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Netflix resumed strong growth in domestic US streaming subscriptions in Q1 2012, but weak Q2 guidance and high churn reinforce doubts about long term profit growth in an increasingly competitive market. Netflix has embarked on a global expansion strategy in the belief that achievement of global scale will improve its bargaining power, but the rationale is questionable and the prospects of incremental profits at best long term. The Netflix UK and Ireland streaming launch in January 2012 exceeded expectations; however, the importance of the US and interlocking of established content creation and TV distribution interests underscore the challenge facing Netflix and the thinness of the line between success and failure.

VMed’s underlying financial performance in Q1 was hit by continuing high capex on customer equipment for TiVo and high speed broadband, and on marketing opex to retain customers Strong take-up of next generation TV, lower cable churn and continuing progress at the Mobile and Business divisions continue to give us confidence that the company’s strategy is working Despite early indications that most cable customers will accept the latest round of price increases, the outlook for underlying cash flow growth in 2012 appears limited

US music publishers have reached agreement on rolling over the mechanical royalties due on sales of digital and physical music formats for 2013-17

The expanded scope of the statute to cover ‘scan and match’ cloud locker services, such as Apple’s iTunes Match, provides incremental revenues to music publishers; the unlicensed ‘storage’ cloud locker services are not concerned

ASCAP’s agreement on US radio performance royalties will however reduce music publisher revenues

Sky Deutschland has renewed its broadcast rights contract with the Bundesliga until 2017, removing the most important source of uncertainty for investors and consumers, albeit at the cost of a 77% jump in the fee from 2013/14

Combined with Sky’s new exclusive channels, high definition offer and on-demand services, the contract will sustain subscriber growth, but ARPU will only rise slowly

Although we forecast Sky to meet its EBITDA breakeven target in 2013, cash flow should stay negative until 2015 due to rising spend on receivers

Vodafone’s proposed acquisition of Cable & Wireless Worldwide is far from a done deal and is unlikely to be completed until September

The cost synergies are real but likely slim, with the main rationale being to cost effectively expand Vodafone’s fixed enterprise business in the UK, and to gain the expertise to do this elsewhere

The impact of an acquisition, while gradual, would reverberate for years to come. Wireline wholesalers, then corporate service retailers would be affected, notably BT. Later, the impact could spread to the small business segment. The prospect of Vodafone’s re-entry into the UK residential wireline market would remain distant but more likely

The London Olympics promise to be a major success for both the free-to-air broadcast licensees and the leading pay-TV platforms as a result of co-operative deals being forged between them

Recent distribution agreements with Sky provide the BBC and Eurosport with a massively bigger window to showcase their credentials in in-depth sports coverage and new technologies, especially 3D

For Sky, and assuming VMed in due course, there exist a number of potential indirect commercial benefits, as the message is sent out loud and clear that there is no better place to go for London Olympics free-to-air coverage than the pay-TV platforms

On 9 April Facebook bought the 547-day-old Instagram for about $1 billion in cash and shares, acquiring 40 million users, strengthening its positioning in mobile and photo sharing and preventing anyone else from buying it first

That Instagram could grow to be so big, so quickly, and with just 13 staff and $7 million of funding shows how precarious Facebook’s market leadership might still be. This is not a one-off – many more companies will use cloud services, mobile and social to achieve similar growth in future

This acquisition comes in the context of explosive growth in mobile and social and an accompanying land grab by Facebook, Amazon, Apple, Google and many others. More eye-catching deals are likely to follow

According to IABUK/PwC, internet advertising grew 14.4% like-for-like in 2011 to £4.8 billion, overtaking press to become the single largest advertising medium

Search was again the main growth driver, surging 17.5% to £2.7 billion last year, while display rose 13.4% and classifieds increased just 5.2% on the weak economy

We now forecast internet advertising will increase 14% in 2012 and 12% in 2013, taking spend to £6.1 billion or 36% of UK advertising, up from 30% in 2011