UK Media

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  • December 18, 2017

    UK online ad forecast 2017-2019: A grey digital market

    We estimate that UK online ad spend grew by 12.3% this year, with growth concentrated almost exclusively in mobile search and social in-feed advertising (particularly video), and mostly incremental to overall ad spend. Even after payments to publishers and distributors, Google and Facebook captured 80% of all net new spend in the market, and 96% of it flowed through their platforms. Despite improving standardisation and disclosure, the outstanding issues around measurement, the ad-tech supply chain, and particularly the obscure and growing Google/Facebook/Amazon segment, lead us to identify a large portion of digital advertising as a “grey market”: difficult to get a handle on, with uncertain beneficiaries and slippery definitions
  • TV platform forecasts to 2026: DTT and pay-lite set to grow
    TV platform forecasts to 2026: DTT and pay-lite set to grow
    December 12, 2017

    Children’s changing video habits:And implications for the conte [...]

    Children’s media use and attitudes have dramatically changed over the last few years, stemming from the rapid take-up of smartphones and tablets. Traditional TV continues to decline at the expense of newer video services such as YouTube, Netflix and Amazon, with 43% of children aged 8-15 preferring YouTube videos over TV programmes.These online services offer content producers wider opportunities, but questions remain around the lack of regulation online, and the recent scandal around children’s safety on YouTube has heightened these concerns.
  • November 24, 2017

    TalkTalk Group Q2 2017/18 results: Growth at a cost

    TalkTalk continued to maintain positive broadband net adds in Q2 despite increased churn, and its on-net revenue growth turned positive as well, helped by the turnaround in subscriber growth trends and an overlapping price increase implemented during the quarter. The return to growth is taking its toll in marketing costs however, and the company is now guiding to a full year ‘headline’ EBITDA at the lower end of its previous given range, and this is after redefining ‘headline’ to exclude losses from its winding-down mobile business. Even this looks challenging given the cost trends in the first half of the year. The company’s new strategy of subscriber growth and focusing on the basics is probably the right one, but it is proving tough to implement in a slowing and increasingly competitive market
  • November 13, 2017

    BT Q2 2017/18 results: Unresolved issues

    BT Group revenue growth dipped to -1.5% from an instance of rare modest positive growth in the previous quarter, albeit mostly due to a predicted price timing effect in Consumer and revenue growth predictably going from bad to worse in Global Services. The bright spots were continued strong 4% revenue growth at EE, with an acceleration in mobile-related revenue also helping other divisions, and strong growth of 5% in external revenues at Openreach driven by accelerating fibre adoption by competitor customers. A number of very important regulatory/policy/legal issues remain unresolved, including 5G spectrum auction rules, leased line pricing, FTTC pricing and FTTP roll-out rules, but without a number of these going BT’s way the outlook remains tough for at least the next 18 months
  • November 8, 2017

    Premier League: winner’s curse

    The Premier league (PL) will be hoping for another huge increase in rights payments in the upcoming auction for the three seasons starting 2019/20. Aggressive competition between BT Sport and Sky has led to hyperinflation of most premium sports rights. Sport now accounts for two thirds of multichannel content spend, but only 8% of its viewing. BT’s current financial position makes it difficult to justify expansion or further hyperinflation of its PL rights portfolio, but it cannot withdraw completely
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  • October 26, 2017

    Supply of news in the UK

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    Since Communications Act 2003, the number of national news outlets supplied on broadcast and in print has been stable. Adoption of multi-channel TV, supported by Freeview, has augmented the number of homes accessing on a free-to-air basis five "all news" channels (BBC News, BBC Parliament, Sky News, CNN, Russia Today), with many more all news channels served on pay-TV platforms. Original news production has been transformed by digital tools and Twitter occupies the centre of the journalism ecosystem. Jobs devoted to news production are in recovery, although mask a decline in newspapers to the benefit of online mainly. Expansion of fixed-line broadband and, more recently, consumer adoption of mobile broadband and connected devices, have made the internet a platform for the supply of and consumption of all news services. Broadcasters serve eponymous text-based websites, all newspapers serve websites, and native news outlets have entered the market due to low barriers to entry. Prominent native brands in the political genre include Buzzfeed, HuffPost and Politico
  • October 17, 2017

