Enders Analysis

YouView, the hybrid DTT/IPTV service backed by the public service broadcasters, is here, but with an initial retail box price of £300 it will be heavily dependent on the subsidies offered by ISP distributors BT and TalkTalk The TV market has evolved since YouView’s conception in 2008, with many other internet-enabled options now available; its managed and integrated approach gives it some advantages but doesn’t make it a ‘must have’ We expect YouView to mainly appeal to Freeview and BT Vision upgraders and project take-up between 1-3 million TV homes by 2015, though if the product improve

Sky has launched NOW TV, an unbundled internet video service offering non-Sky households pay-as-you-go access to select Sky content, starting with movies, with sports added later in the autumn and TV shows to follow NOW TV addresses the growing opportunity for broadband TV, primarily appealing to the 8 million non-pay-TV households that have broadband – the same target audience as Netflix, LoveFilm, BT Vision and YouView We expect NOW TV to have only incremental impact on Sky’s financials, but it has the potential to put Sky in pole position in the nascent market for over-the-top TV

This report contains our annual assessment and forecasts for recorded music, in the context, as always, of the implacable physical-to-digital transition in music consumption and purchase, which continues to drain the topline of the recorded music industry.

Although 2011 was another year of decline in global recorded music retail sales, these fell just 4% in 2011 compared to 10% in the previous year, on a strong year for the album in the top markets, notably Adele’s 21 album.

Netflix returned to profit in Q2 2012 with results that were largely in the middle to upper range of its Q2 guidance estimates Underlying concerns remain about the ability of Netflix to deliver profit growth as it expands its international business due to weaker than anticipated growth in its core business of domestic US streaming subscriptions Reaching one million subscriptions since the January launch of Netflix’s streaming service in the UK and Ireland points to a marked slowdown during Q2 2012, suggesting breakeven will occur during 2014 at the earliest

Reallocation of Burberry’s marketing spend to digital at the expense of magazines since 2009 has been a key driver of the brand’s increased global awareness.

Burberry’s digital activism is tied to its strategy of ‘democratic luxury’ to engage and cultivate a new generation of 20-something potential customers.

Other luxury brands also have digital tactics, but the scale and depth of Burberry’s approach suggests that it is alone in having an integrated retail and communications strategy.

Though likely to be appealed, the CAT’s dismissal of the Ofcom WMO remedy seems certain to cut off any further re-regulation of pay-TV in the next two years

The CAT decision hands Sky pricing power in the wholesale of its premium sports content, while forcing other retailers to switch their focus on to attempts to enter into commercial supply agreements with Sky

Financially Sky has potentially most to gain and VMed most to lose from the CAT decision, while BT’s strategy to expand its content offer is highly challenged

In this report we show our analysis of the performance, key trends, competitive dynamics and factors impacting the UK broadband, telephony and pay-TV markets

The first part of the report focusses on market level performance and KPIs such as volume and revenue growth, net adds, pricing and ARPU, and market shares as well as our analysis of key developments in high speed broadband and pay-TV offerings

The second covers the individual results of the four largest ISPs (BT, Virgin Media, BSkyB and TalkTalk Group) in the context of the wider market developments

Around 125m smartphones were sold globally in Q2, up over 30% from Q2 2011. Around 450m mobile handsets were sold in the quarter, giving smartphones a volume share of around 28% Apple and Android dominate with a combined of 85% of units sold, and a cumulative total of 810m devices running their mobile platforms. Of these we estimate that 680m are active, of which 95m are tablets Android arrived later and has grown faster, but Apple’s market share of smartphones as been steady at 20-25% for several years: Android’s growth has come at the expense of Nokia, RIM and feature phones

A US jury has found Samsung infringed Apple’s patents with Android products and awarded $1bn damages. This is 17% of Samsung’s Q2 operating profit and would be crippling to any other Android OEM: it sends ripples of uncertainty through the ecosystem.

We expect the verdict to accelerate IP licensing between Apple and other Android OEMs, with Apple (like Nokia and other IP holders) levying a fee per device, though Google’s ownership of Motorola may mitigate this somewhat.