Publications

Format: Dec 2019
Sector(s) Datesort ascending
Netflix: churn, content release and marketing

Netflix’s US business provides an insight into the patterns of the subscriber take-up of a maturing streaming service, trends that the comparatively nascent international markets may yet have ahead

Through analysis of the relationship between Netflix’s churn, subscriber additions, marketing spend and content release schedule, a clearer view of the rhythms of the streaming business become apparent

Rising churn, and correlation—such as the emphasis on returning original series during the year’s turbulent second quarter—gives guidance on Netflix’s likely future course, including its use of debt

  • Netflix
Media, TV 16 December 2019
Bopping along the bottom: European mobile in Q3 2019

European mobile revenues remain decidedly in decline this quarter at -2% – a slight worsening since Q2 as the full force of cuts to intra-EU calls hits 

There are signs that dual-brand strategies may be reaching their useful limit as erstwhile premium customers shift to value

There is scope for some trends to slowly improve from here, although end-of-contract notifications will impact all markets before the end of 2020, with the UK first off the blocks in Q1
 

  • BT
  • EE
  • France Telecom
  • Hutchison 3G
  • Iliad
  • O2
  • Ofcom
  • Orange
  • SFR
  • T-Mobile
  • Telecom Italia
  • Telefonica
  • Vodafone
Telecoms 13 December 2019
The ayes have it: DMGT scoops the i

Low-priced quality tabloid the i has been bought by DMGT for £49.6m, a 4.5x multiple on historical operating profit. The sale provides a lifeline to JPI Media as Reach has withdrawn from negotiations for the local estate

The i signals growing confidence in consumer media at DMGT after a long period rebalancing the portfolio towards B2B, and new ownership serves as an opportunity to rethink and drive the i’s online service

Although the acquisition will be reviewed by the Competition and Markets Authority (CMA), we expect the deal to pass

  • DMGT
  • Johnston Press
  • Trinity Mirror
Media 10 December 2019
The General Election of 2019

The polls predicting the outcome on December 12 currently imply a Conservative majority of around 18 to 100 seats, making a hung Parliament unlikely

The polls were wrong before: a 2017-sized error still yields a small working majority for Boris Johnson to get his EU withdrawal deal passed by the Commons and the UK out of the EU by the end of January and onto the FTA path

Labour had hoped for a 2017-style surge of support on the back of a big ground campaign fronted by Jeremy Corbyn, but the polls have not tightened as they did two years ago, though the party could still do well among late deciders

Brexit, Media, Public Policy 10 December 2019
Prime Video Channels: part of Amazon’s bigger picture

Amazon Channels’ aggregation of third-party streaming services enhances the consumer appeal of its wider video proposition, provides incremental revenues and increases the stickiness of the Prime shopping service

Content partners range from major players (e.g. Discovery and ITV) to the more niche (e.g. MUBI and Tastemade), who all benefit from a ready-made platform, billing relationships and a receptive subscriber base. But the revenue shares, data costs and lack of direct customer relationships remain too high a price for some

Two and a half years on from its UK launch, opportunities for live, ad-supported and bundled content are diversifying the platform, but Amazon must prioritise discovery within Prime Video to continue to flourish

  • Amazon
  • Apple
  • ITV
Media, Telecoms, TV, UK Media 3 December 2019
UK broadband, telephony and pay TV trends Q3 2019: Darkest before dawn

Market revenue growth fell in Q3 to below 1%, and may drop below zero next quarter as existing customer pricing comes under more pressure

New customer pricing is however rising, and average pricing should rise much further as ultrafast increases in availability and popularity 

Political enthusiasm for full fibre should be welcomed, although some specific plans are likely to do more harm than good if implemented literally
 

  • BT
  • Ofcom
  • Openreach
  • Sky
  • TalkTalk
  • Virgin Media
Telecoms 2 December 2019
Weathering the storm: UK mobile market Q3 2019

The UK mobile market suffered its worst performance in six years this quarter as competition heated up and regulation continued to bite

Vodafone’s unlimited tariffs have proven popular, reaching 5% of its contract base in one quarter, helping to drive its outperformance

Some reprieve is in prospect next quarter, before the impact of out-of-contract notifications and automatic discounts from February, although there is the possibility of pre-emptive moves bringing some of the effects forward 
 