    Sky Q1 2017/18 results: Solid quarter, but challenges remain

    Sky made a strong start to fiscal 2018, with improved customer net adds across each of its markets versus the previous quarter, as well as group revenue growth at 5%. Operating profits switched back to growth, after the negative Premier League effect annualised out, with it now settled at the full cost of £1.4 billion per year. EBITDA growth hit 11%, or 15% excluding the effect of UK mobile and the Spanish OTT launch. Against the backdrop of continued uncertainty around the UK advertising market, attention has turned to the upcoming Premier League auction, though we think it unlikely that digital players will cause disruption
  • October 17, 2017

    News and Facebook

    Even though Facebook is not a producer of news, 6.5 million UK internet users claim to mainly source their news from the platform. Posts and shares by friends in the user's network, in the context of Facebook's algorithm, determine the order of stories in the personalised News Feed, removing the control of the news agenda that publishers have for their websites. Premium publishers operating a paywall (The Times, The Financial Times) have a lower key approach to Facebook than publishers generating advertising revenue from referral traffic to their websites or from on-platform consumption of Instant Articles. The latter will seek to stimulate social media engagement, optimising stories through attention-grabbing headlines, and installing Facebook’s share and like buttons on their websites. Case studies of the news stories that were prominent on Facebook (measured by likes, comments and shares) in the periods leading up to the Brexit Referendum and General Election 2017 votes respectively demonstrate that newspaper brands (the Express for Brexit, and The Guardian for the General Election) achieved the highest reach on Facebook during these periods, despite being ranked below other news brands (BBC in particular) in terms of traffic to their websites
  • October 16, 2017

    Consumer Magazine Publishing Part Two: The Power of Brands and In [...]

    In a challenging digital marketplace, publishers face a crisis of purpose. To navigate the turbulent seas, publishers must invest more in their brands and the industry as a whole must innovate. Consumer engagement, previously held by magazines, has sailed to social media where young influencers across Instagram, YouTube and Snapchat challenge established norms of content discovery and curation. Magazines are more heterogeneous than is commonly assumed, and strength lies in a distinctive brand. To right the course, we recommend the industry carry out bespoke reviews that outline brand-specific audiences, use-cases and revenue solutions, and exploit systematic audience data to optimise all brand manifestations - with enhanced marketing income a secondary benefit.

  • September 1, 2017

    UK broadband, telephony and pay TV trends Q2 2017:Dead cat bounce [...]

    UK residential communications market revenue growth bounced up to 3.6% in Q2, a full 1.4ppt improvement on the previous quarter and reversing the downwards trend of the previous two quarters. However, this was entirely driven by price rises at BT and Sky, with the ongoing market volume growth decline continuing at pace. In competitive terms, TalkTalk was the only operator able to improve its broadband net adds on a year earlier, and Virgin Media was solid with only a modest decline, leaving BT and Sky shouldering the worst of the slowdown, albeit with neither company doing particularly poorly given the market context. New customer pricing remains tight, with Virgin Media in particular becoming more competitive. Looking forward, we expect volumes to continue to slow, and for the pricing boost enjoyed in Q2 to largely drop out next quarter, leading to a renewed revenue growth slowdown.
  • August 16, 2017

    Channel 4 relocation and dislocation

    Channel 4 revenues and content spend hit record levels in 2016, but the company faces a declining TV advertising market in 2017 due to a weaker economy and competition. The company’s ability to deliver its unique remit to audiences and producers is also under pressure from Government proposals to move staff outside London. Because Channel 4 can only commission, a move will not stimulate a creative cluster. Risks to the remit include the loss of talent and lower content spend due to higher opex
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  • August 16, 2017

    Virgin Media Q2 2017 results: Mixed quarter, but still the faste [...]

