UK Media

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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
  • March 16, 2017

    BT tightens grip on Champions League TV

    The latest auction of UEFA Champions League televised UK rights has seen further high inflation (32%) as BT renewed its ownership for the three seasons from 2018/19 for an annual payment of £394 million. Although BT annual payments are to increase by £95 million from 2018/19, the new contract offers added commercial attractions, though we expect BT’s efforts to monetise them will fall some way short of the cost increase. However, BT had to win to cement its position against Sky as a strong number two in UK premium pay TV and we expect weaker future inflation of premium football rights. For Sky followers, the focus is now on the UEFA auctions in Germany and Italy, where the outcome is far from certain.
  • February 24, 2017

    Virgin Media Q4 2016 results: Accelerated build, delayed benefits

    Virgin Media successfully ramped up its network extension in Q4, passing more than double the homes in the previous quarter, and above the rate required to meet 2017 expectations. Net customer additions were, however, relatively weak, entirely due to extra churn caused by the price increase implemented in the quarter. The price increase’s effect on ARPU and revenue growth was muted by ARPU discounting for new customers, leaving revenue growth broadly unchanged. Subscriber growth has already improved in early 2017, and is likely to continue to improve through the year. The discounted ARPU impact will be more sustained, but robust revenue growth is still likely throughout the year.
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    February 7, 2017

    TalkTalk Group Q3 2016/17 results: Weak quarter, reassuring guida [...]

    TalkTalk had a weak quarter, as was pre-warned, with the decline in the broadband base accelerating and consumer revenue growth of -6% slightly worse than the previous quarter. Guidance was however very bullish, with the company confident that it can bounce back to return to positive net adds in the March quarter, while still hitting its profitability guidance. This looks a difficult task in a market which is still highly competitive, but if it can achieve it, the longer term aim of a stable customer base and growing revenue and profits looks much more plausible.
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    February 1, 2017

    BT Q3 2016/17 results: Strong core, let down elsewhere

    BT had a solid enough quarter, with revenue and EBITDA growth dipping due to pre-warned temporary factors, consumer continuing to outgrow business, and very solid operating trends evident, especially in high speed broadband and mobile. This has of course been entirely overshadowed by the profit warning, with prospective weaknesses in UK public sector and international corporate of far more concern than the contained, albeit surprising, accounting irregularities in Italy. BT has a large share of revenue and a much smaller share of profit from corporate/government data network/IT services, which are erratic in nature and arguably in long term decline in their current form, and without major changes they will continue to be so.

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    January 10, 2017

    TV set viewing trends: linear remains vital

    Timeshift viewing on the TV set has doubled since 2010, mainly due to PVR adoption. This has compensated for about 40% of the decline in live viewing, which has fallen by 19% per person on average. Timeshifting habits are widely spread across all age groups. They are proportionately higher for the young, who watch much less live TV, but are still substantial among over-55s, whose total viewing has hardly changed since 2010. Large genre variations in the volume of timeshift viewing (dramas high, live events low), and the fact that this still occurs very soon after the live broadcast, underlines the strength of the linear schedule. And, despite widespread initial concerns that timeshift viewers would fast-forward through all ads, nearly 50% of timeshifted commercials are viewed.
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    December 16, 2016

    UK broadband, telephony and pay TV trends Q3 2016: Peak growth?

    UK residential communications market revenue growth accelerated to 5.8% in Q3, from 5.0% in the previous quarter, helped by an overlapping price rise at BT, and supported by firm pricing and accelerating high speed adoption elsewhere. Volume growth in the core three products – broadband, line rental and pay TV – in contrast continues to slow, with little sign that this will ever re-accelerate. In the longer term we cannot see ARPU growth acceleration continuing to fully compensate, and market revenue growth might also have peaked. Virgin Media is putting extra pressure on the other operators through its network extension roll-out, broadband speed advantage and improving pay TV service. Sky and TalkTalk are becoming increasingly aggressive in marketing high speed broadband to help protect themselves (and perhaps also to boost ARPU), with Openreach’s high speed net adds being mostly derived outside BT’s retail divisions for the first time this quarter.
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    December 16, 2016

    TalkTalk Group Q2 2016/17 results: Growing profits, slowing reven [...]

    TalkTalk’s broadband subscriber decline has re-accelerated, with retail weaker than wholesale, and its consumer revenue is declining at 6%. This is partly due to price change timings, partly due to last year’s cyber-attack, but also partly due to underlying weak retail broadband subscriber growth. EBITDA did grow strongly, although this was in part due to less subscriber growth. The new pricing plans will likely drive more short term revenue weakness, but could potentially drive lower churn in the medium term, and they have renewed TalkTalk’s price competitiveness, particularly on high speed products.

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    November 10, 2016

    Virgin Media Q3 2016 results: Continued acceleration

    Virgin Media continued to accelerate in Q3, with subscriber numbers accelerating despite the broader market slowdown, driven by its network extension starting to have a material impact and an enhanced TV offering reversing its pay TV decline. The only weak area was mobile, with revenue and subscriber growth slowing, and convergence stalling. The company hopes that its 4G launch will reinvigorate this; we believe that consumer demand for fixed/mobile convergence remains limited. The early price rise implemented in November will likely help ARPU but harm churn during the rest of the year; for 2017 and beyond the accelerating network extension will increasingly drive volume and revenue growth.

