At the Enders/Deloitte Media & Telecoms 2020 and Beyond conference the economic and policy importance of telecoms infrastructure was a major theme, particularly in the current climate.
Operators envisage a pricing environment that will continue to be very challenging.
Help is required to secure infrastructure investment, deliver the economic upside from 5G, and level the playing field between sub-sectors.
2020 promises a year of transition for the games industry: eSports and games broadcasting are competing with traditional programming; game streaming services are becoming meaningful platform competition; and new consoles are on the way.
While most in the studio and TV industries continue to struggle with the games market—neither understanding (or seeing) a strategic fit, nor showing a willingness to invest—expect explosive growth to power the industry for the next decade and transform all entertainment services, not just games.
The ‘free-to-play’ games sector requires oversight and regulation to protect children and the vulnerable; expect regulatory turbulence in the UK, Europe and China.
TalkTalk’s subscriber base and revenue fell again in Q3, and ARPU continued to decline despite good growth in its higher ARPU (but even higher wholesale cost) high speed base.
The sale of FibreNation to CityFibre and the accompanying wholesale deal provides much needed cash and de-risking, although the migration to full fibre still brings challenges to TalkTalk given its low price focus.
TalkTalk’s shorter term operational outlook is also still very challenging, with growing EBITDA in 2020/21 particularly difficult given stable/declining ARPU and the rising wholesale costs of migrating to high speed broadband.
Mobile sector returns are low, particularly for smaller-scale operators, with H3G earning less than its cost of capital. Regulatory initiatives, spectrum auctions and 5G look set to worsen this picture as H3G strives to gain viable scale
Back-book pricing is crucial to the returns of fixed challengers. Regulatory intervention is likely to lead to a waterbed effect in the fixed sector and exacerbate challenges in mobile
New entrant business case in full fibre is limited to de facto monopoly opportunities. There is the potential for BT’s returns to increase markedly if it gets full fibre right but new entrants’ inferior economics are unlikely to offer sufficient investor appeal
Apple’s iPhone launch event was relatively light on iPhone, which shared the stage with games, TV, Watch, iPad and retail announcements
This reflects Apple’s developing priorities: as iPhone sales soften, it needs to find new ways to extract value from the wealthy user base it has spent a decade nurturing
Apple has embraced this new strategy, offering a range of cheaper points of entry into its ecosystem, making the lost profits back on accessories or content subscriptions
Spotify is investing heavily in podcasting through acquisitions, original content and product innovation
It is under pressure to reduce dependence on record labels, whose power makes generating large profit margins difficult. Podcasts promise a non-music content genre where Spotify can capture more value
Secondary benefits abound: Spotify can take an active and lucrative role in modernising online audio advertising, it can solve the podcast discovery problem, and engagement across more forms of audio will improve retention
Ofcom’s recommendations to Government suggest updating EPG prominence legislation to cover connected TVs, and were warmly welcomed by the PSBs
Balancing various commercial, PSB and consumer interests will be key; determining what content qualifies for prominence will be a particularly thorny issue to resolve
Extending prominence to smart TVs and streaming sticks is critical, but implementation will be challenging
Google’s advertising business has begun losing market share in the US, with competition from Amazon, Facebook and Microsoft intensifying in search and display
In response, the company is redoubling efforts to reshape its apps, services, and the entire web for more efficient monetisation, spelling uncertainty for partners and users
The adaptability and complexity of Google’s services reduce business risk from targeted regulatory measures, but increase the pressure for a radical intervention
After the most challenging period in its history since 2012, Facebook has been able to stabilise its fundamental metrics and announce a major product overhaul
Despite talk of a business model pivot, Facebook’s focus remains on advertising, whose growth will remain concentrated in developed markets
News publishers wishing to stay relevant on the upgraded product set need to target exclusive layers of social interaction, with groups particularly important
Apple is strengthening its household model by doubling down on family-friendly content subscriptions and payments
The model is reliant on hard bargains with mainly US partners, which risks sacrificing potential scale for a short-term boost in margin dollars
The new services offer glimpses of novel concepts, but stop short of taking risks to truly differentiate—a problem in TV, where Apple’s distribution advantage is slimmer than Oprah would have it