Revenue decline accelerated in Q2 as the cost-of-living crisis appears to be impacting UK sales, but profits remained strong thanks to last summer’s Continental sports rights reset.

In Italy, DAZN will return on Sky’s platform just in time for the new Serie A football season, filling a key gap in its aggregation strategy.

Looking forward, thanks to its enhanced profitability, Sky has the flexibility to respond to the economic downturn using pricing and content.

Market revenue growth continued to accelerate in Q2 to reach 3%, but broadband growth worryingly dipped as the lockdown boost waned.

Differing pricing dynamics (among other factors) led to very different outcomes for the main players, with BT’s growth surging to 7% while VMO2’s revenue stayed in decline.

Underlying trends of weakening broadband growth, keener pricing and customer bargain seeking point to slower growth ahead … until the next price increase.

  • Under a revised deal, DAZN, the Serie A broadcaster, is now allowed to expand its distribution to the Sky platform in return for a reduced fee from TIM, the incumbent telco
  • The new-look Italian market is consistent with DAZN’s approach elsewhere in Europe, seeking blanket distribution and avoiding head on challenges with incumbents
  • For the Italian sports rights market, the agreements clear the air, but Serie A needs deep reform
  • ITV’s H1 external revenues were up 8% YoY (to £1,679 million) with Studios up 16% (to £927 million) and Media & Entertainment up 4% (to £1,065 million)—ITV suggests that FY 2022 will beat 2019 for revenues. H2 will face some tough 2021 comparators but Q4 will reap the rewards of a winter FIFA World Cup
  • ITVX is to launch in Q4, with the narrative being that it will target commercially desirable lighter ITV viewers, while causing little cannibalisation of the more monetisable linear platform—enticing these viewers seems difficult, especially given that the ITVX interface will be unashamedly average
  • ITV remains “mindful” of macroeconomic and geopolitical uncertainty, but Carolyn McCall stated that the company has not seen anything that indicates an impact on advertising

VMO2 struggled to fully capitalise on its price increases this quarter, with much of the benefits absorbed by retention discounts and tariff pressure.

EBITDA growth of 4% is nonetheless a solid result in a challenging market and guidance looks achievable, albeit not as easily as it previously did.

The opaque nature of the relationship with the new network company makes it difficult to establish whether VMO2 is capitalising on the current glut of speculative infrastructure investment, or is at risk of being a victim of it.

BT Group’s revenue growth surged in Q1 to 1%, the first time it has been positive in five years, with a stronger than expected boost from the April price rises partially offset by the Virgin Mobile MVNO loss.

EBITDA growth, however, actually dipped to 2%, with little operating leverage due to cost pressures, although the company is still very confident in its full year EBITDA guidance (which implies 4% growth).

BT is far from immune to macroeconomic pressures, with pressure on costs, corporate revenue and signs of a sharp dip in broadband market growth, but it is well placed to deal with them given strong growth at Consumer and Openreach.

Amidst the US macro downturn denting online sales, Amazon reported revenue growth of 7.2%, driven by AWS and advertising, but broad-based in nature

Inelastic demand for Prime has created opportunities to increase efficiency and monetisation, with cutbacks to fulfillment costs and increased subscription fees boosting Amazon's margins

Amazon's bottom-funnel search advertising growth has proved resilient, up 18% YoY, as growth eludes higher-funnel competitors—offering a strong indication that Amazon will largely buck the trend of advertising decline

YouTube’s tepid quarter signals a two-track online ad economy with advertisers protecting search spend as an essential cost of sales while cutting online display.

YouTube faces a challenge to strengthen its brand and direct response ad products while sacrificing some income to Shorts, its answer to competition from TikTok, which we estimate added three times as much ad revenue as YouTube in H1.

Beyond the short term, brands need to generate new demand, and that cannot be accomplished at the bottom of the funnel.

The UK economy is going sideways as the cost-of-living crisis dents retail volumes—a predictor of GDP—as consumers have little choice but to cut back on purchases of essential categories sharply hit by soaring prices

The financial gulf between high- and low-earning households is being driven by inflation, with a fifth of households now unable to afford essentials

GDP growth in May—achieved through rapid digitisation and pent-up demand for travel and transportation services—masks stalling consumer-facing services. The UK economy is likely to record the most drastic slump of all G7 economies in 2023

Growth is crucial for Vodafone’s leverage but remains elusive and the company’s ambition to grow European revenues this year looks challenging

Exacerbating revenue pressure in Germany and the loss of the VMO2 MVNO will weigh heavily in H2 and cost inflation will eat into any margin gains

Deal-making is not yet materialising with considerable question marks remaining over regulatory approval for mobile consolidation, a necessarily more open mind on action on Vantage, and plans to shift fibre investment off balance sheet. Vodafone promises more concrete developments with H1 results