Revenues down, guidance in the balance: Vodafone Q1 2018/19 results
EBITDA growth guidance of 1-5% is in question with group revenues flat to down. Counting AMAP growth in local currencies helps, as will cost control and roaming relief. Sustaining growth in Germany will be key; convergence-led ARPU declines could prove to be something Vodafone can’t afford
Vodafone’s UK business performed strongly in terms of mobile subscribers and fixed business financials, although revenue growth is still lacklustre. Profitability is expected to increase markedly, boosted 10ppts by roaming tariff relief
Although we view Iliad’s business model in Italy as unsustainable, it will nonetheless continue to put significant pressure on Vodafone Italy’s ARPU, which is almost three times that of Iliad’s package
|Non-UK Telecoms, Fixed Line, Mobile, Telecoms||31 July 2018|
More than cautious: ITV H1 2018 results
ITV emphasised its strength and stability at its interim results; a sensible enough approach with a new CEO, and a departing FD/COO
Love Island and the World Cup were both successful, but advertising revenues are becalmed while ITV Studios is enjoying its day in the sun
The ‘strategic refresh’ looks excessively cautious, but heading in the right direction with an emphasis on ITV Hub
|Media, Telecoms||30 July 2018|
Hulu: Why Disney wants 21st Century Fox
Disney’s potential acquisition of certain 21st Century Fox assets is assuredly a play for further scale at a time when the company’s traditional domain, the family home, is increasingly welcoming services such as Netflix.
The deal will consolidate Disney’s dominant film business. But also, the robustness of traditional television, especially 21CF’s cable interests, along with IP assets, will allow Disney to better control the inevitable viewer transition from linear to online and on-demand.
Becoming the one media company with both a strong broadcast and online offering—the control of Hulu, a new Disney streaming service, ESPN+ and other add-on services—could grant Disney the ability to navigate the storm of change and dictate its own future.
|Media, Telecoms||26 July 2018|
Quality media, Ozone protection
The Telegraph, The Guardian and News UK (The Times and The Sun) will jointly invest in The Ozone Project to develop a state-of-the-art platform to sell their digital inventory
Ozone will add value to news digital inventory and seek to win back advertiser expenditure on Facebook and Google’s various properties, (indirectly) reigniting interest in placement next to quality news media content
Each JV participant operates a distinct business model, which risks friction, but this digital reboot is crucial. By 2020, Ozone could add circa £30 million per annum – not a trivial contribution to a national newspaper newsroom
|Media, Technology, UK Media||25 July 2018|
The drive for convergence: a value-destructive strategy
Many European telecoms operators are pursuing a fixed/mobile convergence strategy on the pretext that the addition of mobile reduces churn. We see no evidence of churn reduction from this strategy
Discounts required to encourage take-up of fixed/mobile services are often value-destructive, even before competitor reaction: a 10% bundle discount necessitates a 2ppt improvement in churn to wash its face economically. M&A premia on the basis of convergence synergies raise the hurdle even higher
Most UK operators offer very limited discounts on fixed/mobile bundles for now, sensibly focusing on enhanced services. Vodafone is the most aggressive, albeit less so than it is elsewhere. All UK players should hope that it stays this way
|Fixed Line, Mobile, Telecoms||23 July 2018|
AV ad measurement: meretricious metrics
Rigour and consistency in AV ad metrics is proving elusive. A 10-second ad on YouTube, ITV1, All4, MailOnline, Sky AdSmart or Facebook is measured in as many different ways, often indifferently. It is tricky, costly or impossible for agencies/advertisers to comprehend the overall picture.
By 2020 JIC-based BVOD ad impressions should be available from BARB all being well, giving BVOD a clear advantage over other premium online video measurement.
