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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.

  • 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 – response-measured programmatic advertising – 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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    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

    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 18, 2015

    Apple at WWDC: intelligent design

    Apple has confirmed the launch of Apple Music, its streaming music service, available on iOS devices by the end of June, and later on Android. Priced at the same level as Spotify’s premium tier and lacking a free ad-supported offer, much hinges on the appeal of its curation tools. Other key announcements included a news app, the roll-out of Apple Pay to the UK, improvements to maps, and new operating systems for Mac, iPhone/iPad and Watch. The main theme was one of increasing intelligence in services, with Music and News both being curated and the software getting better at understanding and predicting user needs. This is a necessary step to prepare for the next wave of consumer technology: wearables and connected devices.

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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.

  • 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.

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    May 20, 2015

    Future of the BBC – no immediate need for the blues

    With both the current Royal Charter and licence fee settlement expiring in the next two years, press headlines proclaim the BBC has much to fear from the new Conservative government. Having read through the Culture, Media and Sport Committee's recent "Future of the BBC" report, which was led by the newly-appointed Culture Secretary, we do not share the same view. However, any reduction in BBC funding is likely to lead to further tightening of TV and radio programming budgets, with far reaching consequences across the entire UK creative sector.

  • May 13, 2015

    Video games: buoyant year ahead

    The Game Developers Conference (GDC) and Mobile World Congress (MWC) saw major announcements in virtual reality and new generation streaming game consoles, as well as further opening up of access to game engine software. Latest earnings reports show that major publishers and developers are currently in buoyant form as growth in the PlayStation 4 and Xbox One install base boosts revenue and consumers migrate to digital sales. Results for developers dependent on the mobile or online ecosystem are more mixed: King (producer of Candy Crush) continues to grow, but Zynga is struggling, although recent performance hints at a possible halt in its decline

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    May 11, 2015

    US music publishing 2014-17

    The US music publishing market, worth $2.2 billion in 2013, is poised for moderate CAGR of 2.5% in the period 2014-17, thanks to performance royalty growth from broadcast and new media uses, offsetting flat mechanicals as the physical-to-digital transition in recorded music continues to place pressure on this revenue line. ASCAP and BMI, the performance rights organisations, have been engaged in an intense period of litigation against Pandora, the popular ad-supported streaming service with around 80 million users, in which Pandora has prevailed. ASCAP and BMI have also sought to loosen the consent decree regime in place since 1941 and overseen by the Department of Justice in order to enable "market-driven" rates, but this effort also looks set to fail in light of the firm opposition of all classes of licensees.

  • 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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    April 30, 2015

    Party positions on media & telecoms for GE2015

    The UK’s three main Westminster parties converge on sustaining the dynamic growth of the digital economy and the vibrant creative industries. The biggest area of divergence is on the EU. The Conservatives plan to hold an “in-out” referendum by 2017, while Labour and the Lib Dems are pro-EU and plan to engage with the Digital Single Market. Other important areas of disagreement include the future of the BBC and the Licence Fee, press regulation and reform of media plurality policy.

  • 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.

  • April 27, 2015

    Media & Telecoms: 2015 & Beyond

    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 edited transcripts from some of the talks, and you will find accompanying slides for many of the presentations here. Videos of the presentations are available on the conference website.

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    April 24, 2015

    Sky plc off to a good start – Q3 2015 results

    Sky plc has produced a strong first quarter across its three markets in terms of subscriber growth, record low churn and continuing firm control over costs, which has contributed to a 5% increase in revenues and 20% increase in operating profit over the first nine months of fiscal 2015. As expected, practically all the retail customer growth in Q3 occurred in the UK & Ireland and in Germany & Austria. Nevertheless, the results were also positive in Italy, as it registered the highest net customer increase in 3 years and record low churn. It is still too early to judge the success of the Sky plc strategy in terms of synergies, innovation and content origination. Whilst the potential appears great, the imminence of the next Bundesliga auction is a reminder that the issue of sports rights inflation is unlikely to disappear even after the latest PL auction.

