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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
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
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
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
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
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
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
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
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