Publications

Format: Nov 2019
Sector(s) Datesort ascending
Sky Q3 2019 results: balanced, but more to come?

While Sky’s overall revenues continue to rise, Q3’s growth was hampered by a significant fall in advertising revenue and to a lesser extent a slowdown in content sales

Underlying EBITDA growth was in the mid-teens. Next quarter, Sky will continue to benefit from lower Premier League rights costs versus last season, and profit appears on track to meet full year guidance

Q3 saw a rare decline in Sky’s total number of customers due to the conclusion of Game of Thrones. Sky clearly understands the value of unique content—recently extending its HBO deal. In our view, this was essential, since without a distribution deal for Disney+ (launching in the UK in March) Sky would lose Disney’s alluring content

  • Comcast
  • NBCUniversal International
  • Sky
Media, Telecoms 11 November 2019
O2 doing better than appears in tough times

In spite of total revenue growth of 4%, O2’s service revenue growth took another step down to -3% this quarter, consistent with the worsening environment and EE’s results 

Its true performance is likely better than reported as IFRS15 has an artificially dampening effect on its service revenue as a consequence of O2’s Custom Plans, and is something of a boost to its impressive 6% EBITDA growth

O2 needs to continue to pedal hard to keep ahead of this challenging environment – with little let-up on the regulatory front, more aggression from Vodafone and H3G, and a potential regulatory hit to its Custom Plans 
 

  • O2
  • Telefonica
Telecoms 8 November 2019
Consumer magazine publishing: from brand-led to capabilitities-led

Consumer magazine circulation and advertising continue to spiral down, with notable exceptions at the top of the market and in a handful of key genres, triggering ever greater revenue diversification and innovation

The market is fundamentally over-supplied and the gap between successful portfolios and the glut of secondary titles is growing. Furthermore, the distribution and retail supply chain hang by a thread

There are some encouraging signs. Publishers are evolving, with their strategies and leadership capabilities increasingly defined by the needs of the industry they serve rather than the publishing brands they exploit, bringing the consumer model closer to more thoroughbred B2B models

  • Apple
  • Conde Nast
  • Express Newpapers
  • Hearst
  • Reach
  • TI Media
  • Time Inc
  • Trinity Mirror
Internet, Media, UK Media 7 November 2019
BT: Bumps on the road to recovery

BT suffered a weak Q2 with revenue and (particularly) EBITDA declines accelerating, but this was mainly down to timing (particularly at Openreach, which will likely recover in Q3), with the company confident in maintaining full year expectations

BT’s fixed broadband business enjoyed some recovery as the pricing environment improves, but will suffer another price timing bump next quarter, and its mobile business is suffering from a tough market environment that is unlikely to improve in the short term

The company is busy re-branding, re-positioning and transforming, but the outlook for football rights costs and fibre roll-out regulation will dominate in the short term, and further bumps (such as the Virgin MVNO contract loss) may emerge

  • BT
  • EE
  • Openreach
Telecoms 6 November 2019
Champions League rights auction: BT’s cost-cutting opportunity

Champions League UK TV rights, at £394m/season, appear to have reached a ceiling, with costs on a per match basis now comparable to the more-desirable Premier League

In the imminent auction, current rightsholder BT is the clear frontrunner. Potential competitors appear reluctant: Sky Sports has thrived since losing the rights in 2015, and no other players can reasonably compete at this spend

This presents BT with a golden opportunity to rein in costs, with a view to moving BT Sport towards breakeven at an important time for the wider business, considering the financial pressure it is facing

  • BT
  • ITV
  • Sky
Media, Telecoms, TV, UK Media 4 November 2019
TI Media goes back to the Future

Specialist publisher Future has offered £140m for generalist TI Media’s 41 brands, which will give Future 220 global brands upon expected completion in Spring 2020. The acquisition, which includes wholesaler Marketforce, is contingent upon shareholder and CMA approval

Future is the darling of publisher stocks, pursuing an energetic growth and scale strategy, and diversifying revenues through digital and experience innovation

How Future’s culture of experimentation and optimisation will work with TI Media’s more general portfolio is an open question. Only time will tell if the overall portfolio balance will work

  • TI Media
Media, Technology, UK Media 1 November 2019
Free video! Apple TV+, Disney+, HBO Max and Peacock in a rush for scale and partners

New SVOD entrants are prioritising reach over revenue in the US with extensive ‘free’ offers, including Apple TV+ (to hardware buyers), Disney+ (to Verizon customers), HBO Max (to HBO subscribers) and Comcast’s Peacock (to basic cable homes)

