Homepage

UK digital TV (DTV) growth is rocketing ahead, but how fast? Ofcom and BARB – the two ‘official’ sources – agree that growth has been faster since Q4 2003 and that Freeview is the main reason, but are issuing increasingly divergent estimates. Ofcom is, in our view, overestimating Freeview and BSkyB homes. We prefer BARB's methods and rely on its estimate of 48.1% of UK TV homes (11.7 million DTV homes).

The take-off of local loop unbundling in H2 2003 enabled France to record the highest rate of broadband market growth in 2003 in Europe. This torrid pace of growth continued in Q1 2004 due to retail price declines and 50% rises in ISP ad budgets year-on-year. Free, Neuf, Cegetel, Telecom Italia, Tiscali are offering LLU-based DSL offers, bundled in most cases with telephony.

This report examines the medium-term prospects for Cable & Wireless. In 2003, analysts sensed a new dawn for C&W following the arrival of new management and the company's exit from the US.

Weak Q2 commercial viewing figures fuelled stories that ITV1 NAR could be approximately £100 million lower in 2005 unless audience share rallied in H2 2004. This was due to the Contracts Rights Renewal (CRR) remedy, imposed by the Competition Commission as a condition for the merger of the Carlton and Granada sales houses to create ITV Sales, which now controls over 50% of television advertising sales.

Ofcom produced a tough and rigorous document on ITV licence fee renewals. Although the paper is dense and difficult to understand, we think it is bad news for ITV. The likely licence fee settlement is going to be higher than commentators might have expected six months ago. The prime reasons are Ofcom’s proposed move to assessing the ‘digital dividend’ on the basis of digital viewing, not households and, second, taxing the benefits of the lower costs of the merged ITV business. The first of these is the more important financially since only about 57% of ITV viewing in digital houses is of the digital ITV service.

We have long been sceptical of claims that music download stores like iTunes, combined with hardball legal tactics against pirates, would rapidly turn around the fortunes of the music industry. The wildly successful iPod has driven the growth of digital music downloads, and is expanding the population of music downloaders that pay for music - but not forced a change of heart by file sharers! Music download sales are expanding but not fast enough to balance the decline in physical formats. Globally, we project sales of music downloads of $3.5 billion by 2010, about 10% of the total music market.

Online advertising outperformed other media in 2003 in the three biggest European markets of the UK, Germany and France, a trend which we expect to continue in 2004-06. Paid search has been the principal driver of growth in the UK market (up 70% in 2003), but interest of advertisers has cooled as steep price rises have reduced its cost effectiveness as a customer acquisition tool. Paid search is taking off in France and Germany, and will fuel growth in 2004-06.

MVNOs have attracted much attention recently. Virgin Mobile's IPO revealed attractive economics and discount MVNOs in certain smaller European markets have had success. This report considers the question of whether Virgin Mobile is a one-off or the start of a trend, and whether discount MVNOs can replicate their success in larger countries.

Local loop unbundling (LLU) is about to become a reality in the UK. This is the main conclusion of our quantitative assessment of the cost savings to be realised from unbundling local exchanges following price declines to connection and rental charges by BT in May 2004, as well as those recommended on 26th August 2004 by Ofcom.

This report examines pay-TV developments in Spain where Digital+, Sogecable's DTH pay-TV service, has just celebrated its first birthday (Sogecable [2003-23]). Sogecable financial targets for 2005 are within reach.