Publications

Format: Sep 2019
Sector(s) Datesort ascending
Roku: OTT pioneer under threat

With c.22m accounts across 44m devices, Roku has a US footprint which exceeds the largest pay-TV platforms

Limited competitive advantages highlight the scale of this achievement, but also leave the pioneering firm vulnerable to activities from bigger, wealthier rivals Apple, Amazon, and Google as well as pay-TV providers

The odds are stacked against Roku, but continuing the innovation in production and product that built its lead may secure future success

  • Amazon
  • Google
Media, TV 1 July 2019
Reader-first news media

The number of people willing to pay for online news now roughly matches print paid circulation, and will soon be substantially greater, with publishers increasingly demonstrating that their strategies are influencing industry outcomes

Our thesis is that subscriptions work in some cases, but that a more systematic reader-first approach benefits all cases, recalibrating management focus to media’s core purpose

Effectively implementing such an approach is a more radical, transformative development than is sometimes assumed. The winners will deploy sophisticated, bespoke audience acquisition and retention funnels and undergo detailed appraisals of the trade-offs necessary for optimal user experiences

  • Guardian Media Group
  • New York Times
  • News UK
  • Telegraph Media Group
Non-UK Media, Internet, Media, Technology, UK Media 28 June 2019
A strict early privacy verdict for UK online advertising

The Information Commissioner’s Office reported on the UK online advertising sector, finding common industry practices unlawful under a strict interpretation of the GDPR and UK privacy law

The ICO focused on problems around transparency, consent and data sharing in the Real-Time-Bidding ecosystem, which comprises 16% of UK online ad spend, but most of publisher online ad revenue. The ICO is giving the industry six months to shape up, with the next steps still unclear

The Competition and Markets Authority has had under consideration an investigation into the entire online advertising sector, but is hampered by Brexit-related considerations

  • Amazon
  • Facebook
  • Google
Media, Technology 25 June 2019
2019 TV advertising backstopped by Brexit

We expect total TV ad revenues to decline 3.3% in H1 2019, partly due to a return to Earth following the idyllic conditions of the World Cup in June 2018

Bad omens for advertising for H2 include the sagging economy since April and the Government’s impetus to achieve Brexit on 31 October, with or without a deal

Our forecast remains a 3% decline for total TV ad revenues for 2019 as a whole, with the risk of a more serious downturn in 2020 in the wake of Brexit

  • Channel 4
  • ITV
  • Sky
Brexit, Media, Telecoms, TV, UK Media 21 June 2019
Toughest conditions in four years: European mobile Q1 2019

European mobile service revenue growth slipped again to -2.0%; its worst performance in four years

Regulation limiting intra-EU call prices could hit hard next quarter – with the UK likely to be hardest hit by up to 6% of revenues and 20% of EBITDA

Excluding the EU-call impact, we see greatest scope for improving trends in Italy and France thanks to easier comps and diminishing competitive intensity

  • BT
  • Hutchison 3G
  • Iliad
  • O2
  • T-Mobile
  • Telecom Italia
  • Telefonica
  • Vodafone
Media, Telecoms 19 June 2019
Pressure to mount after mixed bag in Q1: UK mobile market Q1 2019

The UK mobile market posted its slowest growth in more than two years this quarter; just 0.5% service revenue growth although net adds were strong and churn was down

ARPU is under considerable pressure thanks to regulation limiting out-of-bundle spend which will exacerbate as the year progresses

Several other negative developments look set to be layered on the pressures this quarter, including a step-up in competitive intensity as 5G launches –  with H3G’s pricing of unlimited data a sign of a resurgence in its aggression

  • BT
  • EE
  • O2
  • Ofcom
  • Vodafone
Media, Telecoms 12 June 2019
Channel 4’s balancing act: 2018 annual report

Mindful of the uncertain future effects of ongoing events, most notably the stagnating TV ad market and the costs of establishing an HQ in Leeds, Channel 4 returned a £5 million pre-tax surplus in 2018, which after investment in Box left its cash reserves at £180 million

