UK Media

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  • New
    November 16, 2018

    UK PSB SVOD

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    The Public Service Broadcasters (PSBs) have been mulling a possible SVOD service, a decade after their ad-supported Project Kangaroo was blocked on competition grounds. Even if a reboot between the BBC and ITV were this time to be approved, we do not think Kangaroo 2 can succeed as a significant SVOD entrant in its home turf of the UK, above all because it’s too late. Other flaws in the offer are that it would be too small, non-premium, too old (archive), and too old (viewing profile), plus lacking sufficient financial resource to produce a pipeline of unique series.
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  • New
    November 13, 2018

    BBC drama: a loosening grip

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    A string of big, bold hits like Bodyguard, Killing Eve and Little Drummer Girl has reinvigorated the perception of the BBC’s drama schedule, with massive ratings and a coveted place in the public conversation. However, the lack of the broadcaster’s top dramas actually produced by BBC Studios—declining to just 4 of the top 25 in 2018—is cause for ongoing concern. At a time when the BBC is attempting to bulk up the iPlayer and programme IP has become the bedrock broadcasting asset, the BBC could be better placed.
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  • November 5, 2018

    UK Radio’s evolution towards a digital future

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    ­­­­Radio faces challenges from Spotify and other online audio propositions, while the radio “dial” is challenged by smart speakers and global tech. UK radio broadcasters have risen to the occasion through innovation. New DAB stations have helped radio achieve record audiences and revenues. Combined digital listening is now over 50%, but FM remains the primary platform. The current mix of FM/AM and digital maintains radio’s relevance for the medium term. The long-term future is digital—a wide-ranging sector review is required to determine how to support digital radio’s growth and the question of a future switchover.  
  • October 3, 2018

    What Sky means for Comcast

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    Comcast’s £30.6 billion acquisition of Sky brings to an end the long-running ownership battle since Disney agreed to tender Fox’s 39% stake to Comcast, also ending the Murdoch Family Trust’s interest in Sky. Comcast’s US domestic cable and global NBCU media businesses complement Sky’s European operation. Sky’s telecoms business is likely to expand, while the TV side should benefit from NBCU’s global distribution might, with greater revenues generated by its original content. Fox’s long-running battle with UK regulators over the public interest dimensions of the proposed Sky acquisition has also ended. Plurality of media is preserved by Comcast’s undertakings to support Sky News for 10 years.
  • September 17, 2018

    UK Broadcast TV is growing very old, very quickly

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    UK mobile market service revenue grew by 1.7% in Q2, up from 1.3% in the previous quarter, a disappointing result in the context of boosts from both IFRS 15 accounting and the annual price rises in the quarter. O2 was the star performer this quarter, with its service revenue growth leaping ahead to claim the top spot. BT/EE’s service revenue growth declined on an underlying basis, with weak contract net adds over the last six months catching up with it, and H3G and Vodafone were slightly improved and steady respectively excluding some one-off effects. Next quarter, the impact from the EU roaming cuts will annualise out, providing a substantial fillip to all operators. Ceteris paribus, this would put market growth in the vicinity of 4%, a figure not reached for years.
  • September 11, 2018

    UK mobile market Q2 2018: Disappointment before dawn

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    UK mobile market service revenue grew by 1.7% in Q2, up from 1.3% in the previous quarter, a disappointing result in the context of boosts from both IFRS 15 accounting and the annual price rises in the quarter. O2 was the star performer this quarter, with its service revenue growth leaping ahead to claim the top spot. BT/EE’s service revenue growth declined on an underlying basis, with weak contract net adds over the last six months catching up with it, and H3G and Vodafone were slightly improved and steady respectively excluding some one-off effects. Next quarter, the impact from the EU roaming cuts will annualise out, providing a substantial fillip to all operators. Ceteris paribus, this would put market growth in the vicinity of 4%, a figure not reached for years.
  • August 29, 2018

    UK broadband, telephony and pay TV trends Q2 2018: Great volume, [...]

