Publications

Format: Mar 2019
Sector(s) Datesort ascending
TalkTalk stabilising, but strong growth evasive

TalkTalk had very solid Q2 and H1 results, with broadband net adds staying positive, high speed net adds accelerating, revenue growth above 3% and EBITDA rebounding back to growth

This was helped at the revenue line by a price increase in the quarter and in EBITDA terms by steep Openreach price reductions, with strong revenue growth and any EBITDA growth hard to replicate once these effects have annualised out

The company has nonetheless stabilised its subscriber base, revenue and profitability after some erratic years, with cost-cutting providing some potential for growth going forward

  • TalkTalk
Media, Telecoms 29 November 2018
HFSS TV watershed idea should be put to bed

The ban on pre-9pm TV ads for HFSS (high in fat, salt or sugar) products being considered by the Government would not play a constructive or quantifiable role in reversing the UK’s rising childhood obesity rates. 

The ban on HFSS product ads since 2008 around children’s programming has not impeded the inexorable rise of childhood obesity. In 2010, Ofcom termed an HFSS watershed ban ‘disproportionate’ and ‘ineffective’. 

In 2018, a watershed ban would be even less effective. Children’s linear broadcast TV viewing is down by half since 2010, mainly to YouTube’s advantage, which benefits from light-touch HFSS regulation.
 

  • Channel 4
  • ITV
  • Sky
Media, TV, UK Media 27 November 2018
Refocus imperative at Vodafone

Vodafone’s deteriorating financial performance is as much due to an increasing margin of underperformance relative to its peers as to challenging markets such as Italy

A strategic refocus on operational performance is long overdue and seems largely sensible, save for the continued push for discount-led convergence products which are driving underperformance

Although Vodafone posted 3% organic EBITDA growth for H1 of this year and is guiding to same for the full year, we view this definition as overly flattering with true EBITDA performance flat and revenues in decline

  • Vodafone
Media, Telecoms 26 November 2018
Virgin Media Q3 2018 results - Cautiously accelerating growth

Virgin Media’s revenue growth accelerated in Q3, off the back of improved subscriber ARPU and triple play growth, but actual customer and broadband figures slowed in line with the weakening market

Network roll-out was still (deliberately) slow, with the rate now well below the previous year, and the company indicating that it is not expecting to accelerate, although it is still the fastest new network builder in the UK by some margin

Both the ARPU focus and slow roll-out point to a cautious approach, with the company happier to ensure its existing customers offer good yields than to seek significant market share growth at this stage, which is probably wise

  • Virgin Media
Media, Telecoms 21 November 2018
PSB SVOD

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

  • BBC
  • Channel 4
  • Freeview
  • ITV
Media, TV 12 November 2018
BT Q2 2018-19 results - Beating expectations, guidance still looks (a little) conservative

BT’s Q2 results were well ahead of both its full year guidance run-rate and financial market expectations, with revenue flat and EBITDA up 3% versus guidance and consensus at -2% for both metrics 

Operating metrics were more mixed, with broadband churn high and (our estimate of) net adds low, but fixed ARPU was solid, backed up by rapid adoption of BT Plus, fibre adoption re-accelerated and mobile was strong across all metrics

While part of the outperformance was likely due to H1/H2 phasing, it also reflects fairly conservative expectations and a solid operating performance, and hence full year guidance still looks very beatable, with a positive outlook beyond this

  • BT
Media, Telecoms 9 November 2018
BBC Drama: a loosening grip

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  

  • BBC
  • ITV
  • Netflix
Media, Telecoms, TV, UK Media 8 November 2018
Misplaced media spend in a booming identity economy: a brand opportunity

Most UK consumer spending, and the vast majority of its growth, is in categories which reflect who we are and where we feel we belong: lifestyle signifiers, passions, and social activities.

Communities are at the heart of this growing economy, but ad spend on media which visibly targets us as members of a group in a relevant context has on average lagged behind in these categories.

Advertisers recognising the power of emotionally and culturally relevant context in media, sponsorships or events, are finding an opportunity for building brands for the identity economy.

Media, Telecoms 7 November 2018
Radio’s evolution towards a digital future

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

  • Amazon
  • Apple
  • BBC
  • News UK
  • Spotify
  • YouTube
Media, Public Policy, Technology, UK Media 30 October 2018
PSB solidarity and collaboration

The Public Service Broadcasters (PSBs) are in the process of sliding from TV dominance to middling contenders, in terms of content expenditure and significance to viewers

There are calls from many sides that the PSBs need to collaborate in order to thrive, in an era when global debt-funded SVOD services are making all the running

This note explores what can realistically be achieved by PSB collaboration; where partnerships work best; and the areas best avoided

  • BBC
  • Channel 4
  • Freeview
  • ITV
Media, Telecoms 29 October 2018
US department stores, Amazon, and omnichannel fashion retail

Amazon is finding women’s fashion, a missing piece of its household-centric model, a tougher nut to crack than downmarket apparel

Higher-end US department stores are pushing back with an omnichannel model, emphasising long-term partnerships, a clever full-price/outlet model, and experiences which cross the online-offline divide

In apparel, Amazon and big box retailers have already triumphed over lower-tier American department stores, and even prestigious fashion brands are finding it harder and harder to refuse cooperation with the giants

  • Amazon
  • Facebook
  • Google
Media, Mobile, Technology 25 October 2018
Disney, Fox, Sky and Comcast: future relationships

With Comcast’s acquisition of Sky confirmed and Disney’s acquisition of 21st Century Fox on the path to regulatory clearance, how will the relationships of the various parties evolve?