Google/YouTube seems to be ‘getting’ JIC co-operation now and has begun to galvanise video ad measurement, but forceful advertiser intervention is needed to extend and improve standards. Otherwise, advertisers are simply funding a JIC-free jamboree, and they (with content media) will lose the most.
|Media||19 July 2018|
Focus back on ARPU: TalkTalk Group Q1 2018/19 results
TalkTalk had another strong quarter for broadband net adds, adding 80k versus its full year target of 150k+. All of this was due to strong wholesale, with retail net adds slightly negative, although in the market and seasonal context even this retail performance is quite respectable
On-net revenue growth improved strongly to around 4%, with its ARPU decline moderating to 2%, and ARPU should be helped further by price increases for existing and new customers alike in July
TalkTalk therefore looks well placed to hit full year targets, albeit with considerable help from its wholesale customers and some aggressive price increases. The focus back onto ARPU and away from (expensively) chasing retail subscriber growth is nonetheless to be applauded
|Fixed Line, Media, Telecoms, TV||18 July 2018|
TV platform forecasts to 2022: stability rules
Despite significant changes in people’s video viewing habits over the last few years, the TV platform landscape has appeared to reach an equilibrium
We expect pay-TV to retain its utility status for most existing customers. At the margins, movement from Sky and Virgin Media to free-to-air or pay-lite services will be mitigated by population growth
The excitable growth phases for Netflix and Amazon are likely to be over, but they have carved out prominent positions in the market. Meanwhile, the uncomplicated allure of free TV remains strong for half the UK
|Media, TV, UK Media||10 July 2018|
Europe's Creative Hubs Update 2018
This third edition of Europe's Creative Hubs, produced on behalf of Bertelsmann, highlights the challenges of the digital age for enterprises of the creative industries of France, Germany and the UK from new consumer behaviours and the advent of new competitors and new forms of competition for users and customers from tech giants, Amazon, Facebook, Google and Netflix. The report calls upon policymakers in Europe to ensure a level playing field for traditional media in the key areas of taxation, competition law, privacy and data protection, highlighting the interaction of these three in the market for online advertising.
|Media, Telecoms, TV||5 July 2018|
Virtual Reality in 2018: Ready Player None?
Yet another annual hype cycle in 2018 can’t hide a tepid consumer appetite for all VR platforms and heavy weather for the industry as a whole
The launch of Oculus GO, a standalone device at an attractive price, is a milestone for VR; nevertheless, even Facebook remains worried about reach and the state of the industry
Mobile AR is still a strategic focus for Google and Apple, producing diverse applications instead of just games, but new headsets from Microsoft and Magic Leap which promise advanced MR experiences have no launch dates
|Internet, Media, Technology, Telecoms, TV||3 July 2018|
Is CRR still critical to protect advertisers from ITV?
The workings of the TV advertising market are a mystery to most. Overlaying an arcane ‘share of broadcast spend’ trading mechanism is regulation in the form of CRR, which has prevented anti-competitive activity by ITV since 2003
CRR will protect advertisers ‘for as long as needed’. Most advertisers we canvassed believe it should stay in place, but the sell-side and auditors say CRR has passed its ‘Best before’ date and is heading towards its ‘Use by’ date
We propose a review of CRR by the Competition and Markets Authority (CMA) to determine whether it is now helping or hindering the TV advertising ecosystem to become fit-for-purpose for the digital age
|Media, Telecoms||27 June 2018|
The home screen: distribution, discovery and data on connected TVs
The TV, the main screen in the house, is rapidly becoming connected to the internet, opening a new front in the battle for people's attention
Tech players, pay-TV operators, and manufacturers are all aiming to control the user interface, ad delivery and data collection, leaving incumbent broadcaster interests less well represented
To protect their position, and the principles of public service broadcasting, broadcasters will have to work with each other at home and in Europe to leverage their content and social importance
|Media, Telecoms||25 June 2018|
Sky finally renews Serie A rights until 2021
Italy’s top football league awarded Sky the broadcasting rights to seven games per week from August 2018 until May 2021 for €780 million per year, up €208 million. UK-based Perform will carry three games for €193 million. Mediaset exits the market, freeing Sky from price competition
Besides Serie A, Sky added Mediaset’s Hollywood series and films to its content line up in May and will include the Champions League from August. We expect costs to rise by up to €500 million per year, which could be recouped by cuts in content and by recruiting Mediaset subscribers, notably on Sky’s new DTT feed
The best model for Perform would be to wholesale its new DAZN service to Sky, but even if a deal is found we doubt it could break even within the rights cycle
|Media, Telecoms||19 June 2018|
Advertising after the turning point: when offline is the exception
Online advertising became the majority of all UK ad spend last year, in step with China but ahead of all other major markets.
Direct response has further increased its share to 54% of UK ad spend, fuelled by the self-serve platforms of Google, Facebook and Amazon, while content media nets just 11% of the online advertising pot.