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    The UK broadband subscription market re-accelerated in the June quarter, bucking a consistent downwards trend that has been established for over three years, with line rental and pay TV subscriptions also accelerating having both also experienced a more general downwards shift over the last few years. The broadband acceleration may be short-lived, with line rental only a little more sustainable. Pay TV is perhaps the most robust recovery given that the over-the-top new entrants (primarily Netflix and Amazon) are now firmly establishing themselves as add-ons not substitutes.Revenue growth however took a more familiar path, dipping to 1.6% from 2.8% in  the previous quarter, as BT’s overlapping price increase predictably dropped out, partially mitigated by an improvement in ARPU growth at TalkTalk caused by an improved (i.e. slightly less damaging) mix effect.  
  • August 20, 2018

    Sky UK 2017/18 full year results: Winning the game of content

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    Sky maintained strong revenue growth of 5% in 2017/18, with EBITDA and operating profit both bouncing back into strong positive territory after the UK Premier League rights hit of 2016/17. The UK grew revenue well and profits better; Italy performed well and should improve much further given the retreat of its principal competitor; Germany is more challenged, but extra content investment may aid sustained growth. Sky is proving adept at managing content costs and revenue in a changing environment, with investment, cost control and monetisation all being put to effective use as the content type demands it.  
  • August 20, 2018

    Virgin Media Q2 2018 results: Measured approach in a tough market

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    Virgin Media had a mixed quarter, with subscriber ARPU growth maintained, partly driven by a triple play focus with pay TV and telephony adds much improved, but subscriber and broadband net adds unchanged. Cable revenue growth did slow from 3.6% to 3.1%, mainly due to the previous quarter’s net adds slowdown working through, and it is still growing the fastest of the big operators in a slow-growth market that still suffers from pricing pressure at the low end. Its network roll-out was slower than last year and only just above the weather-impacted previous quarter, which appears to be deliberate, and which may at least partly relate to an uncertain regulatory and commercial climate over ‘full fibre’ roll-out by others.  
  • July 30, 2018

    Quality media, Ozone protection

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    The Telegraph, The Guardian and News UK (The Times and The Sun) will jointly invest in The Ozone Project to develop a state-of-the-art platform to sell their digital inventory. Ozone will add value to news digital inventory and seek to win back advertiser expenditure on Facebook and Google’s various properties, (indirectly) reigniting interest in placement next to quality news media content. Each JV participant operates a distinct business model, which risks friction, but this digital reboot is crucial. By 2020, Ozone could add circa £30 million per annum – not a trivial contribution to a national newspaper newsroom.  
  • TV platform forecasts to 2026: DTT and pay-lite set to grow
    TV platform forecasts to 2026: DTT and pay-lite set to grow
    July 13, 2018

    UK TV platform forecasts to 2022: stability rules

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    Despite significant changes in people’s video viewing habits over the last few years, the TV platform landscape has appeared to reach an equilibrium. We expect pay-TV to retain its utility status for most existing customers. At the margins, movement from Sky and Virgin Media to free-to-air or pay-lite services will be mitigated by population growth. The excitable growth phases for Netflix and Amazon are likely to be over, but they have carved out prominent positions in the market. Meanwhile, the uncomplicated allure of free TV remains strong for half the UK.
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  • June 25, 2018

    Hitting targets, but pushing too hard? TalkTalk Group Q4 2017/18 [...]

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    TalkTalk hit both its subscriber and EBITDA targets for 2017/18, but Q4 contained some worrying trends including core consumer revenue in decline despite strong subscriber growth, with strong business revenue growth compensating. It held fast on guidance for 2018/19, although the 15% target underlying EBITDA growth is largely driven by regulated cost cuts, and revenue growth may be (again) achieved through the business side, which will be purely wholesale following the sale of its direct business customer base. Having spent the last few years not growing retail subscribers enough in a growing market, TalkTalk is now perhaps trying to grow too fast in a mature market, putting pressure on its ARPU from new and existing customers alike.  
  • June 19, 2018

    Advertising after the turning point: When offline is the exceptio [...]