    Virgin Media’s subscriber figures in Q2 were a little mixed, with total homes and broadband figures weaker than a year earlier, but pay TV much stronger. ARPU growth fell though, largely due to price increase timing effects, leading to a modest dip in revenue growth. Project Lightning premises passed during the quarter rose to 127k, making at least some progress towards upping its run-rate after changing its roll-out management team and approach, the company declined to give indications of how this will evolve. The broader market context is still one of slowing broadband volume growth, and Virgin Media continues to take market share, being the fastest growing of the ‘big 4’ in both subscriber and RGU volumes
  • August 9, 2017

    BT Q1 2017/18 results: Back to growth (for now at least)

    BT Group revenue returned to growth, at least temporarily, helped by overlapping price rises in consumer, one-off regulated price cuts on leased lines annualising out, and mobile handset sales improving. Regulatory news was unusually positive, with Openreach taking the initiative on FTTP, and BT winning an appeal against damaging leased line regulation, which may end up being significantly eased. BT continues to do well in consumer and struggle in business markets, with the ongoing deceleration in the consumer broadband market the main cloud on the horizon.
  • August 4, 2017

    ITV Studios offsets weak NAR: ITV H1 2017 results

    ITV H1 2017 results are in line with guidance contained in its Q1 trading update issued in May, while full year guidance has remained largely unaltered. The 8% decline in TV NAR, timing of programme deliveries and increased business investment were main reasons for the 8% drop in group EBITA despite growth elsewhere limiting the decline in group external revenues to 3%. ITV continues to deliver strong group profit margins of close to 30%; however, online poses several threats to TV NAR. The threats can only be increased by the quest for retransmission fees, whilst the spate of production acquisitions raises questions about risk management
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  • July 26, 2017

    TalkTalk Group Q1 2017/18 results: Still growing the base

    TalkTalk sustained positive broadband net adds in the June quarter, adding 20k to its base, largely driven by reduced churn, which was largely driven by re-contracting a large proportion of existing customers onto its new cheaper bundles. Unfortunately, this had a negative effect on revenue growth, with Group revenue growth (ex-carrier) dropping to -3.2%, as the new cheaper bundle adoption diluted ARPU, but the company remains confident that revenue growth will turn positive for the full financial year as the ARPU dilution effect annualises out. The company recently announced a price rise due in August of around 5-6% for customers not on its new cheaper bundles (around 38% of its total broadband base), which will help with the ARPU turnaround, but may make maintaining positive broadband net adds more challenging
  • June 27, 2017

    UK broadband, telephony and pay TV trends Q1 2017: Profit warning [...]

    UK residential communications market revenue growth dipped modestly to 2.7% in Q1, from 3.3% in the previous quarter. This was mainly driven by ARPU weakness arising due to the timings of Sky and Virgin Media’s price rises, but weakness also stemmed from the sustained decline in broadband volume growth and continued new customer price competition.Looking forward, the implementation of an overlapping price increase from BT, as well as Sky’s price increases coming into full effect, should boost market revenues by around 1ppt in Q2 2017, but this will drop away again by Q3. The churn fallout from the communication of these price increases should also dissipate in Q2, benefiting BT and Sky competitively, and making it challenging for TalkTalk to repeat the feat of recovering to positive retail broadband net adds

  • June 10, 2017

    BT Q4 2016/17 results: Mobile strength, pressure elsewhere

    BT had a reasonable quarter in its consumer broadband business given market pressures, and a very strong one at EE with continued growth acceleration. It had a good quarter for fibre adoption as well, helping its wholesale divisions stabilise their revenue, but business/IT was weak as expected.Regulatory pressure remains intense despite the (welcome) Openreach agreement, with price cap regulation proposed or due on a range of products, and a regulatory approach which is far from investment-orientated. Pressures in the business/IT market are likely to continue, and pressures in the consumer broadband market are likely to intensify, justifying BT’s current cautious approach to guidance and dividends.

  • June 9, 2017

    UK General Election online: news and advertising

    In contrast to print coverage, most shared news and opinion content on social media was decidedly pro-Labour this election season, with fake news relatively non-existent compared to the US election in November. Facebook’s role in news distribution has steadily grown and now rivals Google’s, but only a half of the UK’s electorate are active users – for the platform to become decisive in political news would require much stronger turnout among young voters. Facebook was the chief digital ad platform for both main parties, with Conservatives targeting Labour seats, Labour defending them and both adopting a negative tone.