We estimate that all online-delivered channels - including "pure play" online properties, broadcaster VOD, digital out-of-home and online radio - could account for well over 60% of UK ad spend by 2020, but only with improved commitment to industry governance.
|Internet, Media, Mobile, Non UK Media, Technology, TV, UK Media||14 June 2018|
UK broadband, telephony and pay TV trends Q1 2018: Diverging strategies
UK residential communications market revenue growth strengthened in Q1, but this was entirely driven by an overlapping price increase from BT, and the decline in market volume growth continues
Continued pressure on both subscriber volume growth and ARPU has led to diverging strategies, with most operators focused on sustaining ARPU, but TalkTalk chasing volumes at the low end, with the former approach currently proving more successful
Looking forward, the benefit of BT’s price rise will fall away completely next quarter and market revenue growth will likely resume its downward trend, but the nadir may be within sight if the flight to quality persists at most operators
|Fixed Line, Media, Telecoms||12 June 2018|
BBC iPlayer Boxsets: performance and what it tells us about on-demand viewing
The BBC is concerned with the performance of the iPlayer, handicapped by its inability to monetise its content. Nevertheless, as it moves towards an all-IP future, it is experimenting with new content strategies
Data from Digital-i shows that the iPlayer's Christmas Boxsets brought 360,000 unique viewers/week to the BBC portfolio; an audience which skewed encouragingly young
Furthermore, case studies of two of the programmes made available over this period—Peaky Blinders and Hard Sun—provide insight into how people consume content delivered this way, something that has been difficult to ascertain due to the major SVODs' secretive treatment of their own data
|Media, Telecoms||11 June 2018|
European mobile in Q1 2018: North–South divide to exacerbate
European mobile service revenue growth was down slightly to 0.3% in Q1, with improving trends in all countries other than France, which was down sharply due to the closure of the VAT loophole and intensifying competition
Iliad's launch in Italy was somewhat muted but its focus on straightforward tariffs is likely to hold considerable appeal there, with hidden charges there commonplace and being investigated by the antitrust authority
We expect greater polarisation between the North and South as the year progresses, the key question marks being Vodafone's strategy in Germany, Iliad's traction in Italy, and whether Iliad's revamp in France will lessen or worsen mobile competition there
|Non-UK Telecoms, Mobile, Telecoms||8 June 2018|
Disruption in Premier League football? 2018 auction finally over
The latest auction of live Premier League broadcast rights commencing in 2019/20 has concluded at last, with three different winners for the first time
The total sum has not been confirmed, but it looks to be down c. 10% from the previous auction at £1.55 billion per season—still substantial, and not far off the BBC’s entire TV content budget
As we predicted, Sky and BT remain dominant, winning 180 of the 200 games per season, whilst new entrant Amazon picked up one of the leftover packages at what looks to be a very low price
|Media, TV, UK Media||8 June 2018|
UK mobile market Q1 2018: Primed for revenue acceleration
Service revenue growth for the UK mobile market improved in the first quarter of the year, lifting from 1.0% to 1.2%. There was an easing of the EU roaming regulatory impact helping growth improve, but the SIM-only drag likely grew to counteract this, suggesting a modest underlying improvement overall
We expect continued market growth improvement in the coming year due to a number of tailwinds, namely annual price rises, the arrival of IFRS 15, and the EU roaming impact dropping out
The fundamentals of the market remain solid: competition is rational; pricing is firm; data demand is strongly rising; supply is partially constrained; MVNOs and convergence do not appear a threat
|Media, Telecoms||7 June 2018|
Football embraces Chinese 'hot' money - at a risk
In a display of chutzpah, Mediapro acquired the Ligue 1 domestic broadcasting rights from 2020-24 in what is the most disruptive shock to the French broadcasting industry in a generation; one that is likely to accelerate Canal+’s decline, force a review of the outdated regulatory framework, and possibly spur an M&A spree.
The Mediapro move only makes sense as a highly speculative bid to resell the rights, or a dedicated channel, to French platforms in 2020. The odds are high that the broker ultimately fails to fulfil the contract, as just happened in Italy, where Sky is now expected to get the Serie A licence.
Precedents of new entrants acquiring domestic top-flight rights bode poorly for Mediapro, and for the league. The Ligue 1 may live to regret the introduction of a ‘re-sell right’ into its licensing terms.
|Non-UK Telecoms, Non-UK Media, Media, Telecoms, UK Media||5 June 2018|