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    September 16, 2016

    BT Sport: positive first year with the Champions League

    BT Sport has seen a very clear positive impact from its first year airing the Champions League, with viewing up 60% year-on-year to June. Remarkably, its reach is now not too far off Sky Sports, though it still has some way to go in terms of consistent viewership.

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    September 14, 2016

    Untapped not tapped out -The over 50s -­ systemic consumption an [...]

    More than one third of the UK population is over 50 (over 23.6 million people) and this cohort is projected to keep growing. They account for substantial wealth, assets and expenditure. Over 50 consumers are more urban, educated, and tech-­‐savvy than the over 50s of previous generations. Given their outsize impact on the economy, influence on social trends and opportunity for brands, we believe the marketing industry underappreciates the diversity of over 50s, and their differentiated requirements. The key group in terms of potential in growth, wealth, expenditure and digital adoption are the 50-­‐65s: they are neither their children nor their parents.
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    August 23, 2016

    UK broadband, telephony and pay TV trends Q2 2016

    UK residential communications market revenue growth was broadly unchanged at 5% in Q2, despite volume growth continuing to slow across all products, with pricing and fibre adoption helping to boost ARPU. Virgin Media continued to gain momentum on the back of its Project Lightning network extension, and this impact is likely to continue to grow as the roll-out continues. Its ARPU was quite weak, hit by promotional discounting and other temporary factors, and this should recover in time, helped by its early price increase schedules for November.

     
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    August 12, 2016

    US and UK: Cord-cutting-shaving-nevering

    Cord-cutting has become a major headache for US pay-TV operators in the last three years, while cable network channels face further erosion due to cord-shaving and we now see a rapidly growing population of cord-nevering households that have never taken a pay-TV subscription. Should we expect it to be only a matter of time for the UK to follow the US? The short answer is no, due to major differences in the pay-TV market infrastructures of the two countries, which leave the UK much less exposed. However, downward pressures from the online space do exist in both countries, while the big cord-cutting-shaving-nevering threat we now see in the UK has most of all to do with the chill Brexit winds on the economy.

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    August 8, 2016

    Sky firing on all cylinders: FY 2016 results

    FY 2016 has been an excellent year, with all three Sky markets showing improved performance as Sky delivered 7% revenue growth (5% after adjusting for 2016 being a 53-week year) and 12% increase in operating profit. The success reflects Sky’s commitment to product and service innovation and diversification in an increasingly fragmented marketplace combined with tight control of back office costs and focus on synergies. As a measure of its success, Sky has set new cost synergy targets of £400 million annual run-rate by FY 2020 and is aiming for continuing middle to high single digit growth in revenues, which should let it comfortably absorb the rising costs of Premier League and Bundesliga live televised rights under the next contracts.

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    August 2, 2016

    Steady progress: ITV H1 2016 results

    ITV H1 2016 revenues and EBITA showed double-digit growth year on year, though the greater share came from ITV Studios acquisitions of independent producers and H1 2016 was sequentially down on H2 2015, with ITV Studios accounting for most of the decrease. ITV Family NAR was flat year on year. Though Brexit has led to growing fears of a sharp downturn, ITV appears relatively well placed to handle such an outcome: ITV Main channel 7% uptick in H1 viewing share; £25 million targeted cost efficiencies in 2017; healthy balance sheet. ITV Studios revenues have doubled in scale since 2011 following 15 acquisitions of independent production companies; yet just how well the underlying business is performing organically is hard to assess due to the bumpiness of short term trends.

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    June 1, 2016

    New VOD rules in the EU Digital Single Market

    The Commission proposes to require VOD services to implement a 20% share of EU works in catalogues, which Netflix already largely meets. More impactful is the EU’s proposal for OTT SVOD services to provide access to the home service when subscribers travel in the EU, benefitting the UK’s 14 million subscribers. TV broadcasters, which observe a 50% EU works threshold in their linear programming served on TV platforms and online players, will be able to opt-in to portability.
  • May 3, 2016

    Internet trends: Mobile engagement from babies to boomers

    While internet and device penetration among younger age groups are approaching saturation, the over 55s have seen an explosion in smartphone adoption, up 83% year-on-year, expanding opportunities for monetisation. More than 50% of ecommerce transactions are now through mobile. Smartphones widen the scope for anytime anywhere mcommerce events and larger-screened phones and tablets facilitate high value transactions. Internet advertising continues to grow quickly, display faster than search and classifieds. Online advertising spend in H2 2015 grew 14% year-on-year to just over £2 billion and the rise of mobile ad spend is dramatic.
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    April 27, 2016

    Sky Q3 2015/16 results: Content scale is king

    Europe’s leading pay-TV operator Sky has extended its long run of strong quarterly results with revenues up 5% in the first nine months of 2016 and operating profits up 12% as Sky retains its intense focus on cost efficiencies and synergies across the group. The KPIs were largely very positive, though the churn uptick from a very low base in the UK & Ireland in recent quarters raises questions about the factors at play, while the one notable short-term uncertainty is the outcome of the Bundesliga auction during Q4. Of the big themes highlighted in the results release, Sky’s commitment to building major content partnerships at a European level stands out as it faces the growing online challenge from Netflix, Amazon et al.

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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.