  • June 1, 2017

    ITV et al. facing the NAR squeeze

    ITV’s latest trading Q1 trading update has sent a clear warning signal to the commercial TV industry as it gave guidance of 8-9% year-on-year decline in TV NAR (Net Advertising Revenue) in H1 2017. A substantial portion of the projected decline may be attributed to economic issues and relatively tough Q1 comparatives as per ITV guidance; however, there are clear signs of growing intrusion by online video advertising on traditional broadcast TV NAR. A review of trends points to major biases that swing the market towards the online space. It is time for all to reconsider both the impact of CRR (Contract Rights Renewal) in restraining TV NAR and the factors – by no means all sound – pushing up online video spend

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  • May 22, 2017

    TalkTalk Group Q4 2016/17 results: Rebasing profits for growth

    TalkTalk managed to return to retail on-net broadband subscriber growth in the March quarter after years of decline, but at the expense of missing their EBITDA target for the year. They have stated a determination to grow the base going forward, but have admitted that this requires a rebasing of their EBITDA to spend the necessary amount on marketing, and guided to an EBITDA drop in the 2017/18 year. This looks much more realistic than their previous plans, but will in itself generate even more competitive intensity in the UK broadband market, which is already squeezed given the market volume slowdown and Virgin Media network extension.
  • Mounting risks to marketing effectiveness
    Mounting risks to marketing effectiveness
    May 19, 2017

    Mounting risks to marketing effectiveness

    A partial — if seductively persuasive and impressive — data framework for online advertising combined with short-term incentives have encouraged a dramatic shift in the ratio of brand to activation advertising from 60:40 to 50:50, depressing the pricing of display media. Mounting evidence suggests a focus on quick returns and cheap media at all costs is hurting marketing effectiveness, measured in long-term Return-on-Investment, brand equity and consumer satisfaction. Guarding against this risk requires brand-focused advertisers to create more space for long-term judgement for CMOs, and to refocus agency remuneration towards planning and creative work.

  • UKTV 2016 results: viewing continues to climb, what awaits online
    UKTV 2016 results: viewing continues to climb, what awaits online
    May 19, 2017

    UKTV 2016 results: viewing continues to climb, what awaits online [...]

    2016 was another good year for UKTV, with appreciable growth in revenue and linear viewing share; a trajectory the product of a sensitive pay/free balance of its channels, investment in productive EPG slots and development of its original programming suite. Recent deals with both Sky and Channel 4 will go some way to providing financial stability, allowing UKTV to invest with more certainty in new content and encouraging further development of its online proposition. UKTV Play has underperformed, chiefly due to a lack of content. But with plans to significantly ramp up both its offering and marketing spend, it may well unlock further audiences; specifically targeting elusive 16-34 year-olds.
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  • TV platform forecasts to 2026: DTT and pay-lite set to grow
    TV platform forecasts to 2026: DTT and pay-lite set to grow
    May 5, 2017

    TV platform forecasts to 2026: DTT and pay-lite set to grow

    Our latest forecasts point to the continued strength of DTT within the UK broadcast market. We predict DTT-only homes will account for 42% of TV viewing ten years from now, up from 38% today. Much of this is due to the UK’s ageing population profile, since DTT skews older. The number of over-45s in DTT-only homes is set to increase by 13% by 2026. The other key factor is the continued growth of flexible pay-lite services—for example, Netflix and NOW TV—which are of greater appeal to younger audiences.

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  • March 23, 2017

    Video viewing forecasts to 2026

    2016 was yet another year in which we saw big changes in the UK’s video consumption habits amongst the under-45s, with little let up in the decline of traditional broadcast linear TV viewing for the younger age groups. Online video-on-demand services will continue to grow, partly at the expense of traditional TV audiences. We also expect the overall volume of viewing to rise, mainly due to wider production of and access to short-form content. Despite these changes, conventional broadcasters look to be strong for years to come—we estimate they will still account for 80% of all video viewing in 2026