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    March 11, 2016

    H3G and O2: Merging thoughts

    H3G and O2 are planning for their UK merger to create a mobile-only operator that leads the market in network quality and capacity, taking a contrary approach to the current trend of fixed/mobile convergent strategies. The merger would ease the severe spectral capacity constraints currently faced by both operators, and ease the scale disadvantage suffered by H3G ever since its launch in 2003, allowing a much stronger long term competitor. Post-merger, the UK mobile market will likely end up just as competitive as it is now, with pricing pressure actually more likely to continue into the medium term, and plenty of opportunities and threats for all the main players as the environment re-aligns.

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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

    Programmatic advertising in the mobile era: direct marketing succ [...]

    Programmatic advertising is quickly gaining digital market share across the globe. We discuss the key market trends fuelling the rise of programmatic advertising, the expected impact to the advertising market, the value of programmatic advertising within Australia, as well as the issues, myths and opportunities associated with programmatic advertising.

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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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    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 €13 billion, representing 52% of internet display and three quarters of net growth in internet display.
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    March 1, 2016

    Channel 4 viewing trends and sustainability

    The Government is exploring the privatisation option for future Channel 4 ownership on account of its concerns about the sustainability of the Channel 4 business model in light of recent viewing trends. Channel 4’s focus on 16-34s has put it under extra pressure, but the topline figures do not remotely tell the true story. 2010-2013 was a period of disruption due to special factors. Little decline has occurred since, and Channel 4 group 16-34 and peak time viewing shares have held firm since 2010. As for revenues, the trading dynamics of UK TV advertising have seen audience loss more than matched by increased spend, benefiting both Channel 4 and ITV. This is not about to change, while BBC3 closure and Channel 4 digital video growth will reinforce the financial sustainability of Channel 4, now delivering its remit better than ever.

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    February 26, 2016

    Trinity Mirror starts New Day

    Trinity Mirror is launching a national newspaper, New Day, into a challenging marketplace: declining volumes of -7%, and the loss of £121m (-9%) in advertising in 2015 alone. New Day has been inspired by market research into lapsed newspaper buyers. While consumer behaviour is largely driven by a shift to digital, mobile and social media distributed news, some consumers want a different print product from anything in the marketplace. In digital, New Day eschews the need for a website or App, focusing on social media to market the product; a rare example of a strategy that does not blur or compromise print and digital objectives.

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    February 24, 2016

    A future for tablet publishing? La Presse case study

    Montreal’s La Presse follows a unique tablet-focussed, free access, fast track digital strategy. It said adieu to weekday print editions in December. An in-house developed app – La Presse+ – sets new benchmarks: advertising friendly, easy to navigate, and engaging. High ABC1 market share in French speaking Quebec helped build digital scale rapidly. La Presse+ has broken circulation records thanks to an influx of younger readers. Advertising is sold at a premium to print and the newsroom has expanded. In a tougher market The Toronto Star launched the app last September with positive initial results. The Star Touch approach is additive rather than substitutional to print and may be more relevant to newspapers elsewhere. Slower tablet penetration growth is no big worry as phone screen sizes increase and PCs converge towards tablets.

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    February 19, 2016

    Independent, i and content publishing models

    The sale of the i, the innovative 2011 launch by the Independent, inevitably led to its parent’s death in print form and pushes two media experiments into the marketplace. ESI Media becomes the first publisher to switch a traditional national news brand into a digital-only service, while Johnston Press has developed a new local-national platform to compete with Trinity Mirror. Content publishers will increasingly experiment with vertical models and membership models for a range of services including access to some content as the challenges of the digital advertising market begin to mount.
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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 11, 2016

    UK advertising expenditure forecast 2016-2018

    2014 and 2015 have seen outstanding real growth of 13% in display advertising spend. Although we cannot rule out a recessionary downturn, we project further 11% growth during 2016-2018, but at a slowing rate as display spend continues to benefit from relatively benign economic conditions. A sizeable chunk of the display growth reflects a shift from non-display. However, the most dramatic change in the present decade is the total reversal of the balance in display market share between press and the internet: 75% press/25% internet in 2010; 25% press/75% internet in 2018. Nor will the shift be over in 2018. Meanwhile, we expect other display categories – television, out of home, radio and cinema – to see advertising spend grow at close to the market average. As yet, we have seen no signs of television advertising spend suffering due to the decline in viewing among younger age groups and emergence of digital video. If anything, evidence points to the contrary.

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    February 10, 2016

    Vodafone Q3 2015/16 results: Almost stable

    Vodafone Europe’s service revenue growth continued its trend of gradual improvement, helped by solid contract net adds and sustained high data traffic growth, and is now almost stable. Project Spring network metrics performed strongly in the quarter, and there is some evidence of this translating into better operating performance in Italy, which enjoyed positive mobile service revenue growth for the first time since 2010. Problems remain for the company in its other key mobile markets however, all of which remain in decline. Although these issues may prove temporary, and Project Spring may yet offer them a boost, further pressure is on the horizon due to competitor consolidation and associated regulatory remedies.
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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

    Google’s exaggerated mobile trouble

    Rumoured details of Google’s traffic acquisition deal with Apple and also the size of its Android revenue have prompted many to doubt the search giant’s prospects on mobile.

    Compared to previous analyst estimates and in view of Google’s traffic cost structure, we see the reported figures as positively rather than negatively surprising.

    Since the mobile economy is still developing around the world, it is in our view misguided to evaluate the success of Android in revenue terms alone, since the OS responds to Google’s broader strategic aims.

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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.

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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 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 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 – brands such as Country Life, the FT and the Telegraph – 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.

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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.

  • December 9, 2015

    UKTV – From pay to free?

    UKTV has continued its strong audience performance throughout 2015, and with Dave and Drama the company now has the two largest channels outside the PSBs. Growth has been driven by the effective use of the DTT platform with UKTV positioning its DTT channels to take advantage of the platform’s audience profile and sheer volume of viewing. Assuming UKTV maintains its commissioning spend we expect continued growth on free-to-air, but question marks remain on some of its more niche pay-TV channels.

  • 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.