The UK retail market for digital movies has shown steady growth, but has not offset the decline in physical sales. While iTunes remains the UK market leader, Sky is clearly driving the growth with its Buy & Keep offering, backed up with the reassurance of physical product.

However, a move away from the collector mentality alongside the growth of a subscription mentality will affect long term prospects. This is not helped by the consumer proposition for digital retail, which remains disjointed, lacks inter-device operability and a clear consumer benefit.

Without co-ordinated efforts and investment from the studios, content owners and retailers to resolve these issues, we believe the opportunity for digital video retail in the UK is limited. Even with that, the EST market may never be as profitable as the DVD home video market.

UK residential communications market revenue growth was broadly unchanged at 5% in Q2, despite volume growth continuing to slow across all products, with pricing and fibre adoption helping to boost ARPU

The combination of weakening market growth and an accelerating Virgin Media (on the back of its Project Lightning network extension) is putting pressure on the other operators, all of which were weak in subscriber terms

These factors bode for a competitive Q3 with the major operators offering very aggressive promotions in the battle for subscribers at the start of the football season. Underlying pricing though looks firm with price rises already implemented, scheduled or expected in Q4

Cord-cutting has become a major headache for US pay-TV operators in the last three years, while cable network channels face further erosion due to cord-shaving and we now see a rapidly growing population of cord-nevering households that have never taken a pay-TV subscription  

Should we expect it to be only a matter of time for the UK to follow the US? The short answer is no, due to major differences in the pay-TV market infrastructures of the two countries, which leave the UK much less exposed

However, downward pressures from the online space do exist in both countries, while the big cord-cutting-shaving-nevering threat we now see in the UK has most of all to do with the chill Brexit winds on the economy

FY 2016 has been an excellent year, with all three Sky markets showing improved performance as Sky delivered 7% revenue growth (5% after adjusting for 2016 being a 53-week year) and 12% increase in operating profit

The success reflects Sky’s commitment to product and service innovation and diversification in an increasingly fragmented marketplace combined with tight control of back office costs and focus on synergies

As a measure of its success, Sky has set new cost synergy targets of £400 million annual run-rate by FY 2020 and is aiming for continuing middle to high single digit growth in revenues, which should let it comfortably absorb the rising costs of Premier League and Bundesliga live televised rights under the next contracts

Gaming giant Tencent acquiring Supercell for $8.6bn when rivals are grappling with costs shows the importance of strategic discipline and scale for mobile games success

The games lineup on Sony’s PlayStation4 is pulling ahead of that on rival Microsoft’s Xbox One, testament to a growing lead in console sales and strong relationships with Asian studios

Transitioning to a VR dominated future, Sony is preparing to roll out VR globally in the autumn, while Microsoft pins hopes on a new VR-ready Xbox set to arrive next year

TalkTalk reported net losses in broadband (-9k), with likely negative pressure on line rental, and weakness also in TV (-23k) although fibre (+36k) and mobile (+48k) net adds remained strong. Ahead of insight from competitor performances, the figures suggest a challenging quarter for the operator

Group revenue growth improved 1.3ppts to -0.4% owing to particularly strong carrier revenues, an inconsistent revenue stream. This was in spite of slowing consumer revenue growth (-1.2ppts to -2.5%) partly owing to cyber-attack related impacts

The concerted strategic shift away from being a price discounter to a fuller featured value for money provider may well encounter similarly challenging quarters in a highly competitive market where rivals have larger marketing budgets and offer deep discounts

Google’s recent product updates and developer conference announcements aim for as many users on as many platforms and devices as possible – a return to strategic form

The company has a dual approach: using Android as a mobile trend-setter while also devising new ways for users and developers on other platforms to use Google services

The reach provided by these initiatives will help Google’s machine learning algorithms to better understand and predict user intent – the cornerstone of the company’s ad business

Adverse market trends are finally touching the iPhone, the mainstay of Apple’s business, which looks healthy in the short term but is facing substantial threats further out

In response, Apple has changed its iPhone pricing, is warming up to developers and seeks to address long-standing problems with its first-party service offerings

While some of the holes in Apple’s service suite are now being patched, the company is still playing catch-up to rivals Google and Amazon in areas like smart assistants, maps and the connected home

Cinema, TV and VOD services share in the same ratings regime in the UK, giving parents confidence they can discern content unsuitable for their children.

Risks to children of being exposed to unsuitable content and advertising multiply on the 'open' internet. 

Parental controls supplied by ISPs are key to filtering content and sites, although a unified approach is better 

The award of the match packages in the 2017-21 domestic football rights auction in Germany is probably optimal for Sky (within the “no single buyer” constraint): it will broadcast about eight out of nine weekly fixtures including the top picks, while Eurosport’s package is complementary to Sky’s rather than substitutional

Sky will, however, pay a hefty price, with the new contract costing 80% more than the current one – although the new Bundesliga rights value is not out of line with other Continental leagues

We expect Sky’s German operations to briefly break even in fiscal 2017 before falling back into losses with a return to profit if other costs are kept under control. Management has made a bold statement of self-confidence: building scale is the priority