After a strong post-pandemic rebound, Sky has the opportunity to leverage its strong reputation with consumers to meet the challenge posed by new competitors and the studios’ direct-to-consumer transition, establishing Sky Q as the ultimate gatekeeper of video subscription homes.

Sports rights costs in Germany and Italy have been cut significantly, while Sky’s spend on UK Premier League rights will decrease in real terms. Savings will ease the financing of the shift to original content, which, associated with owner Comcast’s NBCU output, anchors the aggregation strategy.

Fibre deployment in the UK and Italy presents a subscriber and revenue growth opportunity, and underpins the gradual shift away from satellite to online content distribution.

Virgin Media’s subscriber boom continued into 2021, despite a marked price rise in Q1, benefiting from lockdown and continued demand for higher speed broadband.

ARPU remained weak in Q1, suppressing revenue growth, but this will recover (somewhat) in Q2 as the price rise takes effect, countering the current disconnect between volume and revenue growth.

The merger with O2 is set to complete in June, with much operational pre-merger preparation already done, but the key strategic questions appear yet to be decided.

Advertising income has been the lifeblood of commercial TV for decades, but declining linear audiences—combined with digital video alternatives—mean the TV advertising model must evolve to ensure it remains as potent a medium for brands as ever.

Lack of effective audience measurement and somewhat opaque advertiser/agency/sales house relationships are hampering linear TV advertising revenues. Both issues need resolving to underpin a healthier ecosystem overall.

Flexibility is key to this evolution. A move to audience buys across most linear and BVOD inventory would provide greater flexibility and targeting for advertisers, and would sit alongside some premium context buys. A greater onus on volume deals would give broadcasters more certainty to invest in content and their advertising propositions.

Market revenue growth sunk back to -3% in Q4 from -2% in Q3, with further backbook pricing and lockdown effects to blame .

Backbook pricing will improve with numerous price increases announced, but these will only start to take effect in Q2 2021.

Demand for broadband and ultrafast looks promising, but will also take time to filter through to revenue, with Q1 again lockdown-affected.

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The Creative Industries accounted for 6% of UK GVA in 2019, more than the automotive, aerospace, life sciences and oil and gas industries combined. The UK’s Creative Industries are the largest in Europe and are central to promoting the UK’s soft power globally.

At the core of the creative economy is the AV sector, which, in turn, is driven by the UK’s PSBs. In 2019, the PSBs were responsible for 61% of primary commissions outside London and are the pillar upon which much additional regional economic activity depends.

Going forward, only the PSBs are likely to have the willingness and scale to invest in production centres outside London with sufficient gravitational pull to reorientate the wider creative economy towards the nations and regions.

Virgin Media’s subscriber growth continues to be very strong, and it looks like next quarter’s price rise will (at worst) only stall, not stop, the renaissance.

ARPU was hit in Q4 by the postponed price rise, and it will likely remain in decline in 2021, with regulatory pricing pressure and lockdown effects still weighing, despite firm new customer pricing.

Nonetheless, accelerating subscriber growth is expected to drive group revenue growth positive again (helped by B2B growth), and Virgin Media’s main strategic problem—its fibre trilemma—looks like it will be dealt with after the merger with O2, expected to close mid-year.

Market revenue growth improved to -2%, after the sport-affected -6% last quarter, but was still low by historic standards.

Backbook pricing pressure is still hitting the market, and this will not improve until 2021 at the earliest.

Demand however looks strong; broadband adoption has re-accelerated, and the early signs of ultrafast adoption are encouraging.

Sky appears to have weathered the COVID-19 crisis, revealing an encouraging turnaround in its Q3 operating results, with revenue growth flat overall as each stream saw significant improvement from Q2.

Rights costs from a condensed sporting schedule began to hit EBITDA, which remains guided to fall by 60% across H2, with most of the impact in Q4. This was anticipated long ago, and Sky’s ambition remains to double 2020’s EBITDA “over the next several years”.

Having disclosed contrasting performances between its markets, Sky now appears more clearly committed to replicating its UK success in both Italy and Germany, with tangible plans in place to streamline costs and rebalance content expenditure—namely by “resetting” its spend on sports rights.

Virgin Media’s lockdown subscriber surge continued into Q3, as working-from-home highlights the importance of the faster speeds its network can offer.

ARPU is more challenged, and will get worse next quarter given its forgone price rise, but price rises are back in fashion in the industry, so this problem is likely to prove temporary.

Openreach’s full fibre remains a medium-term threat, but the company is rightly taking advantage while its network superiority remains, with momentum firmly in its favour for now.

With the European Commission’s decision to block the H3G/O2 merger annulled and with new H3G management sounding a very pro-consolidation tone, the prospect of mobile operators going from four to three in the UK seems to be back on the cards.

Both H3G/Vodafone and H3G/O2/Virgin Media combinations seem possible although each has its own complexity—existing network sharing arrangements being one of them.

With 5G delays and mounting costs following the decision to ban Huawei, consolidation is increasingly feeling like the most viable option for H3G whose returns are already too low and falling rapidly.