Channel 4 revenues and content spend hit record levels in 2016, but the company faces a declining TV advertising market in 2017 due to a weaker economy and competition
The company’s ability to deliver its unique remit to audiences and producers is also under pressure from Government proposals to move staff outside London
Because Channel 4 can only commission, a move will not stimulate a creative cluster. Risks to the remit include the loss of talent and lower content spend due to higher opex
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
2016 has seen Channel 4 break new records in growing revenues and investing in content origination, whilst making further progress in delivering its remit and maintaining audience share for its main channel
However, the second half of 2016 and early months of this year promise a significantly tougher 2017 as the economic and TV advertising climate has worsened and the future is clouded with uncertainties
Channel 4 nonetheless starts from a relatively strong position financially and we expect it to be well capable of sustaining its remit under the leadership of its new CEO Alex Mahon, though much hinges on the outcome of the Government consultation on relocation
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
The first half of 2017 has seen the announced departure of three CEOs from the commercial PSBs within the space of less than two months: David Abraham of Channel 4 (14th March), Rob Woodward of STV (25th April) and lastly Adam Crozier of ITV (3rd May)
Responding to the challenges of digital switchover and the advertising recession of 2008/09, as well as their own specific company issues, one of the first tasks for all three CEOs has been to raise staff morale
The last seven to ten years may have been taxing at times. The next seven to ten promise to be no easier, and may yet be harder, as the successor CEOs chart their way through the continuing transformation of the UK digital landscape
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
Our latest forecasts point to the continued strength of DTT within the UK broadcast market. We predict DTT-only homes will account for 42% of TV viewing ten years from now, up from 38% today.
Much of this is due to the UK’s ageing population profile, since DTT skews older. The number of over-45s in DTTonly homes is set to increase by 13% by 2026.
The other key factor is the continued growth of flexible pay-lite services—for example, Netflix and NOW TV— which are of greater appeal to younger audiences.