Disney is betting on a standalone SVOD service in the US. However, its content deal with Sky in Europe is lucrative, and the performance of DisneyLife in the UK suggests its US strategy may not fit elsewhere

Sky’s relationships with Disney and Fox are crucial to its business. A joint pursuit to maximise returns from IP and distribution in Europe would be economically efficient for both Comcast/Sky and Disney/Fox

  • 21st Century Fox
  • Amazon
  • Netflix
  • Sky
  • Walt Disney
PDF Report, Media, TV, UK Media 24 October 2018
Esports & broadcasters: No game for old players

Drawn by its rapid growth and enviably youthful audience profile, incumbent broadcasters are paying increased attention to esports and its followers

Viewership of esports on UK broadcasters’ linear channels is low, with consumption on their online platforms likely the same. The market’s fragmented nature and global audience, along with the dominance of Twitch—and to a lesser extent YouTube—makes this unlikely to change

Broadcasters’ low-cost approach has primarily benefited competition organisers and games publishers. For broadcasters to create real revenues, massive upfront investment would be needed, with the risk of failure high

  • Amazon
  • BBC
  • BT
  • Facebook
  • Sky
  • YouTube
Internet, Media, Technology, TV 9 October 2018
Price is the object: the iPhone and its services

With a carefully priced, strong line-up of iPhones, Apple will consolidate its main revenue line and core user base in the near term

The latter feeds into a services business showing impressive growth, but which is also marked by missed opportunities and mounting negative consequences on the rest of the online ecosystem

For media businesses, Apple’s impact is larger than ever, inevitably leading to new kinds of friction around commercial terms, App store policies and browser features

  • Apple
  • Google
Media, Technology, Telecoms 2 October 2018
What Sky means for Comcast

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

  • 21st Century Fox
  • Sky
  • Walt Disney
Media, Telecoms, TV, UK Media 28 September 2018
From promises to practice: AI in marketing at DMEXCO 2018

At DMEXCO, the top online advertising conference in continental Europe, a call for responsibility took centre stage rhetorically, but was hardly reflected on the conference floor

In contrast, concrete, on-the market applications of AI in advertising were no longer a rarity, with businesses from ad tech to consultancies demonstrating case studies in campaign management, consumer segmentation and personalisation

The industry is betting that the ePrivacy Regulation will be canned as policymakers fear Chinese and American dominance in AI, but the Chinese giants still had a confused marketing pitch at DMEXCO

Media 24 September 2018
European mobile in Q2 2018 - North-South gulf emerges and threatens to widen further

European mobile service revenue growth was sharply lower this quarter dropping to -0.7% after two years in positive territory, owing to weakness in the southern(ish) European markets of France, Italy and Spain

Iliad has strong momentum in Italy and we expect ARPU dilution to worsen into Q3, with the subscriber loss impact also growing.  Any loss of traction for Iliad is likely to drive another round of price cuts

We expect continued north/south divergence in Q3 with the anniversary of the European roaming cuts boosting the UK and Germany in particular whilst the outlook for Southern European operators remains challenging

  • BT
  • EE
  • Hutchison 3G
  • Iliad
  • O2
  • Orange
  • T-Mobile
  • Telecom Italia
  • Telefonica
  • Vodafone
Media, Telecoms 17 September 2018
Broadcast TV is growing very old, very quickly

Linear TV is ageing, and the largest channels are ageing fastest. There is an ongoing double-whammy effect of a growing older population, and the loss of younger viewers to social media and SVOD services.

The PSBs are suffering more than most, especially the BBC channels. 31% of the population is aged 55+, but over 60% of viewing to BBC1 and BBC2 is by those aged 55+.

The trend can be halted, and even reversed to some degree. There is no inevitability to this ageing process, but it will take concerted efforts to fight it.

  • BBC
  • Channel 4
  • Five
  • ITV
  • Netflix
  • Sky
  • UKTV
  • Virgin Media
Media, TV, UK Media 13 September 2018
UK mobile market Q2 2018: Disappointment before dawn

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

  • BT
  • EE
  • Hutchison 3G
  • Liberty Global
  • O2
  • Sky
  • TalkTalk
  • Telefonica
  • Vodafone
Media, Mobile, Telecoms, UK Media 10 September 2018
Japan's recorded music market starts to stream

Recorded music revenues in Japan are stuck in decline as physical sales sag, although 2017 marks the first year when streaming gained a foothold with 8 million subscribers. 

J-pop fans spend on 'experiences' with their idols including events, merchandise, CDs and DVDs, which streaming cannot replicate. Top native LINE MUSIC offers integration with a popular messaging app and bundling with mobile. 

Serving international repertoire, Apple Music claims more subscribers than Spotify in Japan, which is more localised, and has most users on the free tier. Amazon Prime Music is a looming constraint on the adoption of subscriptions. 

  • SMG
  • Spotify
Media, Music and Radio 6 September 2018

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