March 1, 2016 Reports
The Government is exploring the privatisation option for future Channel 4 ownership on account of its concerns about the sustainability of the Channel 4 business model in light of recent viewing trends. Channel 4’s focus on 16-34s has put it under extra pressure, but the topline figures do not remotely tell the true story. 2010-2013 was a period of disruption due to special factors. Little decline has occurred since, and Channel 4 group 16-34 and peak time viewing shares have held firm since 2010. As for revenues, the trading dynamics of UK TV advertising have seen audience loss more than matched by increased spend, benefiting both Channel 4 and ITV. This is not about to change, while BBC3 closure and Channel 4 digital video growth will reinforce the financial sustainability of Channel 4, now delivering its remit better than ever.
The Government is exploring the privatisation option for future Channel 4 ownership on account of its concerns about the sustainabi [...]
February 11, 2016 Reports
2014 and 2015 have seen outstanding real growth of 13% in display advertising spend. Although we cannot rule out a recessionary downturn, we project further 11% growth during 2016-2018, but at a slowing rate as display spend continues to benefit from relatively benign economic conditions. A sizeable chunk of the display growth reflects a shift from non-display. However, the most dramatic change in the present decade is the total reversal of the balance in display market share between press and the internet: 75% press/25% internet in 2010; 25% press/75% internet in 2018. Nor will the shift be over in 2018. Meanwhile, we expect other display categories – television, out of home, radio and cinema – to see advertising spend grow at close to the market average. As yet, we have seen no signs of television advertising spend suffering due to the decline in viewing among younger age groups and emergence of digital video. If anything, evidence points to the contrary.
2014 and 2015 have seen outstanding real growth of 13% in display advertising spend. Although we cannot rule out a recessionary dow [...]
February 4, 2016 Reports
Europe’s biggest pay-TV service provider Sky has delivered another strong quarter, which saw H1 adjusted operating profits across the group rise by 12% year-on-year on a like for like basis at a constant Euro exchange rate, and the upward trend clearly has a lot of mileage left in it. Although Sky UK & Ireland now generates almost all the current operating profits, the performances of Sky Germany & Austria and Sky Italy give cause for optimism and testify to the group’s deep commitment to top of the class innovation and customer service. In a converging online, telco and TV space, the appointment of James Murdoch as non-executive Chairman and entry of Showtime into the Sky Atlantic partnership of Sky and HBO send out a clear message from the TV side about the importance of global scale and ties between its members.
Europe’s biggest pay-TV service provider Sky has delivered another strong quarter, which saw H1 adjusted operating profits across [...]
January 5, 2016 Reports
Channel 4 is a key pillar of the UK’s audio-visual economy. Its unique commissioning model fosters a hotbed of new creative UK talent, an ecosystem of independent producers, many micro. Channel 4 commissions a greater share of its budget than any other broadcaster, public or private, also fostering the creative economy outside the M25, and 9% of commissions will be to the Nations by 2020. The future success of the stand-alone independent production companies is not in the hands of ITV and Channel 5, but of Channel 4 and the BBC – the pure PSBs.
Channel 4 is a key pillar of the UK’s audio-visual economy. Its unique commissioning model fosters a hotbed of new creative UK ta [...]
December 18, 2015 Reports
The newly elected Conservative government is exploring all the options for privatising Channel 4, but faces a complex legislative pathway. The privatisation case would be made easier if the current model were unsustainable. Only, Channel 4 is delivering its remit with great success, is commercially sustainable, and promises both to remain highly sustainable and grow its PSB contribution through its current licence ending in 2024. Channel 4 privatisation offers small returns to the Treasury as long as the remit, IP ownership restrictions and ban on vertical integration remain in place.
The newly elected Conservative government is exploring all the options for privatising Channel 4, but faces a complex legislative p [...]
December 9, 2015 Reports
UKTV has continued its strong audience performance throughout 2015, and with Dave and Drama the company now has the two largest channels outside the PSBs. Growth has been driven by the effective use of the DTT platform with UKTV positioning its DTT channels to take advantage of the platform’s audience profile and sheer volume of viewing. Assuming UKTV maintains its commissioning spend we expect continued growth on free-to-air, but question marks remain on some of its more niche pay-TV channels.
UKTV has continued its strong audience performance throughout 2015, and with Dave and Drama the company now has the two largest cha [...]
