Publications

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Sector(s) Datesort ascending
Mobile media goes beyond the iPhone

Mobile content is moving to the centre of strategies for online
media. At MWC, the world’s biggest mobile conference, Google announced it now develops
all products ‘mobile first’ and Facebook reported a quarter of its 400m users access
the service through mobile

Three years after the iPhone 
launched, the handset industry is catching up, adding decent user interfaces
and mobile apps to colour touch screens and taking easy access to mobile content
beyond the iPhone

Beyond the self-selecting early adopter iPhone base, we found
real evidence of companies already successfully providing mobile content to much
wider segments of the population

 

  • Google
  • Facebook
  • Apple
Media, Internet, Telecoms, Mobile 5 March 2010
ITV FY 2009 results – Preparing for transformation

ITV survived the worst recession and advertising downturn in its history thanks to market outperformance, cost cutting and other measures that delivered a full year profit of £25 million despite a 7% decline in total revenues, largely the result of a £134 million drop in its core advertising revenues

With the worst of the recession past, the focus of the incoming management is on revival and sustainable earnings growth through a transformation that will make ITV increasingly less reliant on at best stable broadcast advertising revenues in the digital age

Announcement of the transformation strategy awaits the conclusion of the ongoing internal review. We are slightly more optimistic about the TV advertising outlook over the next five years and see some upside potential from possible changes in the airtime rules, whilst the key to revival rests with the future coordination of ITV’s content and multichannel interests

  • ITV
TV, Media 5 March 2010
Apple: The power of music

Apple’s hardware-driven strategy for music recently passed two major milestones, with 10 billion paid track downloads and 250 million iPods sold

In 2009, Apple ‘returned’ to record labels and publishers roughly $1.9 billion, while generating gross profits in the region of $3.2 billion from the sale of iPods and music

Of wider significance to Apple is the music strategy’s contribution to building a mass market brand and expanding its customer base, helping to drive adoption of their computers and, more recently, the iPhone

  • Apple
Music and Radio, Media 3 March 2010
Virgin Media Q4 2009 results: continuing strong performance and positive outlook

 

VMed’s Q4 results were again strong; the May 2009 price increases continued to lift revenue and operating cash flow, as expected

There are continuing grounds for optimism, including further price hikes, cost reduction and modest turnarounds at Mobile and Business

There was no news regarding content M&A, but a sale some time this year appears likely and should have a significant positive impact on the company’s financial position

 

  • Virgin Media
Fixed Line, Telecoms, TV, Media 26 February 2010
European digital television platforms update

The switchover to digital television is well advanced in Europe – it is already completed in The Netherlands, Sweden and Germany (but not on cable) and will be over in all other large markets by 2012

This report presents a cross-country comparative assessment of TV platforms switching over and the emergence and adoption of new digital platforms, such as DTT, IPTV and free digital satellite

Media, TV, Non-UK Media 17 February 2010
BT FY 2009/10 Q3 results: recovery continuing, but longer term outlook uncertain

BT’s Q3 results and improved guidance for the year to March 2010 showed the current turnaround is well on track. But revenue continued to decline and improvements were concentrated at Global Services, the results for which were flattered by the dire prior year comparable

The UK business’s long term prospects also depend on successful deployment of next generation access, but this is over two years away

The results were overshadowed by the Pensions Regulator initially expressing ‘substantial concern’ over some features of the pension deficit valuation and recovery plan that the company has agreed with the trustees. Clarity on this is also some way off

  • BT
Telecoms, Fixed Line 15 February 2010
Trinity purchase could signal consolidation phase

Trinity Mirror (TM) has acquired Guardian Media Group’s (GMG) regional media business for £7.4 million cash, also releasing GMG from a £37.4 million liability print contract

The deal is the first significant consolidation play since the cyclical downturn that started in 2008 helped reduce local newspaper advertising by about 35% or £1 billion. TM is understood to have beaten private equity to the deal, signalling that consolidation activity in local media may be starting to warm up

While the price tag appears small for a business that generated £94.5 million in FY 2009, its operating profit had fallen to £0.5 million, and TM should be able to realise measurable local synergies and cost savings

  • Guardian Media Group
Media 11 February 2010
UK Next Generation Access and the Conservative policy for ‘nationwide superfast broadband’