Increased digital revenue more than made up for the anticipated drop in spot advertising and sponsorship (with group viewing share and SOCI down) while cautiousness necessitated lower content spend (down 5% from the peak in 2016); a concern given rising content costs

Nevertheless, Channel 4 is doing a good job delivering its remit in a tough environment, continuing to broadcast programming no-one else would and leveraging long-standing relationships to nurture television and film of a quality and ingenuity that belies the modest size of the organisation

  • BBC
  • Channel 4
  • ITV
  • Turner
  • Vice Media
Media, TV, UK Media 11 June 2019
UK broadband, telephony and pay TV trends Q1 2019: Price wars dominate

Market revenue growth dipped to around zero in Q1, with fierce competition on new customer pricing the major factor

All four of the big operators now suffer from declining ARPU, with existing customer price rises increasingly hard to land given falling prices for new customers

The rapid move to superfast is not helping as much as it should; the operators will hope that they fare better with the move to ultrafast

  • BT
  • Sky
  • TalkTalk
  • Virgin Media
Media, Telecoms 10 June 2019
O2: holding its own in toughening conditions

After a period of significant outperformance, O2’s Q1 results reverted to sector average revenue growth with ARPU down by 3% and all of the growth coming from ‘other’ revenues

Regulation limiting out-of-bundle spending has been a significant drag which will continue to worsen

A more competitive market and a punishing regulatory outlook will make it very challenging to sustain 2018 growth trends as this year progresses

  • O2
  • Telefonica
Media, Telecoms 7 June 2019
Monetising user-generated video

Video sharing platforms, like YouTube, Facebook Watch and Twitch, are vying to attract creators with monetisation options such as branded content and user payments

Advertising income, already limited for many small and medium-sized creators, has been undermined by YouTube’s response to brand safety concerns

The new tools come with their own obstacles, but are necessary to keep platforms attractive to video creators

  • Amazon
  • Facebook
  • YouTube
Internet, Media, Telecoms, TV 6 June 2019
Advertising Pays 7: UK advertising's digital revolution

Online advertising plays a larger role in the UK economy than anywhere else in the world, having grown hand-in-hand with the highest ecommerce spend per capita and a business creation boom

There are many factors behind this success, access to investment and top talent (both technical and creative) structural characteristics in the economy and society—not least a culture of experimentation and entrepreneurship

As with all maturing industries, sustaining future growth will bring new challenges: along with economic headwinds, UK online advertising now faces an urgent need to restore public trust, with a combination of statute and self-regulation

VIP List, Media, Telecoms 5 June 2019
HFSS advertising ban consultation

The UK government is now consulting on a wider TV advertising ban until 9pm for food and drink high in fat, salt and sugar (HFSS), to combat childhood obesity

TV and TV advertising are not the cause of children being overweight or obese (O+O). Policy change in this area should inform and educate parents and young children, as they have in Leeds and Amsterdam

With 64% of the UK population being O+O, obesity is a complex societal issue requiring a multifaceted approach. The evidence from existing rules, and plummeting TV viewing amongst children, says that further restrictions on TV advertising will be ineffective in curbing the rise of obesity in the UK

  • BBC
  • Channel 4
  • Comcast
  • Freesat
  • Freeview
  • ITV
  • Ofcom
  • UKTV
VIP List, Media, TV, UK Media 3 June 2019
TalkTalk: a welcome slowdown

TalkTalk hit the bottom end of its (revised) 2018/19 EBITDA guidance, an achievement given fierce price competition and the margin-dilutive effect of high speed upgrades

This is however helped by one-off Openreach price cuts, and price rises for ancillary products (voice calls and pay-TV) and out-of-contract customers that look hard to sustain

Subscriber growth slowed dramatically in Q4, and continuing this more measured approach could help the company counter multiple market pressures, and perhaps even lead to a détente in the current price wars

  • TalkTalk
Media, Telecoms 30 May 2019
Vodafone: pressure is still on

Vodafone’s operating performance worsened again this quarter with revenues down 3.3% and an extension of its underperformance relative to peers 