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    Online advertising became the majority of all UK ad spend last year, in step with China but ahead of all other major markets. Direct response has further increased its share to 54% of UK ad spend, fuelled by the self-serve platforms of Google, Facebook and Amazon, while content media nets just 11% of the online advertising pot. We estimate that all online-delivered channels - including "pure play" online properties, broadcaster VOD, digital out-of-home and online radio - could account for well over 60% of UK ad spend by 2020, but only with improved commitment to industry governance.
  • TV platform forecasts to 2026: DTT and pay-lite set to grow
    TV platform forecasts to 2026: DTT and pay-lite set to grow
    June 11, 2018

    Disruption in Premier League football? 2018 auction finally over

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    The latest auction of live Premier League broadcast rights commencing in 2019/20 has concluded at last, with three different winners for the first time. The total sum has not been confirmed, but it looks to be down c. 10% from the previous auction at £1.55 billion per season—still substantial, and not far off the BBC’s entire TV content budget. As we predicted, Sky and BT remain dominant, winning 180 of the 200 games per season, whilst new entrant Amazon picked up one of the leftover packages at what looks to be a very low price.  
  • TV platform forecasts to 2026: DTT and pay-lite set to grow
    TV platform forecasts to 2026: DTT and pay-lite set to grow
    June 6, 2018

    Football embraces Chinese ‘hot’ money – at a risk

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    In a display of chutzpah, Mediapro acquired the Ligue 1 domestic broadcasting rights from 2020-24 in what is the most disruptive shock to the French broadcasting industry in a generation; one that is likely to accelerate Canal+’s decline, force a review of the outdated regulatory framework, and possibly spur an M&A spree. The Mediapro move only makes sense as a highly speculative bid to resell the rights, or a dedicated channel, to French platforms in 2020. The odds are high that the broker ultimately fails to fulfil the contract, as just happened in Italy, where Sky is now expected to get the Serie A licence. Precedents of new entrants acquiring domestic top-flight rights bode poorly for Mediapro, and for the league. The Ligue 1 may live to regret the introduction of a ‘re-sell right’ into its licensing terms.  
  • May 30, 2018

    BT new Consumer strategy: Converging, but in a good way

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    BT has emphasised ‘convergence’ in its new Consumer strategy, but it has avoided most of the usual fixed-mobile convergence mistakes, with separate brands, minimal discounting and only slightly flawed converged products. The general strategy is to improve customer service to improve market share trends (particularly in broadband), enable premium products/positioning, and allow for cross-selling of a strong set of converged (in a broader sense) products, which is very sensible in our view. It does require extra spending in the short-term to improve customer service and the perception thereof (particularly in broadband) before premium positioning and cross-selling can be effective, therefore improved trends at the bottom line may take some time to come through.
  • May 23, 2018

    BT Q4 2017/18 results: Slowing broadband bites, but recovery pos [...]

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    BT Group met expectations for the 2017/18 financial year, but future guidance is very modest compared to previous performance and financial market expectations, with 2018/19 revenue and EBITDA both guided to decline by around 2% with capex rising. In our view, this weakened outlook is primarily driven by the ongoing slowdown and increasing competitiveness of the UK broadband market, with operating metrics at BT Consumer particularly weak. BT’s re-vamped strategy looks good in parts, and could deliver the incremental improvements necessary to outperform the new (much more modest) expectations, helped by existing – and likely continued – strength in mobile.
  • May 15, 2018

    Covert growth in UK mobile

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    The UK mobile market is growing strongly – we estimate revenues by 5% and EBITDA by 8% in 2017 – excluding one-off regulatory drags and the loss of non-profit-generating handset revenue. Regulatory price cuts end in mid-2018, and the handset effect will disappear from all reported figures from April 2018, leaving scope for very positive headline growth next year – considerably better than its European comparators and the sluggish UK fixed market. The outlook for the UK mobile industry is the best it has been in a decade, with significant growth in data demand, price increases, some supply constraints, rational competition, and major regulatory drags rapidly fading.          
  • May 14, 2018

    Video viewing forecasts to 2027: continued divergence by age grou [...]

