Sky

Sky Q2 2019 results: strong subscriber growth and long-term investment in original content

Sky’s Q2 results were encouraging overall, with significant subscriber growth swinging direct-to-consumer revenue growth back to positive. ARPU declined once more, since new streaming customers are taking lower-priced products, but total revenue growth accelerated to 2.4%

EBITDA rose 20%, primarily due to the dropping out of some large one-off costs. Next quarter, Sky will begin making savings on the new Premier League rights contract, and increased football rights costs in Italy and Germany will have annualised out

Future of Public Service Media: EPG prominence to the fore

Ofcom’s recommendations to Government suggest updating EPG prominence legislation to cover connected TVs, and were warmly welcomed by the PSBs

Balancing various commercial, PSB and consumer interests will be key; determining what content qualifies for prominence will be a particularly thorny issue to resolve

Extending prominence to smart TVs and streaming sticks is critical, but implementation will be challenging

2019 TV advertising backstopped by Brexit

We expect total TV ad revenues to decline 3.3% in H1 2019, partly due to a return to Earth following the idyllic conditions of the World Cup in June 2018

Bad omens for advertising for H2 include the sagging economy since April and the Government’s impetus to achieve Brexit on 31 October, with or without a deal

Our forecast remains a 3% decline for total TV ad revenues for 2019 as a whole, with the risk of a more serious downturn in 2020 in the wake of Brexit

UK broadband, telephony and pay TV trends Q1 2019: Price wars dominate

Market revenue growth dipped to around zero in Q1, with fierce competition on new customer pricing the major factor

All four of the big operators now suffer from declining ARPU, with existing customer price rises increasingly hard to land given falling prices for new customers

The rapid move to superfast is not helping as much as it should; the operators will hope that they fare better with the move to ultrafast

Disney gets the final piece of Hulu

Disney announced that it would acquire Comcast’s 33% share of Hulu in a put/call agreement that can be enacted by either party from January 2024, while taking full operational control of the vehicle immediately

Under the agreement Disney will pay Comcast a minimum of $9 billion for its current stake, provided Comcast fulfils agreed capital calls, which going forward would be just over $500 million/year

Sky Q1 2019 results: weak ARPU hits bottom line

Sky made a surprisingly weak start to 2019, with revenue growth decelerating to 1.9% (the first time below 4% since the European businesses merged in 2015), due to weaker ARPU trends

However, Sky expects improvement to follow, blaming one-off factors in the quarter. The ARPU weakness drove EBITDA down 11.3%, but this should bounce back across the rest of 2019 as football rights costs turn from a drag to a positive

UK broadband, telephony and pay TV trends Q4 2018 - High speed accelerates, but pricing under pressure

Market revenue growth accelerated to 3% in Q4, but it might never reach this level again, being helped by a never-to-be-repeated BT overlapping price rise

With price rises becoming more challenging in general, and superfast pricing under pressure in particular, maintaining/increasing ARPUs is becoming more difficult despite superfast volumes surging

Openreach’s ultrafast roll-out has accelerated, challenging Virgin Media and bringing the prospect of further price premia, but perhaps too late to be of significant benefit in 2019

Time to create an addressable TV market

Addressable linear TV advertising, where precision-targeted ads overlay default linear ads, could enhance the TV proposition for advertisers, agencies and viewers, benefiting all broadcasters

In the context of dwindling linear viewing and rocketing online video ad spends, the adoption of Sky AdSmart and similar services on YouView and Freeview could take addressable TV ads from a sideshow to a pillar of revenue

European Pay-TV - Resilient In The Face Of SVOD's Growth

Across the EU4, pay-TV is proving resilient in the face of fast growing Netflix (with Amazon trailing), confirming the catalysts of cord-cutting in the US are not present on this side of the Atlantic. Domestic SVOD has little traction so far

France's pay-TV market seems likely to see consolidation. Meanwhile, Germany's OTT sector is ebullient, with incumbents bringing an array of new or enhanced offers to market

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