Publications

Format: Dec 2016
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Sector(s) Datesort ascending
Copyright owners and ad-supported digital content models: more trouble brewing

Highlighting the challenges of the ad-supported digital music model, SpiralFrog, the first licensed service to launch in the US, collapsed recently in a sea of red ink and failed promises

Newly licensed ‘cloud’ jukeboxes like Spotify or We7 are struggling to make sense of the ad-supported model whose licensing costs far outweigh their potential revenue at present

Digital Britain’s proposed Digital Rights Agency could improve the licensing environment for cloud jukeboxes, but we expect copyright owners will take particular care to avoid substitution of music consumption from pay-for to ‘free’ (but ad-supported), unless the financial rewards are commensurate

Media, Music and Radio 26 March 2009
UK behavioural targeting: Google raises the ante

Google’s announcement that it will offer ‘interest-based’ advertising to key partners on YouTube and its AdSense publisher network from next month, with a wider rollout later this year, raises the ante for behavioural targeting

Targeting based on users’ activity on publisher websites has become widespread, but concerns over privacy have slowed deployment of technologies that track users’ entire click-stream activity on the internet, such as Phorm

Exponents believe that behavioural targeting will boost the market for internet display, which we estimate was worth £650 million in 2008. In our view, its main impact will be to accelerate the shift to performance-based pricing

  • Google
Media, Internet 24 March 2009
Revised offers at Virgin Media: light before the dawn?

We expect VMed to use the upgrading of its 2 Mbit/s broadband base to 10 Mbit/s as the basis for a de facto price increase

The resulting increase in revenue could be substantial, although growth in subsequent years is likely to be reduced by lower gross additions

We continue to expect cash flow performance in 2009 to be resilient but unspectacular. However, the prospects for double digit growth in subsequent years to 2012 are beginning to look more promising

  • Virgin Media
Fixed Line, Telecoms 17 March 2009
UK Commercial Radio Update

This report updates our ongoing coverage of the UK commercial radio sector (UK Commercial Radio Q2 2008 [2008-84]), and includes our latest revenue forecasts for the period 2009-2013 (Table 1)

In the context of a UK recession that is proving to be deeper and longer than official forecasts had anticipated in 2008, we have severely downgraded our advertising forecasts. We now anticipate that, following the 6.4% decline in 2008 to £560.2 million, commercial radio advertising revenues will decline by a further 14.6% in 2009, to £478.2 million (compared to the peak of £641 million reached in 2004)

Media, Music and Radio 13 March 2009
Further pain at Johnston Press

Johnston Press results for 2008 (calendar year) all too eloquently illustrate accelerating local media advertising decline, with property advertising down 10% in Q1 and 55% in Q4

Write-downs have forced Johnston to record losses of £429 million in the year and there is a very real threat that the publisher will breach its borrowing covenants in June 2009, or by the end of the year

While digital is highlighted as the only growth area for the group, we remain concerned that many local publishers are effectively accelerating their own decline by ‘doing too much too well’ in terms of digital news provision at the expense of the quality of their newspapers

Media, Press 13 March 2009
The Digital Dividend: made for mobile

Ofcom has reallocated its Digital Dividend spectrum, allowing the UK to fit in with plans for harmonised usage of the spectrum across Europe, resulting in most of the spectrum being made ‘mobile friendly’, and a little left for digital TV services

The revised plans provide a much improved platform for mobile services in a very attractive spectrum band, with European harmonisation providing the potential for standardised (i.e. cheap) equipment and handsets

On the downside, there will still be insufficient quantity of spectrum to satisfy demand from the mobile operators, with five operators chasing three decent blocks of spectrum, so the auction is likely to be very competitive

Telecoms, Mobile 12 March 2009
Canal+ FY 2008 results

Vivendi’s Canal+ Group overshot its 2008 EBITA target, despite sluggish subscription growth, delivering to shareholders some of the promised post-merger gains from “synergies” with TPS

For 2009, Vivendi has issued cautious revenue and EBITA guidance that, on current trends, will easily be met. However, management has now recognised that initial targets for 2010 will be “hard to reach” – as we have already warned

In the medium term, a further downside risk for Canal+ Group is the likely loss of exclusivity for the distribution of themed channels, which could be the outcome of the anti-trust investigation of CanalSat, with a ruling expected in 2009

