Vodafone Europe’s revenue growth bounced back from a weak previous quarter, but its top 4 markets combined were broadly flat in underlying terms. There are nonetheless promising underlying signs, including reduced churn, (slowly) improving subscriber growth and steady NPS

Vodafone has launched all-you-can-eat social/music/video bundles under the ‘Vodafone Pass’ moniker in several markets, which appear both popular and ARPU-enhancing, and being early to market with such an innovation is laudable

Next quarter Vodafone will be hit by the full force of the EU roaming regulation, but excluding this factor the performance is likely to be steady at least, helped in part by the UK business recovering from its recent weaknesses

Across Europe, markets are becoming more competitive. Incumbent pay-TV paltforms (e.g. Sky or Canal+) face increasing threats from both internet-based services (e.g. Netflix and Amazon), and telecoms operators

Telecoms providers are proving the most potent challengers as they enter the premium football rights market to create attractive triple and quad play bundles – examples include BT, SFR and Telefónica. The latter is now the main pay-TV operator in Spain whereas France’s Canal+ has entered into a strategic alliance with Orange

Across the top five markets (UK, France, Germany, Spain, and Italy), Sky remains the leading operator with an estimated 21.5m video subscribers, twice as many as Netflix

After a quarter coloured by big, returning series Netflix now has just shy of 104 million subscribers worldwide, with, for the first time, the majority living outside the US

Content expenditure continues to dazzle with $4.2 billion spent in the first half of 2017. Negative free cash flow looks set to hit $2.5 billion for the year, with large upfront payments for self-produced and commissioned content coupling with rights acquisition expenditure to create a library of programmes that necessitates continual subscriber growth

Current international growth is small considering the magnitude of the opportunity, revealing the difficulty of creating sizeable customer bases outside of the West, where competitors are cheaper, US programming less desirable and internet access comparatively limited

The US scripted content boom is spilling over into Europe: Free-to-air TV drama ratings have proven resilient but as costs and audience expectations have risen budgets are under pressure, necessitating flexible co-financing arrangements with American broadcasters, and Netflix and Amazon. Pay channels have boosted output—with uneven results

Long-term IP control is a key factor behind independent production consolidation, led by broadcasters seeking a secure stream of content and diversification away from advertising

Notable developments include the new wave of Berlin-based, internationally-financed series, the rise of domestic French content and Sky Italia’s edgy originals, Telefónica’s giant leap into Spanish dramas, and the continuation of Britain as an export powerhouse

The debate over the entitlement of free-to-air PSBs to retransmission fees from pay-TV platforms has simmered for the last few years, yet promises to boil over once the Digital Economy Act 2017 (DEA 2017) comes into force; as expected in late July/early August

The repeal of section 73 of the Copyright Designs and Patents Act 1988 (CDPA 1988) has removed a barrier to negotiations between the PSBs and the cable operator Virgin Media over retransmission fees, seen by some as the thin end of a wedge for obtaining such fees across all pay-TV platforms

However, pressing for retransmission fees could have the opposite effect of what the PSBs – in particular the commercial PSBs – wish for, threatening as it does to undermine the principles of universality and free access at the point of use, so long the bedrock of public service broadcasting in the UK

Secretary of State (SoS) Karen Bradley has made an initial decision to refer 21CF’s bid for Sky to the Competition Markets Authority (CMA) for a detailed consideration of media plurality concerns, to be finalised in the near future

The issue at hand is the potential increase in the influence of the members of the Murdoch Family Trust (MFT) over the UK’s news agenda and political process. The SoS rejected the remedy for Sky News brokered by Ofcom

Ofcom’s non-negative decision on the fitness and propriety of 21CF to hold Sky’s broadcast licences cleared another hurdle in the event the merger is finally accepted

UK mobile service revenue growth continued to improve, with EE now the clear leader in service revenue growth terms. The rate of improvement has started to slow, but pricing remains solid and data traffic continues to grow healthily

EE’s performance was helped by robust subscriber growth but mainly driven by its very strong ARPU growth, which is in turn driven by ‘more-for-more’ pricing and a service/content tiered pricing model. Others are starting to follow this approach

The short/medium term outlook remains healthy, with the price increases made in Q2 likely to more than compensate for roaming cuts in the latter part of the year.  Looking further forward, the launch of 5G could be disruptive due to the introduction of copious extra spectral capacity, and therefore the results of the upcoming auction will be key for the sector post-2020

Vodafone Europe’s mobile service revenue growth declined again to -1.0% from -0.6% in the previous quarter, but across the core top 4 markets it was essentially flat at -0.8%, and signs are encouraging for it improving next quarter

Contract subscriber share has (at last) stabilised across its top 4 markets, and continuing improvements in NPS suggest that Project Spring investments are finally being reflected in subscriber sentiment

The short-term outlook is positive with both subscriber growth and ARPU looking solid at worst. The longer-term results of market consolidation are the main threat, with powerful competitors potentially being created

Domestic championship and Champions League rights for 2018-21 are auctioned almost simultaneously. The main uncertainties are the extent to which Sky will increase its exclusive coverage of Serie A, and whether it will try to win the Champions League auction to take advantage of rival Mediaset Premium’s announced retreat

Mediaset has complained to regulators over the Serie A terms, possibly seeking a repeat of the 2014 scenario when it provoked the termination of the auction and ultimately gained a private deal – an outcome still facing legal challenges. Any possible resolution of Mediaset’s dispute with Vivendi should not impact the auctions

We doubt that telecom or digital operators will be tempted by the €200m minimum price for the two internet-only packages with patchy regional coverage – a bad idea mandated by the regulator. However irrational behaviour at auctions should never be ruled out

After a US debut, Amazon’s marketplace of SVOD services arrives in the UK and Germany, but without the major draws of HBO and Showtime

Unbundling SVOD for premium content strengthens Amazon’s position in the fast-developing connected TV landscape, where Prime Video is taking on Netflix, NOW TV and YouTube

For niche content providers, Amazon Channels provides a new, low-friction route to go direct-to-consumer with a mix of live and on-demand premium content alongside existing distribution strategies