Digital Music Downloads

Despite strong revenue growth in Q3 (+12% YoY to $12.9 billion) and operating income that also beat guidance (+37% to $4.5 billion) more attention will be paid to Netflix's ruthless attempt via layoffs to reset a corporate narrative that has drifted towards a perception that the company has plateaued.

Four years along, Netflix's advertising business has yet to prove truly incremental, now contributing to overall price sensitivity, ARPU drag and net engagement loss. These consequences will only be intensified by the necessity to increase prices to continue revenue growth.

Despite denials, management is clearly floating the idea of the introduction of a free tier. With the aforementioned internal forces already in motion, this would be a difficult product to design.

Although YouTube’s total viewing in the home is flat year on year, it continues to strengthen on the TV set: this is driven more by older users than a transfer of viewing from devices.

YouTube has become a clear destination service on the TV for younger audiences—who are more likely to go directly to the app and stay for longer—while older viewers tend to channel-surf before switching to YouTube.

TV growth appears to be stoking the communality of the service: YouTube’s co-viewing minutes overtake solo during prime time, mirroring traditional viewing behaviour associated with broadcasters and SVODs.

BT is buying TalkTalk as a buyer of last resort, given the chaos that would ensue with a disorderly shut down, and will face a regulatory clearance process that reflects this.

The acquisition will cost BT c.£400 million this financial year, and will be hard to
manage given the ongoing subscriber decline, with limited longer-term upside.
Damage limitation appears to be the main driver.

There is a limited impact on the rest of the market, with some opportunity to pick up
business, limited risk for CityFibre despite it supplying TalkTalk, but less choice for
some types of smaller broadband competitors.