  • BT
  • EE
  • Hutchison 3G
  • O2
  • Ofcom
Telecoms 29 November 2019
Pressure on Facebook over political advertising

With elections in the UK in December, and in the US in 2020, online political advertising is receiving intense scrutiny. Google has announced limits on targeting, while Twitter has banned politicians from buying ads

Facebook is the big player in online political ads, and it continues to allow targeted political ads, and to carve them out as exempt from fact-checking

Facebook wants to keep Republicans on side and surf the revenue opportunity, but pressure will increase with US elections, and we expect Facebook to bring in restrictions

  • Facebook
  • Google
  • Twitter
Internet, Media, Technology, UK Media 28 November 2019
TalkTalk - A discount brand pushing a premium product

TalkTalk enjoyed impressive EBITDA growth of 14% in H1 19/20, despite revenue growth pitching down sharply in Q2, and gross margin falling due to the rapid adoption of high speed broadband

The fall in costs was driven by a combination of good expense control and lower subscriber acquisition costs, in part due to improved efficiency, but in part due to a falling subscriber base, which is not a sustainable route to earnings growth

While the current dynamics are challenging, market prices have been firming recently, and should firm further as ultrafast becomes more popular, but TalkTalk needs to move to a more premium pricing position to take full advantage

  • TalkTalk
Telecoms 26 November 2019
Champions League senses end of growth cycle

With pay-TV competition faltering, UEFA is aiming to stimulate demand for 2021-24 TV rights with early auctions, a possible relaunch of FTA broadcasts, and even, unrealistically, by considering an online service of its own

In the recently completed UK auction, facing no major threat from Sky, BT kept the rights at an almost flat price – probably missing a cost saving opportunity

In the upcoming auctions on the Continent, with former buyers such as SFR, Mediaset and Vodafone having cut back on premium sports, the major platforms’ bids will probably be unchallenged

  • BT
  • Canal Plus
  • DAZN
  • Discovery
  • Mediaset
  • RTL
  • SFR
  • Sky
  • Sky Deutschland
  • Sky Italia
  • Telefonica
  • Vivendi
Media, Telecoms 26 November 2019
Turnaround still elusive at Vodafone

Vodafone continues to strike a very shareholder-friendly focus and tone but its operating performance remains decidedly muted, with revenue growth up just a touch but EBITDA growth halved

Vodafone’s drive for convergence is still costing it dearly. German mobile ARPU is down 7% and Liberty Global’s assets disappointed on their first consolidation with cashflow enhancement less than half that expected 

Apart from its ill-advised convergence strategy, Vodafone is making many sensible moves and there are indications that its unlimited plans are gaining traction. With leverage tight, pressure is mounting for demonstrable improvements in the financials some time very soon 

  • EE
  • Liberty Global
  • O2
  • T-Mobile
  • Telecom Italia
  • Vodafone
Telecoms 20 November 2019
Local media at a crossroads: from incremental to radical innovation

The local press is in an existential crisis: relentless decline in revenues since 2004 has rebased the scale of the sector, but there is little if any consensus about what to do next, despite broad agreement that the implications for democracy are deeply troubling

Incumbents have focused on incremental innovation with limited success, and have failed to adapt their digital strategies from those created 20 years ago, despite overwhelming evidence that they do not work, and never will

We argue for radical innovation, switching the industry’s focus from advertising to communities, building new use-cases while also sustaining print media for as along as possible, both to buy time but also to develop a multimedia roadmap for utility, entertainment and public good services

  • Auto Trader
  • Express Newpapers
  • Facebook
  • Gannett/Newsquest
  • Google
  • Guardian Media Group
  • Johnston Press
  • Local World
  • New York Times
  • Reach
  • Trinity Mirror
Internet, Media, UK Media 15 November 2019
Virgin Media: challenging quarter, but opportunities ahead

Virgin Media had a challenging quarter, with its early price rise driving weak subscriber figures and product spin-down, resulting in reduced revenue growth and an accelerated OCF decline

The market environment remains challenging with very competitive pricing on superfast and little push for ultrafast, but superfast pricing is easing and competitors’ ultrafast pushes should accelerate in 2020

Full fibre roll-outs remain a threat and an opportunity in almost equal measure, with Virgin Media’s positioning likely to be clarified as the regulatory mist clears over the next year

  • Liberty Global
  • Openreach
  • Virgin Media
Telecoms 14 November 2019
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 capabilities-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

Pages