The Conservative policy for broadband involves replacing
Labour’s proposed line rental tax with a portion of the TV licence fee, together with measures to encourage passive access to BT’s network and the use of alternative infrastructure

The policy sounds negative for BT, equivocal for VMed and
positive for Sky and TTG, but is unlikely to have a significant direct impact in the near term in the event of a Conservative government

We view as more significant the likely indirect impact on
Ofcom’s upcoming access market reviews. In the longer term, the development of alternative infrastructure could be significant, such as that already being deployed by Fibrecity in partnership with the water companies

  • BT
Fixed Line, Telecoms 10 February 2010
UK internet advertising: raising 2010 forecasts

Recent news flow – including Google UK’s Q4 2009 results and reports of facebook’s rapid revenue growth – points to a better than expected recovery in internet advertising. On a like-for-like basis, we estimate that online ad spend grew 2.2% last year to £3,425 million or 23.5% share of total advertising

We have raised our 2010 UK forecasts and now predict that Google’s UK gross revenue will grow 12.5% YoY, helping to drive online advertising spend up 7.6% to £3,685 million (excluding sites currently not reported by IABUK/PwC)

The economy remains an issue, with the potential impact of tax rises and cuts in Government spending in H2 threatening the already anaemic recovery. In our view, the balance of risk is still on the downside

  • Google
  • Facebook
Media, Internet 5 February 2010
Vodafone December quarter update: inflection attained

Vodafone’s European revenue growth improved by 1.4 percentage points in the December 2009 quarter to reach -3.2%, the first improvement since the start of the economic slowdown in 2008

While data revenue is growing fast in absolute terms, its contribution to growth is flat to slightly down, with the main driver being more traditional services improving due to the recovery in year-on-year GDP growth

We expect revenue growth to continue to improve as economic comparables improve, with a return to positive growth likely by the end of 2010

  • Vodafone
Telecoms, Fixed Line, Non-UK Telecoms 4 February 2010
Orange and T-Mobile UK merger: UK review looks likely, timetable extends

The UK regulatory authorities have requested that the Orange/T-Mobile merger be scrutinised in the UK as opposed to in Brussels, which makes it likely that the EU will refer it down

Once in the UK, the deal is likely to be referred to the Competition Commission for a lengthy, detailed study, which is likely to result in significant concessions at least

A final result is unlikely before October 2010, putting the merger a few months behind the schedule indicated by the parent companies in September 2009

  • T-Mobile
  • Orange
Telecoms, Mobile 3 February 2010
Can mobile save print publishers? - Do tablets bring salvation, or 40 years in the wilderness?

Large parts of print media face existential problems from the structural decline of consumption and core advertising businesses, and the growth of an internet model of free content and large-scale disaggregation

Employment trends in US media underline the depth of the decline in sales of print media (no similar data is available for the UK), across newspapers, periodicals and books

Publishers are being forced to search for business models that align with new patterns of consumer behaviour –and which make money

  • Apple
Media, Internet 1 February 2010
Sky fiscal H1 2010 results: high on HD, 3D to come

Sky fiscal H1 2010 results show continued resilience in the face of weak economic conditions, delivering strong net subscriber growth, a big lift in ARPU, and a record lift in HD subscriptions, almost 200,000 up on any previous quarter and only just short of the half a million mark

Sky+ HD is now manifestly the centre point of a three-pronged operational strategy that focuses on driving customer growth, selling more products into the customer base and seeking efficiencies in fixed costs

Sky 3D, due for residential launch in H2 2010, fits in well with the core Sky+ HD proposition and the satellite operator looks well placed to combat growing retail competition from other platforms, assuming Ofcom implements its wholesale pay-TV proposals for Sky premium subscription films and sports some time in spring 2010

  • Sky
TV, Media 29 January 2010
Orange possible U-turn on pay-TV and Canal+

France Télécom’s forthcoming Chief Executive Officer, Stéphane Richard, is considering a radical shake up and potential U-turn of Orange’s TV ‘content’ strategy, initiated and driven by CEO Didier Lombard

Orange could withdraw entirely from supplying premium pay-TV channels (sports and film) and distribute only third party content, as has been the focus of other broadband suppliers

A retreat of Orange from TV content would enable a more active cooperation with the Canal+ Group, benefiting both partners, who have largely overlapping subscriber bases

  • Orange
  • France Telecom
  • Canal Plus
Media, TV, Non-UK Media, Telecoms 28 January 2010
Spotify and ad-supported music models

