The battle in the US between Amazon, ecommerce giant, and Walmart, the retail titan, reflects the changing face of US retail as online drives growth
Amazon, the everything store, innovates on marketplace, warehouse and logistics, and customer tools like Prime, while Walmart fortifies in-store and builds on its strengths
Walmart cannot overtake Amazon online, but it can defend its position as the largest US retailer as Amazon drives an ecommerce future for retailing
European mobile service revenue growth worsened slightly in Q2, dropping to -1.2% after three consecutive quarters at -0.8%. Southern Europe significantly outperformed the North, reversing the regional trend of recent years
EU roaming rate cuts and the increase in SIM-only subscriptions were the two main negative, albeit temporary, factors with the former particularly impacting northern European operators with heavy roaming exposure and the latter more varied in its impact across the EU5
Mobile service revenue growth was thus quite robust given these factors, helped by price firming in a number of markets. Looking forward, while the negative factors are likely to continue in the short-term they will drop out in two years in the case of roaming cuts, and SIM-only, whose impact is mostly profit-neutral to operators, will also reach an equilibrium in due course, and the market's overall resilience is encouraging
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.
Amazon will test three possible features of their drone delivery system in the UK, which could make this novel shipping solution for small packages viable
When it launches, Prime Air will be limited to a catchment area of 2.3 million homes in the UK, with further exclusions for no-go areas for drones like airports and urban areas
Prime Air’s UK pilot will help the Civil Aviation Authority (CAA) craft the rules for future drone delivery by retailers
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
European service revenue growth improved in aggregate but with traction noticeably gradual and fragile, and growth remains negative. The future of this fragile recovery is highly uncertain in the wake of a vote to take the UK out of the EU. Most economists have budgeted a slowdown in UK GDP growth, revising 2017 expectations from around 2% to near zero or below. The IMF expect 1.3% growth in 2017 (-1ppt revision) based on “limited” Brexit impact with implied potential for further downward revisions, and it has made more modest cuts to forecasts for other European markets
Mobile service revenues are susceptible to the slowdown but we believe there to be sources of resilience in the revenue stream that would temper the impact including much reduced prepay share of the base, heavily eroded ARPU differential of contract users over prepay and contract tariff value for money, bundling trends, high smartphone penetration (>64%) and data attachment rates (>75%), and 4G coverage and penetration
Following a failed acquisition of O2 in the UK, H3G have turned focus to the proposed JV merger with Wind in Italy where offered remedies are rumoured to have been found acceptable although official confirmation (pending) is only due by 8 September. These include furnishing Iliad as a replacement fourth market entrant with uncertain consequences for the Italian market
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
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
Amazon’s newly launched open video hosting service, Video Direct, will appeal to creators of ‘professional’ videos by offering them a new platform and monetisation options
Amazon’s attractiveness to video creators resides mainly in the prospect of earning a portion of subscription fees from millions of Prime members
While Video Direct might not become a huge business for creators, this move cements Amazon as a media platform and risks hurting YouTube