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    Our latest forecasts predict traditional broadcasters will account for 72% of all video viewing in 2027, down from an estimated 82% in 2017, reflecting the continuing adoption of online video services across all UK age groups. Additional viewing of online short-form content such as YouTube will keep pushing overall volumes higher, with SVOD services serving more as a substitution for linear TV. The extent will be greater among younger age groups, for whom the shift has already been significant. We predict that in 10 years just 42% of 16-34s’ total viewing will be to conventional broadcasters versus 91% for the over-55s.      
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  • May 8, 2018

    Trinity Mirror and Northern & Shell raise regulatory hackles

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    The Competition and Markets Authority (CMA) halted the merger of the publishing assets of Trinity Mirror and Northern & Shell, and is inquiring into the merger’s likely impact on competition in the national newspaper market. The CMA will take into account efficiencies of £20 million in newsrooms, printing and advertising sales, which if realised could help sustain national news provision in a failing print market transitioning to digital services. Secretary of State (SoS) Matt Hancock has issued a Public Interest Intervention Notice (PIIN) citing newspaper public interest (PI) grounds, on concerns the TM/N&S merger may be contrary to the public interest
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  • April 12, 2018

    TV set viewing trends: ‘Unmatched’ viewing growth and cha [...]

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    Despite the continued decline of linear TV set viewing through 2017 (-4%) and the first 12 weeks of 2018 (-3%), overall TV set usage remains flat at 4 hours/day due to the continued rise of unmatched activities (+19% in both cases). We consider the recent growth of unmatched use to be predominantly due to viewing of online-only services (i.e. Netflix, Amazon and YouTube), since time spent gaming is unlikely to have changed dramatically. The increase in unmatched usage since 2014 exceeds the total viewing to the most-watched broadcast channels for all age groups under 35. Within the shrinking pie of consolidated TV set viewing, market shares remain broadly flat. However, several key digital channels have shown surprising signs of recent decline, reflecting stalling growth from the multichannel long tail versus the main PSB channels.
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  • March 26, 2018

    Time Inc. UK magazine portfolio

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    At the end of January 2018, the acquisition of Time Inc. by rivals Meredith Corporation closed for $2.8bn. Time Inc. had already been in the process of selling its UK arm, which completed on March 19 to private equity fund Epiris LLP for an estimated £130m. The Time Inc. UK portfolio is a reasonably diverse one, with the following categories: Entertainment, Fashion & Beauty, Home & Design, Sport & Fitness and Specialist. Within the consumer magazine sector as a whole, oversupply remains the core issue, and we expect to see further closures of weaker titles benefiting category-leading brands.
  • March 26, 2018

    UK – ITV FY 2017 results: glass half full?

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    In her first results appearance as the new CEO of ITV, Dame Carolyn McCall announced a fairly good full year performance in the face of 2017’s tough ad market, with NAR and Group EBITA both down 5%. The main announcement was the start of a strategic refresh. For now, this is light on detail, but with more to come at the H1 interims. The bottom line is to improve all areas of the business through greater use of data. Under the looming threat of tech giants, increased calls for collaboration—with content producers, advertisers, and other broadcasters and platforms—could spur more tangible opportunities for significant growth in the UK public service broadcasting system.
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  • March 2, 2018

    UK broadband, telephony and pay TV trends Q4 2017

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    UK residential communications market revenue growth fell again to 1.2%, with weakening ARPU growth the main driver. New customer pricing remains flat to down, and existing customers are being increasingly discounted, fuelling the ARPU weakness. High speed broadband adoption is proceeding apace, but the high speed premium is fairly thin, muting the impact on ARPU. Regulated wholesale price cuts from Openreach finalised today and due in April 2018 will not help. Looking forward, the March quarter will benefit from price timing effects at BT and Virgin Media, but we fear that the rest of 2018 will follow the current downward trend and the operators will need to adjust to an ex-growth environment.