Spotify is among the leading providers of legal online music streaming services in major European markets such as the UK, France and Spain. Entry to the US is rumoured and would make sense to establish the brand as a global one

As this report details, the commercial viability of the ad-supported ‘free’ service in a market that is five times the size of the UK will depend crucially on the royalty structures agreed by licensors, including recorded music companies and publishers

Media, Music and Radio, Non-UK Media 27 January 2010
Court of Appeal verdict on Sky stake in ITV

The Court of Appeal’s (CA) dismissal of Sky’s second attempt to overturn the Competition Commission’s (CC) decision that it must reduce its 17.9% shareholding in ITV to below 7.5% makes it increasingly probable that Sky will comply with the CC ruling at some point during 2010/2011

Although the CA’s dismissal of Sky’s appeal has always seemed the likely, even if never certain, outcome, the extra time consumed has so far benefited Sky greatly as the ITV share price has recovered from a low of below 20p in March 2009 to around 60p in January 2010

Sky’s share purchase was seen by ITV and others as unwanted interference in ITV’s affairs, but there was no suggestion of interference during the whole period of review by the competition and judicial authorities, while the outcome suggests that any future interest shown by other leading UK TV media players will probably also raise tough competition issues

  • Sky
  • ITV
Media, TV 25 January 2010
BT Retail 40 Mbit/s broadband: priced to sell

BT Retail has announced its intention to launch residential
40 Mbit/s broadband at similar price points to its existing two higher tier
broadband offers. While this looks unlikely on its own to create significant
additional shareholder value, it could eventually help BT retain existing value

The move is unlikely to seriously inconvenience other
players for the next year or so, but could encourage TTG and Sky to sign
wholesale deals with BT for higher speed broadband and, ultimately, make it
more likely that a demerged TTG is acquired by another player

BT Retail’s strategy is likely to accelerate the
implementation of state-backed rural NGA in the UK since end user demand
outside commercially viable areas will be greater than would otherwise have
been the case

  • TalkTalk
  • Sky
  • BT
Fixed Line, Telecoms 22 January 2010
Ofcom airtime rules review and CRR clash

Ofcom’s plan to review commercial airtime rules in 2010 with an emphasis on deregulation clashes with the Competition Commission’s provisional decision to retain the Contract Rights Renewal remedy (CRR) as it is, other than to extend the ITV1 definition to include staggercast and HD variants

The core issue is that it is impossible to address UK commercial airtime rules in isolation from CRR, which strongly motivates all parties to sell 100% of their commercial airtime inventories, and is seen by many as exerting a strong deflationary pressure on TV advertising spend

Even without CRR, the Ofcom aim of being in a position to effect change from the start of 2011 looks optimistic. Increasingly, it seems that meaningful relaxation of the existing rules will require primary legislation in order to circumvent the continuing competition issues that have led to CRR

  • ITV
Media, TV 21 January 2010
Carphone Warehouse trading update: clearer water

At TalkTalk Group (TTG) net broadband additions were solid, possibly helped by stronger growth in total market demand; but churn at Tiscali UK appears to remain high

TTG revenue was heavily distorted by the Tiscali acquisition but appears to remain in gradual decline on a like-for-like basis, due to continuing decline in non-broadband customers

Carphone Warehouse’s like-for-like distribution revenue showed a firm pick-up in the quarter, with it likely enjoying the first quarter of significantly improving market growth since the recession started

  • TalkTalk
  • Carphone Warehouse
Telecoms, Fixed Line 20 January 2010
UK TV advertising outlook 2010

December 2009 showed exceptional year-on-year growth of around 10% in TV NAR (Net Advertising Revenue), causing the year to end down -11%/12% according to market estimates, which as recently as August were contemplating a decline of -15% or below

The December spike reflects various causes, including robust retail conditions in the last days of reduced VAT at 15%, strong likelihood of marketers releasing budgets held back earlier in the year due to uncertainties over the economy and record-breaking audiences for The X Factor

TV NAR in Q1 2010 is shaping to be up by 1% or 2% on Q1 2009, but cyclical economic, structural and other one-off considerations have caused us to put our central case TV NAR forecast for 2010 at -2.5% down on 2009, with a further fall of -2.5% anticipated in 2011 before recovery starts in 2012

Media, TV 19 January 2010

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