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    April 20, 2015

    GE 2015 update: Election and government outcomes

    There are still two and a half weeks of the campaign to go before polling day, but postal votes are already being sent out to voters and many have already made up their minds. We believe there is now a small range of likely seat outcomes, and therefore possible governments. Our central case sees the two main parties almost level on seats, resulting in a Labour minority government dependent on the support of the SNP and its allies (the Greens and Plaid Cymru). Slightly different outcomes are also possible, depending on the final size of the swing from the Conservatives to Labour in England and Wales, over which there is still considerable uncertainty. If Labour does worse than we expect, it could require the votes of the Lib Dems as well as the SNP; if it does better, it could require only Lib Dem votes. The upside case for the Conservatives is now that they win enough seats to make a minority government dependent on the support of the Lib Dems, DUP and UKIP possible. We think that scenario is now unlikely, but even if it were to occur, we think it would be very challenging to both knit those parties together and persuade the parliamentary Conservative party that its interests are best served by doing so. For these reasons, we think a government led by the Conservatives can now be all but ruled out.

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    April 20, 2015

    Free-to-air TV business models

    Prospects for European free-to-air commercial broadcasters are clouded by a weak advertising recovery, decline in TV set viewing by younger age groups and increased competition from pay-TV and international operators. Growth opportunities are nevertheless to be found in fine tuning families of channels to sustain audience shares, increased production of differentiating original content, wider HD and catch-up programmes distribution and smart pay-TV developments – broadcasters must focus on strengthening the quality gap between the TV set experience and online entertainment. ITV has shown the greatest increase in profitability, benefitting from its global production strategy. RTL and ProSiebenSat.1 have a modest upside from carriage fees for HD channels but production and pay-TV initiatives have yet to pay off. TF1 and M6 have withdrawn from pay-TV and face regulatory obstacles to launching channels and production investments. Mediaset in Italy should benefit from the ad market stabilising, but risks large pay-TV losses. In Spain, Mediaset and Atresmedia enjoy an ad boom.

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    April 16, 2015

    Local media: new structures emerging

    Local newspaper circulation continues to decline precipitously, while decline in some categories of print advertising has slowed marginally. Digital traffic exploded in 2014, however, substantially outperforming the market generally, resulting in signs of stabilisation across print and digital in some marketing categories, notably recruitment and pockets of display. Industry leaders have moved beyond cost-cutting and are no longer reproducing their print products online: local platform solutions, and strategic technology and business partnerships, mean fundamentally different companies are emerging in local media.

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    March 30, 2015

    Radio – set for a digital future?

    Radio’s transition from analogue to digital has been slow, with no switchover date yet in sight 16 years after Digital Audio Broadcasting’s (DAB) commercial launch. Recent initiatives intended to boost DAB are welcome, but most will not be transformatory as they offer little new to the consumer. However, the award of the second national commercial multiplex to Sound Digital with the launch of new, compelling content in 2016 could finally give radio listeners the reason to upgrade and make a case for switchover.

  • March 16, 2015

    Apple Watch: the next must-have device?

    Apple has provided more details on its smartwatch range, on sale from April, priced between $350-$17,000 to appeal to a wide range of would-be buyers and initially focusing on enhancing the iPhone through added convenience. The Watch is likely to develop quickly in the next few years, and has the potential to become an indispensable tool for managing payments, health data and identity, as well as controlling other connected devices. The company is laying the foundations for Watch to become a must-have device, but the case is still to be made and ultimately its success depends on a number of key groups and factors outside Apple’s control.

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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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    February 18, 2015

    Global recorded music 2015: Purchasing past its peak

    Consumer expenditure on recorded music continued its decline in 2014 by about 6% to $18 billion, as purchasing of download-to-own (DTO) albums and singles passed its peak in 2013, adding to the ongoing decline in total sales of CDs that started a decade ago Streaming is now the only growth story left for the industry, and it has a global footprint, being embraced by developed and emerging markets alike, unlike purchasing The US phenomenon of rapidly rising revenues from ad-supported audio streaming services such as Pandora and music video streaming on YouTube is quite unique as other markets currently lack the potential for online advertising.

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    February 16, 2015

    New phase for news brands

    News has entered a new phase, defined by the disruptive forces of mobile, social media and video, effecting rapid changes in consumption and the underlying economics for news businesses: the level of change and innovation is rewiring the structure and financial models for news more quickly than many news providers are able to respond. While charging for news looks to be a successful route for some brands, we note that the scale of charging for the industry is substantially smaller than in print. Apart from this, three models are gathering traction: selling audience engagement; selling news services; and selling news to businesses. Each of these options involves very different strategies and opposing objectives which can only be pursued at the same time by those with the deepest pockets. Everyone else has to choose.

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