Vodafone was right to cut its dividend given the extremity of the cash constraint. With financials in Euro terms in negative territory and worsening, an elevated and progressive dividend was not sustainable 

In spite of difficult market conditions, the lower end of guidance looks achievable as comparables will become easier and football rights costs decline. The transformation programme will need to pay off fast to deliver any meaningful growth
 

  • Vodafone
Media, Telecoms 24 May 2019
BT: Promising future, but investment required

BT is accelerating its ‘full fibre’ rollout, likely due to a combination of a successful build to date, very promising regulatory developments, and (let’s not deny it) worrying competitor build plans

Full year results were a little weak versus consensus, with guidance a little soft as well, leading to questions of how this can be funded, particularly the roll-out acceleration from 2021/22 to cover half the country by the mid-2020s

Whatever the funding mechanism, we regard the investment as sound, with BT’s planned operational transformation also promising but potentially requiring further upfront investment

  • BT
  • EE
Media, Telecoms 21 May 2019
Virgin Media: contemplating its strategic future as pressure mounts

Q1 results evidenced the downturn that Virgin Media had flagged in February. Consumer cable weakened sharply to just 1% growth vs 3%+ historically, partly thanks to ‘increased promotions in response to market dynamics’

Monetising Virgin’s speed advantage is becoming more challenging. Competition is hotting up for high-speed broadband in particular, fuelled by Openreach targets for smaller players and BT’s full fibre and G.fast rollouts

The company faces two vital strategic decisions – whether to wholesale BT’s fibre products outside its footprint, and whether to allow wholesale access to its own network. The former is likely to have the most legs and offers an alternative to further Lightning extension

  • Virgin Media
Media, Telecoms 21 May 2019
Disney gets the final piece of Hulu

Disney announced that it would acquire Comcast’s 33% share of Hulu in a put/call agreement that can be enacted by either party from January 2024, while taking full operational control of the vehicle immediately

Under the agreement Disney will pay Comcast a minimum of $9 billion for its current stake, provided Comcast fulfils agreed capital calls, which going forward would be just over $500 million/year

Disney secured the continued licensing of NBCUniversal content for Hulu, contributing about 30% of Hulu’s library, but Comcast can loosen obligations to Hulu for the launch of its own SVOD service in 2020

  • 21st Century Fox
  • Comcast
  • Sky
  • Walt Disney
Non-UK Media, Media, TV 15 May 2019
Facebook doubles down on advertising

After the most challenging period in its history since 2012, Facebook has been able to stabilise its fundamental metrics and announce a major product overhaul

Despite talk of a business model pivot, Facebook’s focus remains on advertising, whose growth will remain concentrated in developed markets

News publishers wishing to stay relevant on the upgraded product set need to target exclusive layers of social interaction, with groups particularly important

  • Apple
  • Facebook
  • Google
Media, Technology 9 May 2019
Sky Q1 2019 results: weak ARPU hits bottom line

Sky made a surprisingly weak start to 2019, with revenue growth decelerating to 1.9% (the first time below 4% since the European businesses merged in 2015), due to weaker ARPU trends

However, Sky expects improvement to follow, blaming one-off factors in the quarter. The ARPU weakness drove EBITDA down 11.3%, but this should bounce back across the rest of 2019 as football rights costs turn from a drag to a positive

Comcast highlighted collaborations with Sky across tech, advertising, content distribution and even news, stating it is on track to achieve the anticipated $500 million in annual synergies over the next couple of years

  • Sky
  • Sky Deutschland
  • Sky Italia
Media, Telecoms, TV 8 May 2019
Online media monetisation: When free costs too much

The commercial challenges for media online are well-documented: online advertising pays for utilities such as search and social networking many times over, but not for media beyond user-generated content and low-investment journalism

There are also costs from a user perspective: wasted time, harmful content created to attract views, and the collection, sale, use and frequent leakage to criminals of personal data

Different sectors have found varying success with alternatives: games, video and music are attracting user payments, driving the paid online economy up 15.5% to £8.2 billion in 2018

Media 1 May 2019

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