This is the latest development in an unfolding global story of partnerships, continuing on from multiple Netflix and Amazon distribution deals with platforms, bringing benefits to both parties

In Europe, Sky faces price pressure, but it has secured its HBO partnership and can now talk to Disney from a position of strength

  • 21st Century Fox
  • Comcast
  • NBCUniversal International
  • Netflix
  • T-Mobile
  • TalkTalk
  • Turner
  • Virgin Media
  • Walt Disney
Media, Non UK Media, TV, UK Media 31 October 2019
Peak football revenues and post-boom scenarios

Broadcast licensing revenues for football are likely to be ex-growth in the top five markets in Europe, with some limited upside from sponsorship and out-of-Europe rights. 

The broadcast revenue boom stoked the rise of super clubs with global fan bases, feeding player transfer valuations, and a potential downturn of the latter could magnify the impact of the revenue decline. 

The leagues in Italy, France and Spain are more exposed to the risks of broadcast licensing revenue decline, while the Premier League’s model looks robust.
 

  • BT
  • DAZN
  • Sky
Media, Telecoms 25 October 2019
SVOD subscriber trends: who is buying and how many subs

With a raft of new streaming services about to hit, there remains a question as to the appetite for multiple subscriptions

Pay-TV subscribers continue to be more likely to take SVOD services—especially when they are distributed on their set-top boxes—however the average number of services per household is well below one

Greater variety and quality of services will likely increase the average number of subscriptions but given the siloing nature of these services, Netflix’s incumbency, library and distribution are its strength; new entrants will battle for a supplementary role

  • Amazon
  • Netflix
  • Sky
  • Virgin Media
Media, TV 23 October 2019
Telecoms sector returns: Money’s too tight to mention

Mobile sector returns are low, particularly for smaller-scale operators, with H3G earning less than its cost of capital. Regulatory initiatives, spectrum auctions and 5G look set to worsen this picture as H3G strives to gain viable scale

Back-book pricing is crucial to the returns of fixed challengers. Regulatory intervention is likely to lead to a waterbed effect in the fixed sector and exacerbate challenges in mobile

New entrant business case in full fibre is limited to de facto monopoly opportunities. There is the potential for BT’s returns to increase markedly if it gets full fibre right but new entrants’ inferior economics are unlikely to offer sufficient investor appeal

  • BT
  • EE
  • Hutchison 3G
  • O2
  • Ofcom
  • Openreach
  • TalkTalk
  • Vodafone
Telecoms 18 October 2019
Women's sport: inching towards the media mainstream

Media coverage of women’s sport escalated this summer thanks to the 2019 FIFA Women’s World Cup, which ignited national interest. The Lionesses attracted an exceptional peak TV audience of 11.8 million for England’s semi-final match against the USA

Still, coverage of women's sport remains minimal outside of major events: only 4% of printed sports articles reference female athletes. Quality press are leading the way—the launch of Telegraph Women’s Sport being the prime example—but the popular press are yet to follow

Freely-accessible coverage will generate greater interest and audiences for women’s sport, but continuous investment from all media will be needed to fulfil its potential

  • BBC
  • BT
  • Channel 4
  • DMGT
  • Express Newpapers
  • Guardian Media Group
  • ITV
  • News UK
  • Ofcom
  • Reach
  • Sky
  • Telegraph Media Group
  • Trinity Mirror
Internet, Media, TV, UK Media 7 October 2019
BVOD advertising: on-demand in demand

Broadcaster video on demand (BVOD) advertising is in demand with an £89m rise in 2018 spend to £391m, and is predicted to double within the next six years

The rise of on-demand viewing has created a scaled advertising proposition with a strong 16-34 profile – a relief for both broadcasters and advertisers, given the long-term decline in linear TV impacts for younger audiences

Big challenges remain: linear TV ad loads look excessive in on-demand, BVOD CPTs can be off-puttingly high, and measurement is still unresolved. BVOD is a welcome bright spot which faces online video competition head-on, but it won’t be able to turn broadcasters’ fortunes around alone

  • Channel 4
  • ITV
  • Sky
  • YouTube
Media, Telecoms, TV, UK Media 4 October 2019
Time to liberalise UK TV advertising minutage

The UK TV advertising market, in decline since mid-2016, could benefit from a liberalisation of advertising minutage if Ofcom reviews COSTA and decides to make changes

Broadcasters could gain from the flexibility to devote up to 20% of peaktime minutes to advertising under the EU’s revised Audiovisual Media Services Directive (AVMSD)

