Publications

Format: Sep 2018
Sector(s) Datesort ascending
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
Commercial TV impact trends: better than viewing trends, worse than ideal

There has been no shortage of attention paid to declining TV viewing over recent years, but much of it focuses on overall viewing time rather than advertising delivery 

This is to overlook the engine driving most of the UK’s television industry. Commercial impact delivery has held up well relative to overall viewing, and is strong for certain key demographics

Nonetheless there are generational and behavioural changes afoot which are exerting downward pressures on impacts, especially for younger audiences. An archipelago of Love Islands is needed (Stranger Things have happened)
 

  • Sky
  • Turner
  • UKTV
  • Viacom
  • Discovery
  • Channel 4
  • ITV
Media, Telecoms 30 August 2018
UK broadband, telephony and pay TV trends Q2 2018: Great volume, shame about the ARPU

UK broadband subscriptions re-accelerated in Q2, bucking a three-year downward trend, but market revenue growth still fell as BT’s overlapping price increase dropped out and all of the operators continued to struggle to meaningfully grow ARPU

Regular existing customer price increases and continued (but slowing) migration to high speed are being cancelled out by flat-to-down new customer pricing, and the frequent need to discount existing customers down to these levels to retain them

High speed net adds disappointed despite Openreach’s price cut, with many consumers unwilling to pay even a modest price premium for extra speed, a sobering thought as aggressive full fibre network roll-outs are being considered

  • TalkTalk
  • Sky
  • Virgin Media
  • BT
Fixed Line, Media, Telecoms, UK Media 28 August 2018
Audible, audiobooks and lessons from Amazon

Audiobooks are growing fast, driven by smartphone adoption and better supply, as well as interest from people who don’t usually buy books, such as young men

The sector is dominated by the presence of Audible, Amazon’s audiobook publisher/retailer, which has driven growth of audiobooks but put publishers under pressure. Its strategy is a lesson in Amazon’s approach to media

Audio is an opportunity to sell to new customers, but publishers must acquire and use rights responsibly, and experiment while not letting the audio tail wag the print dog

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  • Amazon
  • Bertelsmann
Internet, Media, Technology, UK Media 22 August 2018
Sky 2017/18 full year results: Winning the game of content

Sky maintained strong revenue growth of 5% in 2017/18, with EBITDA and operating profit both bouncing back into strong positive territory after the UK Premier League rights hit of 2016/17

The UK grew revenue well and profits better; Italy performed well and should improve much further given the retreat of its principal competitor; Germany is more challenged, but extra content investment may aid sustained growth

Sky is proving adept at managing content costs and revenue in a changing environment, with investment, cost control and monetisation all being put to effective use as the content type demands it

  • Sky
  • Sky Deutschland
  • Sky Italia
Fixed Line, Media, Mobile, Non UK Media, TV, UK Media 16 August 2018
Virgin Media Q2 2018 results: Measured approach in a tough market

Virgin Media had a mixed quarter, with subscriber ARPU growth maintained, partly driven by a triple play focus with pay TV and telephony adds much improved, but subscriber and broadband net adds unchanged

Cable revenue growth did slow from 3.6% to 3.1%, mainly due to the previous quarter’s net adds slowdown working through, and it is still growing the fastest of the big operators in a slow-growth market that still suffers from pricing pressure at the low end

Its network roll-out was slower than last year and only just above the weather-impacted previous quarter, which appears to be deliberate, and which may at least partly relate to an uncertain regulatory and commercial climate over ‘full fibre’ roll-out by others

  • Liberty Global
  • Virgin Media
Fixed Line, Media, Telecoms, UK Media 15 August 2018
Regulating harmful video content and advertising online: Publisher, platform or in between?

Video-sharing platforms, such as YouTube and Facebook video, enjoy a light-touch regulatory regime for harmful content and advertising. As video viewing of non-broadcaster content grows, the regulatory gap between TV broadcasters and video-sharing platforms widens, part of a broader uneven playing field for publishers and platforms

However, there is momentum against this: the “platforms vs publishers” divide looks set to weaken in EU law, and the platforms themselves are investing more in combatting harmful content within a self-regulatory regime, though their internal policies and outcomes are still opaque

Effective and fair regulation of video-sharing platforms would involve the balancing of national freedom of speech conventions and the public utility of user-generated video hosting with concerned stakeholder views: something approaching a co-regulatory system for online video-sharing platforms

  • Facebook
  • Google
Internet, Media, TV 15 August 2018
Local TV - Five years after launch

Although launched with an array of public service goals in mind, local TV’s flawed design has created a sector struggling to live up to its optimistic ambitions. 

Five years and £37 million of licence fee monies later, it is unclear what public service contributions are being made, or whether the scheme has provided value-for-money. A wholesale review of the sector is urgently needed.

The vision of a “thriving and sustainable” sector has fallen flat. Most licences remain loss-making, with doubts as to their long-term viability. Those operating low-cost models seem best placed to survive.

  • BBC
Media 14 August 2018
Consumer magazine publishing: Quality, not quantity

The decline in demand in print presents trading challenges, but the more immediate pressures are on the supply side, with a 15% rise in paper prices accentuating the burden of production and distribution costs

With digital advertising growing at stubbornly low rates, UK publishers need to return to their fundamental consumer-centred strengths by switching their strategic attention towards strong brands, curation, and community

The case for specialist, branded publishing media remains robust: products, services, and consumers are still best brought together in an authoritative, trusted media environment. Advertisers and agencies (and also media) have undervalued the effectiveness of those environments, and direct-to-consumer opportunities have been exaggerated by many brands

  • Amazon
  • Apple
  • Facebook
Internet, Media 13 August 2018
BT Q1 2018/19 results: On target in the short term, making progress for the long term

BT’s Q1 results were fairly robust given a number of one-offs hitting in the quarter, with revenue growth of -2% in line with full year guidance, EBITDA growth of 1% ahead of plan, and a number of metrics looking promising

Openreach’s newly announced volume discount plans offer advantages in growing high and higher speed volumes, infrastructure competitiveness and regulatory pricing pressure, while giving up little in external revenue, a win-win-win for BT at least

Full-fibre regulation appears to be slowly moving towards more clarity, but is still far too unclear to justify an accelerated investment, with critical issues being ducked (for now) by government and Ofcom alike

  • EE
  • BT
Fixed Line, Media, Mobile, Telecoms 3 August 2018
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

  • Vodafone
Fixed Line, Non-UK Telecoms, Mobile, Telecoms, Vodafone 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

  • ITV
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 
 

  • 21st Century Fox
  • Walt Disney
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

  • Guardian Media Group
  • News UK
  • Telegraph Media Group
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

  • France Telecom
  • O2
  • Orange
  • T-Mobile
  • Telecom Italia
  • Vodafone
Fixed Line, Mobile, Telecoms, Vodafone 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

  • Channel 4
  • Facebook
  • Google
  • ITV
  • Sky
  • Virgin Media
  • YouTube
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

  • TalkTalk
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

  • Amazon
  • BBC
  • Freesat
  • Freeview
  • Netflix
  • Sky
  • TalkTalk
  • Virgin Media
Media, TV, UK Media 10 July 2018

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