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The Government’s Green Paper on Charter Renewal asks whether BBC News is “crowding out” commercial news suppliers and, if so, whether this is justified

Our research shows that UK newspaper publishers have been damaged by the internet. They face inherent challenges in monetising online audiences, in common with other news publishers. To be blunt, the BBC plays no role in exacerbating these challenges

Scaling back BBC News will damage the UK’s sole source of impartial, quality and trusted news, whose independence is valued by users in the UK and around the world, risking the UK’s global “soft power”

While volume growth remained robust in Q2, UK residential communications revenue growth did dip again during the quarter, to 3.6% from 4.5% in the previous quarter and 5%-6% for much of 2014

However, this largely related to the timing of price increases, with there being a host of headline and effective increases due before the end of the year. The combined effect of those announced so far is sufficient to push market growth back up to the 5%-6% range for both of the next two quarters

Looking ahead, the actual launch of BT Sport Europe in Q3 may have further impact, but a modest pre-launch effect suggests that this will not be dramatic. BT will be hoping that it at least drives an acceleration of growth in its TV base, given that it is still free for these users

UK advertising is having a bumper year – some of the strongest growth for two decades – but print is receiving none of this upside. The year started soft then plummeted in the weeks immediately before and since the General Election, with increasingly serious implications for the sector

A reasonably steady UK economy and explosive TV and digital spend evidence a structural decline for print media display, though specific factors also point to some cyclical effects

We forecast a slowing of the rate of decline in H2 2015 and 2016, but we believe sooner or later the industry will have to work closely with agencies and brands to establish new terms of engagement for print media

The first set of annual results to include all three Sky pay-TV operations in Europe shows Sky plc to be off to a very good start: subscriber growth up by 5%, churn everywhere below 10%, adjusted group revenues up 5% and operating profit up 18%.

Excellent though the start has been, each of the pay-TV operations faces its own specific challenges – be they to do with ARPU growth in Germany & Austria, subscriber growth in Italy, or football in some shape or form across all three markets and nowhere more so than in UK & Ireland.

Most importantly for the Sky European merger, the latest results indicate that Sky is well on course with its target annual run-rate of £200 million in synergies by 2017; but with the UK model to act as a template, it is the fast-growing connected space that catches the eye.

Vodafone Europe’s slow but steady improvement in service revenue growth continued into the June quarter to reach -1.5% from -2.6% in the previous quarter, and -8.2% just one year ago

This was driven in roughly equal parts by subscriber growth improvements and ARPU, with both likely benefiting from Vodafone’s Project Spring investment, rapidly growing mobile data and an easing of competitive aggression

Mobile service revenue is still declining at 2-3%, making margin stabilisation still challenging for now, but there remains room for further improvement, and revenue stabilisation is at last in sight

The DCMS Green Paper on BBC Charter Review promises a nit-picking examination of all the BBC does, where the focus will be on how to redefine its mission as well as reform and/or improve BBC services in the internet age.

A central theme is the scale of the BBC. The Green Paper underlines the “dramatic” expansion of BBC services in the last 20 years, and questions whether there is still a need for the current breadth and universality of the BBC’s offering in the online world of greatly expanded choice.

Among the future BBC funding options laid out in the Green Paper, the suggestion of a mixed public funding and subscription model raises serious concerns with regard to its potential negative impact on the commercial television sector.

The recently elected Conservative government took less than a week to negotiate a licence fee settlement with the BBC immediately prior to Charter Renewal in which it will offload the government’s over-75s licence fee subsidy on to the BBC in return for various financial benefits.

But, there are strings attached to a financially poor settlement, making it very difficult for the BBC to protest in the run-up to a charter that promises a major diminution in its ability to contribute to the UK creative economy.

The only possible gainers are the commercial media, though the benefits may prove much less than some anticipate, however pleased the newspaper publishers may be by the Chancellor’s criticism of the BBC’s “imperial ambitions” in online news. Much more to be feared is the likely negative impact on the UK TV production sector.

Last Monday’s (6 July) announcement by the Secretary of State marks the second major direct intervention by government without recourse to public consultation in the financing of the BBC throughout the corporation’s history. The previous occasion was 2010.

 

As in 2010, the government has interfered by top-slicing the BBC’s licence fee revenues. We estimate the current annual top-slicing component that will appear in the annual accounts for 2014/15 (BBC year running from April to March) to be in the region of £525 million, including funding the BBC World Service for the first time (est. circa £245 million). By the time the BBC fully absorbs the over-75 subsidy (worth £608 million) in 2020/21, we are looking at a total revenue impact of circa £750 million; that is without taking inflation into account.

News Corp’s original bid for full ownership of BSkyB was withdrawn because of the phone hacking scandal. It was never blocked by regulators. Had it not been for the scandal, the bid would almost certainly have been approved.

With the phone hacking scandal fallout largely over and the election of a friendly government, the climate is now much more favourable to a renewed bid. With undertakings, we believe it would be approved by regulators.

The increasingly global scale of TV and film distribution means the commercial case for the bid is, if anything, stronger now than in 2010. The questions are simply whether the right price can be agreed, and how high up it is on James Murdoch’s list of priorities.

European mobile service revenue growth improved once more in Q1, rising 1.1ppts to -1.6%, continuing a trend of underlying growth improvement that started in Q3 2014. The improvement was mainly driven by easing declines in France and Italy but deteriorating performance in Spain meant that Europe-wide growth did not improve by as much as in the last two quarters

Pricing stabilisation appears again to be the main driver of recovery (in those countries that are recovering) with more rational pricing allowing operators to monetise rapid data usage growth. However, more price cut moves have been made in France since the end of the quarter, Italy remains an inherently unstable market and Spain again suffered this quarter from convergence discounts

As data usage continues to grow rapidly, customer concern for high quality data networks increases, which makes investment in superior 4G networks a clearer differentiator for operators to convey to customers. The UK market leads the EU5 in this regard, and has taken advantage through rationally priced tiered data plans, but this effect spreading to the rest of the EU5 is a source of optimism as 4G roll-outs continue across Europe