Ofcom could also level the playing field between PSB and non-PSB channels, although more minutes of advertising on TV is unlikely to inverse the medium’s decline

  • Channel 4
  • ITV
  • Ofcom
  • Sky
Media, Telecoms, TV, UK Media 24 September 2019
Amazon’s pivot to Marketplace

Amazon, the gatekeeper to 100 million Prime members, is increasingly reliant for growth on Marketplace, where third-party sellers compete with first-party products 

Amazon’s multi-channel platform strategy delivers choice and low prices to customers, but third-party sellers have increasingly complained that their playing field is not level

After Amazon’s seller agreements were modified in August to implement a competition ruling in Germany, the European Commission is now investigating the data layer 

 

  • Amazon
Non-UK Media, Media 16 September 2019
Cut-price iPhones: Apple's innovative approach

Apple’s iPhone launch event was relatively light on iPhone, which shared the stage with games, TV, Watch, iPad and retail announcements

This reflects Apple’s developing priorities: as iPhone sales soften, it needs to find new ways to extract value from the wealthy user base it has spent a decade nurturing

Apple has embraced this new strategy, offering a range of cheaper points of entry into its ecosystem, making the lost profits back on accessories or content subscriptions

  • Apple
Internet, Media, Mobile, Technology, Telecoms 13 September 2019
No real let-up: European mobile in Q2 2019

European mobile revenue trends are not yet improving. Italy is still flat-lining at almost -10%, Spain worsened again, and the UK deteriorated sharply. France is the only good news story

5G rollouts seem somewhat tentative. Indications from the UK that it is leading to a more competitive environment may discourage European operators from exacerbating already challenging markets

Prior year comparables for Southern Europe will be more flattering in the second half of this year although a doubling in the drag from intra EU calls will dampen any recovery

  • BT
  • EE
  • France Telecom
  • Hutchison 3G
  • Iliad
  • O2
  • SFR
  • T-Mobile
  • Telecom Italia
  • Telefonica
  • Vodafone
Telecoms 12 September 2019
Spotify's podcast play

Spotify is investing heavily in podcasting through acquisitions, original content and product innovation

It is under pressure to reduce dependence on record labels, whose power makes generating large profit margins difficult. Podcasts promise a non-music content genre where Spotify can capture more value

Secondary benefits abound: Spotify can take an active and lucrative role in modernising online audio advertising, it can solve the podcast discovery problem, and engagement across more forms of audio will improve retention

  • Apple
  • Spotify
Internet, Media, Music and Radio, Technology 11 September 2019
Reality bites, and will bite some more: UK mobile market Q2 2019

The UK mobile market suffered its worst performance in five years this quarter with Vodafone alone, somewhat inexplicably, bucking the trend

5G capacity is impacting pricing trends with SIM only packages flattening and unlimited packages increasing in popularity and complexity

As the operators invest in solving rural coverage and rolling out 5G, they will continue to be hit by regulation. Out of contract notifications and discounts are next in a long series of assaults

  • BT
  • EE
  • Hutchison 3G
  • O2
  • Vodafone
Telecoms 4 September 2019
Under pressure, how TV is changing on the screen

Analysis of peak time TV programming on the main five PSB channels from 2002 to today shows a decline in the number of UK dramas broadcast—predominantly due to a contraction by ITV—though this has steadied since 2010

The resolve of the PSBs to maintain the number of dramas broadcast, despite rising costs, will mean an inevitable increase in the number of repeats and cheaper programming

A number of other observations are eye-catching: a greater turnover of drama series, entertainment formats failing at a higher rate and celebrity being treated as a panacea

  • BBC
  • Channel 4
  • ITV
  • Viacom
Media, TV 2 September 2019
Brexit's effect on TV ad revenue 2019

We have revised our 2019 TV advertising forecasts down to -5% year-on-year due to the prospect of Brexit on 31 October, without an agreement and transition period of continued free trade to the next trading regime with the EU, thus implying the interruption of the free flow of goods across the UK's borders with Ireland, France and the EU generally.

With the UK economy already grinding to a standstill, forward guidance for Q3 2019 indicates further decline, and the prospect of a hard Brexit will make advertisers even less willing to commit TV budgets in November and December. As a result we forecast TV advertising to be down 6.7% in H2 2019.

Understandably, no official and reliable economic forecast for no-deal Brexit is in the public domain, so we are not yet in a position to forecast TV advertising revenue for next year.

Media, Telecoms 21 August 2019

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