  • Canal Plus
Media, TV, Non-UK Media 11 March 2009
ITV NAR crunch point: ITV FY 2008 results

ITV has switched from a turnaround to a survival strategy focused on preserving its core broadcast and content production business. The switch comes against a backdrop of plunging total TV NAR (net advertising revenues) due to the devastating mix of severe recession and major structural decline in the TV advertising medium

ITV plans to cut programme budgets outside regional news by £65 million in 2009 versus 2008 and rising to £135 million by 2011, raising the spectre of a downward spiral in programme budgets, audiences and NAR

We expect the eventual programme budget cuts to be at least double those already planned, given the scale of the unprecedented advertising crisis. Despite this, ITV may just squeeze through without getting sucked into the spiral, but it will be close

  • ITV
Media, TV 6 March 2009
Ofcom's statement on Next Generation Access: green light, red ink?

Ofcom’s statement on Next Generation Access (NGA) gives BT the maximum possible incentive to invest by allowing a high degree of pricing freedom and some short cuts to reduce implementation costs

But Ofcom cannot guarantee that BT will make a return from NGA, only the existence of an opportunity to make one

Ofcom’s statement is certainly positive for BT, but we remain sceptical of the business case for BT NGA, particularly given the low price of all-copper based offers and Virgin Media’s roll-out of 50 Mbit/s broadband

  • Vodafone
  • O2
  • BT
Telecoms, Fixed Line 6 March 2009
NGA in Spain

This research on next generation access in Spain continues our series of reports on NGA in the Continent

In relation to incumbents in other European markets, Telefónica’s NGA has one of the more aggressive deployment agendas, aiming to cover 40% of homes with FTTB/VDSL by end-2009 (and some FTTH). Its NGA-based Trio Futura retail offers launched in January 2009 after final regulatory clearance. Conditions for Telefónica's NGA in Spain are propitious because retail broadband prices are relatively high and bandwidth commands a premium

 

 

 

  • Telefonica
Telecoms, Fixed Line, Non-UK Telecoms 4 March 2009
Virgin Media Q4 2008 results: one step forward, one step back

VMed’s Q4 results were mixed, with consumer cable revenue remaining stable but cable net adds dropping significantly and opex performance hit by rising energy costs

Group OCF was stable thanks to improvements at Virgin Mobile and Content

We expect performance to prove relatively resilient in 2009, though not to the extent of generating significant growth in underlying annual cash flow

  • Virgin Media
TV, Media, Telecoms, Fixed Line 2 March 2009
Canvas offers future path for 'Free TV'

Project Canvas is the BBC/ITV/BT backed proposal for next generation Freeview and Freesat services that embraces IPTV reception, new EPG, home storage and HDTV applications

Setting up Canvas as a not-for-profit consortium and making it non-exclusive to content providers should avoid the competition issues which killed Kangaroo, but many questions remain and technical and regulatory delays could push back the launch to 2011

We do not expect Canvas to make a major difference to non-linear viewing of audiovisual content – its importance lies much more in future-proofing the ‘Free TV’ viewing experience on the terrestrial and satellite platforms

  • BT
  • BBC
  • ITV
Media, TV, Internet 27 February 2009
On-demand music streaming from Spotify

Project Canvas is the BBC/ITV/BT backed proposal for next generation Freeview and Freesat services that embraces IPTV reception, new EPG, home storage and HDTV applications

Setting up Canvas as a not-for-profit consortium and making it non-exclusive to content providers should avoid the competition issues which killed Kangaroo, but many questions remain and technical and regulatory delays could push back the launch to 2011

We do not expect Canvas to make a major difference to non-linear viewing of audiovisual content – its importance lies much more in future-proofing the ‘Free TV’ viewing experience on the terrestrial and satellite platforms

Media, Music and Radio 26 February 2009
Local media and the OFT review of the merger regime

The Office of Fair Trading (OFT) has confirmed it is to follow up on Lord Carter's interim Digital Britain report by launching a full consultation on the local and regional media ownership regime, with a call for "views from interested stakeholders" on the key issues for the review of the merger regime to be submitted by 28th February