December 1, 2015 Reports
This year marked the second annual IABUK Digital Upfronts. As well as Facebook, Google/YouTube, Aol, Yahoo!, Twitter, BuzzFeed, Vice and others, several traditional media companies – Sky, The Guardian and Global Radio – participated, reflecting the rising importance of digital media and digital media buyers to their businesses. Many of the pitches were informed by the key shifts in online content: it is increasingly cross platform, driven by mobile devices and focused on video programming, and these formed the main themes of the event. A key piece of context is the rise of social media and the shift to programmatic buying, which continue to driven down pricing for all but the most valuable inventory – audience scale, high value audiences and premium content have never been more essential.
This year marked the second annual IABUK Digital Upfronts. As well as Facebook, Google/YouTube, Aol, Yahoo!, Twitter, BuzzFeed, Vic [...]
November 20, 2015 Reports
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.
The government is expected to announce a Digital Bill in Q1 2016 that will propose profound changes to the structure and funding o [...]
November 4, 2015 Reports
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.
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 [...]
October 29, 2015 Reports
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.
BARB viewing figures provide an encouraging start to BT in its first season showing Champions League and European televised rights; [...]
October 27, 2015 Reports
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.
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 sta [...]
October 26, 2015 Reports
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.
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 i [...]
August 24, 2015 Reports
The UK is the top music publishing market in Europe, at £428 million in 2014, despite being second to France and Germany for collections, because mechanical royalties for the reproduction rights (CDs, vinyl, digital) flow only to music publishers, while performance royalties are shared with writers. Thanks to the recovery of the UK economy that started in 2013, royalties from performance on radio, TV and in public have risen more strongly in recent years than in the difficult period of the recession 2008-10, providing a more promising context for sustained growth of the performance component of music publisher revenues. For online royalties, which accounted for 12% of music publisher revenues in 2014, the withdrawal by major music publishers of their rights to Anglo-American repertoire has shifted licensing to SOLAR, a joint venture of PRS for Music, STIM, and GEMA, also offering an aggregated repertoire and copyright administration services. This makes PRS for Music a leader in the development of multi-territory licensing of digital music services.
The UK is the top music publishing market in Europe, at £428 million in 2014, despite being second to France a [...]July 30, 2015 Reports
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.
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 t [...]July 28, 2015 Reports
Consumer ebook sales exploded after Amazon launched its Kindle in the UK in 2010, but growth rapidly slowed, and disruption was limited by genre, creating parallel ebook and physical book markets. Compared to the relentless downward spiral of music purchasing, these trends have been heartening for publishers and booksellers, but there are signs that slower, more complicated and insidious disruption is emerging. Decades of steady, albeit slow, growth in total book sales have been reversed, as consumers spend more time on a variety of mobile-delivered services, including some in classic content categories for books.
Consumer ebook sales exploded after Amazon launched its Kindle in the UK in 2010, but growth rapidly slowed, and disruption was lim [...]July 15, 2015 Reports
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.
The recently elected Conservative government took less than a week to negotiate a licence fee settlement with the BBC immediately p [...]July 13, 2015 Reports
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.
Last Monday’s (6 July) announcement by the Secretary of State marks the second major direct intervention by government without re [...]July 6, 2015 Reports
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.
Brands are investing more than £5.2 billion a year in content strategies, £1.2 billion of it with consumer media, and investment [...]June 30, 2015 Reports
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.
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 Pac [...]June 16, 2015 Reports
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.
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 rev [...]June 5, 2015 Reports
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.
The latest numbers for Q1 2015 show strong device and internet user growth, with more of the population online than ever before, in [...]May 29, 2015 Reports
UKTV 2014 results show a 2% increase in total revenues and a 10% year-on-year increase in EBITDA to £74.1 million, though the costs associated with the launch of Drama in 2013 will have contributed to the higher EBITDA increase. The 2% total revenue increase is surprisingly low, since we would have expected a circa 8-9% increase in UKTV’s main advertising revenue stream in 2014 due to a 5.4% increase in total TV NAR on top of a 2.9% growth in UKTV adult SOCI during 2013, with the lagged revenue benefits accruing in 2014. Whilst the outlook for 2015 appears very promising, the focus is now on investment in content, above all on new commissions, as a driver of revenue and audience share now that the factors behind UKTV’s successful rise since the Freeview launch in 2002 have largely played out.
UKTV 2014 results show a 2% increase in total revenues and a 10% year-on-year increase in EBITDA to £74.1 million, though the cost [...]May 7, 2015 Reports
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.
The US is seeing steep decline in measured TV viewing by younger age-groups and rapid increase in digital media adspend, prompting [...]