Market revenue growth bounced back to 4% in Q2, the first positive growth for the sector since 2019 .
Most of the improvement was however temporary sports channel bounceback, with underlying growth still negative.
Prospects are nonetheless healthy, with price increases now regular, backbook pressure annualising out, and ultrafast boosts growing.
Sky’s revenue was up 15% in Q2, back to pre-COVID levels despite some lingering pandemic effects such as most pubs and clubs remaining closed. EBITDA fell by a third, driven by higher costs from sports rights, since very few live sports events took place in Q2 2020
The impact of “resetting” football rights is already evident in Germany and Italy, with 248k net customer losses across the group despite growth in the UK. However, Sky will make substantial savings, and we expect this will more than offset lost revenues
Meanwhile, Sky continues to strike deals with other content providers, solidifying its position as the leading household entertainment gatekeeper. In time, apps for NBCU’s Peacock, ViacomCBS’ Paramount+, ITV Hub, and, in Germany, RTL TV Now and DAZN, will all be aggregated within Sky Q
Viewing habits are changing but live is still central to the TV experience
Television’s biggest shows are amongst the most timeshifted, and therefore have an outsized impact on the decline of live viewing debate
Viewing—not just of news and sport—is still overwhelmingly live, despite differences across genres and broadcasters
Market revenue growth improved to -1.4% in Q1 2021, a partial recovery being better than at any point in 2020, but still worse than at any point in 2019.
Next quarter the sports channel suspensions will lap out, driving strong (but temporary) year-on-year growth.
Longer-term revenue growth recovery will need backbook pricing pressure relief, which will start in Q2, and demand for ultrafast broadband.
As private sector employers faced an unprecedented degree of uncertainty, the volume of vacancies fell 60% from 2019 to 2020, driven by the arts & entertainment, food & hospitality and retail sectors, leading expenditure on recruitment advertising to fall by 32%.
In 2021, vacancies for temporary placements are surging as society proceeds to unlock, with the near-term labour market tight, boosting expenditure on recruitment. Our concern is the masked unemployment in B2C sectors that will emerge should furlough end on 30 September.
Judging by global revenue trends in FY2020, professionally-oriented networking platform LinkedIn gained from demand for hiring served by paid-for listings, also filling demand for events. Indeed, which serves the high-volume but lower-value end of labour markets, with a less fruitful budget and cost-per-click model, suffered mild revenue decline.
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.
The Premier League is reportedly seeking to roll over its existing domestic TV rights deal, in a bid to shore up its financial position given its losses during the pandemic.
A rollover would delay the risk of significant long-term deflation in the value of these rights, buying the Premier League greater financial certainty and time.
For Sky, BT and Amazon, a deal could provide even better value, and would delay any potentially-risky auction, closing the door to prospective newcomers.
Apple is bringing in privacy changes on iOS that could hurt ad-funded apps.
Responding to platforms’ legitimate push for user privacy is a trial for regulators in the midst of building new online antitrust regimes.
Antitrust rulings are chipping away at the App Store’s stringent terms of use, but reforms will keep it at the centre of the iOS universe.
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.
Spectrum auction assignment stages are normally fairly dull and routine, but due to the two-part nature of the 5G auctions, and the critical importance of proximity and contiguity, this is not the case with 5G.
The assignments won, combined with the Vodafone/O2 deal, ensures that all the operators enjoy at least 80MHz of (essential) proximity, but only O2 gets (nice-to-have) contiguity.
Further swaps could ensure contiguity for all, but this requires H3G to co-operate, which is in its absolute, but not relative, best interests.