Although the OFT’s announcement notes the “pressures” on local and regional media, the evidence points to a local media sector in steep decline, a trend which the UK’s recession will only exacerbate

Local media will need to consolidate further in the near future if jobs and the supply of local media to communities are to be preserved in a period of declining revenues, and the merger regime (which applies to all UK specific mergers) is a barrier to this consolidation and places a disproportionate burden on local media

Media, Press 23 February 2009
More red than black and white

Recent ABC declines in consumer magazines are not indicative of the accelerated declines experienced in the past 12 weeks

All print media is engulfed in a ‘perfect storm’ of falling consumption, collapsing advertising, and some rising costs

Print advertising will fall by as much as 30% for some print sectors in 2009, pushing previously profitable businesses to the edge

Media, Press 20 February 2009
BT FY 2008-09 Q3 results: another mighty wave is looming

As announced in the January trading update, BT’s Q3 results were hit by poor cost control at Global Services and the identification of some ‘toxic’ contracts. Performance elsewhere continued to be reasonable but helped by a spike at Openreach and non-core business

With a further ‘one-off’ charge against GS EBITDA in Q4 a virtual certainty, we continue to expect problems at Global Services to combine with recessionary pressures and stalling broadband growth to constrain performance well into 2010

A large pension deficit at the actuarial valuation in May looks inevitable. The Digital Britain initiative could pave the way for legitimate government and regulatory support

  • BT
Telecoms, Fixed Line 17 February 2009
UK spectrum withdrawal 2: Ofcom still wants it back

Ofcom has come up with a new 900MHz spectrum refarming/redistribution proposal, in which only 5MHz of spectrum is taken from Vodafone and O2, as opposed to the 15MHz it previously proposed

We still think that disrupting the voice and text services of existing customers in order to extend the availability of little-used 3G data services makes little sense, and that rearranging a small amount of intensively used spectrum when a far larger amount of unused spectrum is about to become available makes even less sense

Should Vodafone and O2 continue to oppose having their spectrum taken away, as appears likely, the delays to new spectrum auctions are likely to continue

  • Vodafone
  • O2
Telecoms, Mobile 17 February 2009
BT Retail residential telephony price changes: rebalancing act

BT Retail is putting through another round of residential price changes, trading further aggressive cuts in call plans in return for 12 month contracts, increases in line rental and some volume-related call charges

The £1 line rental increase is in line with our expectations and could trigger a round of increases by other players following Ofcom’s forthcoming statement on Openreach’s wholesale price ceilings

The price changes should help BT Retail to both defend its residential customer base and conserve ARPU. However, some further loss of residential market share looks inevitable

  • BT
Telecoms, Fixed Line 11 February 2009
European mobile market consolidation

The planned merger of Vodafone and H3G in Australia has raised the question of what consolidation could occur in Europe, although a direct analogy is not appropriate because Vodafone is much weaker in Australia (#3 operator) than it is in the larger European countries, and so would face much more regulatory scrutiny in Europe

The only merger opportunities in the top five markets which would have a similar or lower theoretical impact on competition (and hence would theoretically be as easily approved) in the top five European countries would be T-Mobile and H3G in the UK, Wind and H3G in Italy, and any operator with Yoigo in Spain

There are massive cost savings to be had from in-market consolidation, with network, marketing and general administration costs all fully overlapping between operators. The non-merging players would also enjoy a period of less competitive intensity, which may last indefinitely

  • Vodafone
  • T-Mobile
  • Hutchison 3G
Telecoms, Mobile, Non-UK Telecoms 11 February 2009
Touchscreen Smartphones: the rise of the iClones?

The iPhone has inspired all the major Smartphone makers to launch touchscreen models, and dramatically improve the usability of their interfaces. The iPhone itself remains the most easily usable touchscreen handset in our view, although at the cost of speed of use and adaptability

Unfortunately, the characteristics that make these handsets easier to surf the internet with – large screens and/or QWERTY keyboards – are just the characteristics that are unlikely to trickle down into mass market handset models, meaning that the impact on mobile data usage is limited

We continue to believe that web browsing is unlikely to be popular on mass market handsets for the foreseeable future, but usage of web services can be popularised by more of a widget approach, which the cheap but smart INQ1 handset demonstrates well

  • Apple
Mobile, Telecoms 10 February 2009

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