role as the primary provider of video content. There are stark differences in habits by age: young people’s smartphone use is highly substitutional for other media. Older people, who will account for most of the growth in time online, will add it on top of the time they already spend with other media, particularly TV. The implications of an increasingly mobile-only world are wide-ranging: social discovery and the mobile form factor change what works in content, while in-feed, branded content, payments and subscription are attractive alternatives to display and search advertising on mobile.

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    December 1, 2015

    UK Digital Upfronts 2015: going mobile

    This year marked the second annual IABUK Digital Upfronts. As well as Facebook, Google/YouTube, Aol, Yahoo!, Twitter, BuzzFeed, Vice and others, several traditional media companies ‚Äď Sky, The Guardian and Global Radio ‚Äď participated, reflecting the rising importance of digital media and digital media buyers to their businesses.¬†Many of the pitches were informed by the key shifts in online content: it is increasingly cross platform, driven by mobile devices and focused on video programming, and these formed the main themes of the event.¬†A key piece of context is the rise of social media and the shift to programmatic buying, which continue to driven down pricing for all but the most valuable inventory ‚Äď audience scale, high value audiences and premium content have never been more essential.

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    November 9, 2015

    Apple’s iPhone advantage

    Apple’s results underlined its status as the tech industry’s biggest and most profitable company due to the iPhone, accounting for two thirds of the company’s revenue and capturing three quarters of all smartphone profits. While the iPhone dominates the $500+ handset market, the question is how will this segment develop as smartphone penetration approaches maturity in developed markets and mobile operators restructure handset subsidies. The shift to separate airtime and device plans could increase consumer price sensitivity, but leasing plans with annual replacement, supported by the iPhone’s strong second hand value, bring the opportunity of faster replacement cycles, with upside and downside risks matched.

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    October 30, 2015

    FLASH ‚Äď Telstra Summit 2015 No going back now

    We attended the Telstra Digital Summit and came away with the following key takeaways: 1) we finally have a Government that will promote technology as an enabler; 2) can the Internet of Things replace the mobile as our primary computing device? 3) technology companies will disrupt telcos; 4) mobile is driving the disruption in customer experience; and 5) the pace of disruption is accelerating.

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    October 29, 2015

    UK consumer perspective on Internet of Things

    The UK is a prime market for sales to consumers of IoT products with obvious and compelling use cases: wearables surf perennial social trends such as fitness and diet, while smart home solutions address energy use, safety and security. British Gas’ Active Hive Heating, first to market and the top smart thermostat brand in the UK, is facing competition from the Nest Learning Thermostat from Nest Labs, while Samsung’s SmartThings provides safety and security in the home. A substantial barrier to sales of IoT products to consumers lies in their concerns regarding the privacy and security of the personal data collected online. This data should be safe under the UK’s data protection regime, although well-publicised hacks highlight compliance issues on the part of data controllers.

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    October 8, 2015

    Friends with benefits: Facebook and publishers

    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.

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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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    September 3, 2015

    UK quarterly internet trends Q2 2015

    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.

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    August 27, 2015

    UK internet device and consumption forecasts: Smartphones rule

    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.

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    July 24, 2015

    Apple Q3 2015: Watch this space

    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 ‚Äėphablets‚Äô 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‚Äôs long term potential, though the latter remains a work in progress and, like many of Apple‚Äôs 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‚Äôs still all about the iPhone.

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    July 24, 2015

    East meets West: Nikkei picks up the FT

    A cash offer of £844m from the giant Japanese financial information business Nikkei, a sometime partner of the FT, was too attractive to pass up for Pearson, whatever strategic reservations it felt about offloading the title or doing so now. The deal does not include Pearson’s coveted 50% stake in the Economist (or the FT’s London headquarters), so represents a considerable premium, of 35x earnings and 3x revenues by our estimates. Increased competition in the premium financial information market suggests the FT was a good consolidation opportunity. For Nikkei the move develops its opportunities in Europe and the US.

  • July 6, 2015

    Content marketing: publishers’ saviour?

    Brands are investing more than ¬£5.2 billion a year in content strategies, ¬£1.2 billion of it with consumer media, and investment is growing at 25% per annum, massively outstripping growth in traditional advertising.¬†Content marketing defies the broader direction of travel in the digital era ‚Äď response-measured programmatic advertising ‚Äď by expressing value in content and context, much of it at the top of the discovery funnel.¬†In a rapidly converging marketing value chain some consumer publishers are adopting agency values and practices by responding to the changing demands and expectations of their advertisers.

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    June 16, 2015

    Mary Meeker’s State of the Internet

    We have synthesised the key themes from the latest Internet Trends Report from Mary Meeker at Kleiner Perkins Caufield & Byers. We don’t purport this to be our own ideas, but provide it as an interesting resource (see below for Australian ramifications). Three key trends are evident to us from the report: the shift to mobile, the shift to a service economy and finally that disruption of traditional industries is likely to continue for some time yet.

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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 ‚Äď the challenge is to sustain this position throughout the on-going transition to digital formats.¬†Amazon Prime Instant Video‚Äôs first purpose is to help the transition by building Amazon‚Äôs 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‚Äôs net cost is likely to rise as Amazon must finance content to meet rising consumer expectation while suffering competitive price pressures on the bundle.

  • June 5, 2015

    UK quarterly internet trends Q1 2015

    The latest numbers for Q1 2015 show strong device and internet user growth, with more of the population online than ever before, including more than 90% of under-55s. Growth amongst older groups, however, has slowed to a crawl. Participation in online activities is up across the board, but digital media data shows spend on ebooks and digital music struggling, with the latter being heavily impacted by the rise of unlimited streaming models such as Spotify. The story of mobile's surge continues, with almost a half of e-commerce transactions and a third of search and display ad spend now going to mobile. Most of these mobile devices are Android, but iPhone seems to have gained long term share with its larger phones. Google services, however, have cross-platform reach.

  • April 27, 2015

    Media & Telecoms: 2015 & Beyond slides

    Enders Analysis co-hosted its annual conference, in conjunction with BNP Paribas and Deloitte, in London on 17 March 2015. The event featured talks from 13 of the most influential figures in media and telecoms, and was chaired by Sir Peter Bazalgette. This report provides the accompanying slides for some of the presentations.