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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.

  • November 12, 2015

    In the League of Champions: Virgin Media Q3 2015 results

    Virgin Media had its strongest quarter for three years in broadband net adds market share – a robust performance in a competitive environment and very much in line with recent strong performances at both Sky and BT. Group revenue growth improved 1ppt, or 3ppts adjusting for distortions, driven by accelerating growth in all operating divisions although higher content and hardware input costs offset the benefit to margins. The Project Lightning network expansion program continues, targeting 250k new premises by the end of 2015, with a discernible impact to subscriber and revenue growth likely to be apparent from the start of 2016.

  • November 11, 2015

    Trinity Mirror buys scale with Local World

    By fully acquiring Local World, Trinity Mirror has bought scale advantage in the local media marketplace, and accelerated a much needed growth story for digital assets. The medium term outlook for local media continues to look stormy, underlining the importance of investment in technology and new platforms for publishing, journalism and marketing, essential for longer term sustainability. Consolidation is needed to drive a more cost-effective investment phase as the transition to digital continues apace, provided the competition authorities do not interfere.
  • November 6, 2015

    YouTube Red: Google’s original bid for premium content

    At launch, Google’s new subscription service YouTube Red competes most directly with premium music streaming services, also offering ad-free videos. YouTube’s augmented revenue model re-boots incentives for native talent to produce content for the platform, and will also widen its appeal for established content producers. Although consumers are likely to find paid subscription for ad-free videos a weak proposition, Red holds much potential for YouTube as it competes for attention across device ecosystems, and presents little risk to its existing advertising model.

  • 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.

  • 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.

  • October 29, 2015

    BT’s away game

    BARB viewing figures provide an encouraging start to BT in its first season showing Champions League and European televised rights; numbers are on a par with those achieved by Sky over the previous few seasons. 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.

  • 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.

  • 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.

  • 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.

  • October 6, 2015

    Sky Deutschland: approaching profitability?

    The push for accelerated subscriber acquisition has stalled Sky Deutschland’s underlying growth in profits as promotions have undermined ARPU. After being artificially suppressed by the introduction of two-year contracts, churn is poised to rise. Sky could maintain subscriber growth only through increased marketing and discounting – but this is unlikely. We expect EBIT breakeven before the end of the current Bundesliga contract in 2017. But sustained profitability depends on the outcome of the rights auction to be held next spring.
  • 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.

  • 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.

  • 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.

  • 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.

  • 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”.

  • August 10, 2015

    ITV H1 2015 results: International Television

    The end of ITV’s five year transformation plan leaves it a different company to the one that had only just emerged from the recession and advertising collapse of 2008/9, with total external revenues up 37% on H1 2010 and EBITA more than doubling from £165m to £400m across the same time period. This turnaround comes off the back of a resurgent TV advertising market, with ITV NAR revenues up 15% since H1 2010, but ITV has also expanded its Studios division, investing an initial £760m in international production companies over the last three years. However, there are some areas of concern, particularly ITV’s 7.7% drop in share of viewing since H1 2010, the biggest among the main broadcasters. There are also doubts about the longevity of the Studios acquisitions – what happens when key hits dry up? Or top talent leaves at the end of the buyout period?.

  • 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.

  • 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.

  • 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.

  • 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 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.

  • 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.

  • June 16, 2015

    Channel 4 adapting to change: 2014 annual report

    After a testing 2013, which saw an 11% fall in audience share of main Channel 4, 2014 has seen a £30 million increase in total revenues to £938 million and return to financial surplus for the first time since 2011. Channel 4 is much more challenged than any other PSB group as well as much of the non-PSB sector by the steep recent decline in viewing among younger age-groups, yet has stuck close to its public service remit of reaching out to the 16-34s and a wide selection of minorities while maintaining its investments in programme origination. A buoyant TV advertising climate, innovative approach to content investment and focus within the digital space on getting to grips with the changing viewing behaviours of the 16-34s point to strong revenue growth in 2015.