The UK lockdown since mid March has boosted TV time to levels not seen since 2014, with broadcast TV and online video each growing by nearly 40

minutes/person/day

While trends vary significantly by demographic, news consumption has been a common catalyst for linear TV’s growth, benefitting the BBC above all. Although Sky News has also flourished, Sky’s portfolio has been seriously impacted by the lack of live sport

2019 extended many of the long running trends of the last decade, but, notably, online video’s growth rate appeared to slow among youngsters, in contrast to older demographics. 35-54 year olds watching more VOD will have significant implications for linear broadcasters down the line

When we look back at consumer expenditure on pay-TV and alternative entertainment options during past economic downturns across major countries, we find a broad confirmation of the industry’s comparative resilience.

Also found are variations between services sold through annual contracts and cancel-anytime rivals, a negative impact on big-ticket products, and opportunities for substitutional services.

Unique features in the current crisis include the suspension of sport broadcasts and an SVOD-rich offering which widens consumer options. If hardship persists, incumbents like Sky could face tougher times than during the financial crisis.

COVID-19 has led to an unprecedented decline in advertiser demand for TV, and while the steepest drop has occurred, broadcasters will feel the impact over a long period of time.

Programming costs are being cut or deferred, but it is not possible—or even sensible—to reduce total programming budgets significantly in the mid-term due to existing contractual commitments.

Increased government support in the form of advertising spend, a loosening of Channel 4's programming obligations—the lifeblood of the independent production sector—and revisions to existing measures (to capture a greater proportion of freelancers) will be required to ensure a flourishing, vibrant sector for the future.

European mobile service revenue growth improved by 1ppt to -1.2% primarily as a consequence of diminished competitive intensity in France. Trends elsewhere were largely flat.

The mobile sector is playing an important role in tackling COVID-19 and is likely to be relatively resilient in the short term with a broadly neutral financial impact. Longer term it will be exposed to the fortunes of the economy.

There are reasons to believe that the improvement in trends evidenced in the last quarter may continue as churn reduction takes the heat out of some markets, cuts to intra-EU calls annualises out and for most countries, end-of-contract notifications will only begin to impact in 2021.

 

In a likely scenario, the suspended football season could be concluded in empty stadiums in a June and July rush, nevertheless with severe financial consequences.

Pay-TV incumbents like Sky face limited risk—at worst they lose four months of subscription revenue for games already paid for. No-contract services such as DAZN must anticipate a more severe shock. 

To limit disruption, pain will have to be shared across the supply-chain with players’ pay first in line. But fast coordination in a continent-wide, multi-layered industry is challenging; in places, the issue may turn political.

 

Despite operating in a challenging market, Sky has continued to increase revenues, with the resilient performance of its direct-to-consumer and content businesses offsetting the disappointing drop in advertising income.

Across FY 2019, EBITDA was up 12.2%; profit growth driven by a significant reduction in “other” costs as large one-off effects disappear and cost-cutting continues.

Extended distribution deals with Netflix and WarnerMedia will protect Sky’s content proposition for the coming future, as would the mooted integration of Disney+.

Comcast’s new, on-demand service, launching in April, is an attempt to break NBCU’s unsustainable dependence on sales to Netflix and other SVODs. Peacock provides a path of digital transition for advertising-funded TV with a revamped low-load, high cost-per-thousand model.

Reach will be built with a free online tier and distribution to Comcast subscribers. Peacock seeks carriage from other pay-TV operators, with which reciprocal deals would make sense (i.e. HBO Max on Comcast alongside Peacock on AT&T’s platforms).

In Europe, where Comcast has no existing major free-TV offering to transition, launching Peacock will be challenging but could present Sky with ideas to counterweigh Netflix on its own service.

21st Century Fox and Sky plan to notify their proposed merger to the European Commission, perhaps by March, and obtain clearance on competition grounds, as rapidly as in 2010.

The merger could also face, along the lines of 2010, a separate regulatory process in the UK on media plurality grounds, by a decision of Secretary of State Karen Bradley.

If the UK process happens, Ofcom will provide its advice on the merger’s impact on news and current affairs, whose consumption has shifted massively online since 2010.

European mobile service revenue growth recovered to nearly reach positive growth in Q3, improving a whole percentage point over the previous quarter to -0.2%

The main driver of the improvement was continued ‘more for more’ price increases combined with a lack of price wars at the lower end, although the current detente does not feel very stable. Furthermore, the pressure on growth from the general trend towards SIM-only and the consequent lower contract revenue looks unlikely to alter

Revenue growth of around zero as almost achieved this quarter is sufficient for the operators to grow the bottom line, but not to transform their network coverage in the style envisaged by 5G enthusiasts – more substantial growth is needed to cover the costs of such a step-change

France’s number two telecoms operator has suffered extensive damage since the 2014 takeover by Altice, which engaged in a slash-and-burn leveraged buy-out. Market share loss has triggered a revenue decline, with uncertainty of when this might stabilise

Increased investments will barely allow SFR to stand still in the competitive race for 4G and fibre deployment. Cash flow, while in decline, is sufficient to meet high debt payments – but rising bond yields could pressure P&L

SFR aims to appeal to subscribers through enlarged bundles of content sourced mainly from Altice investments in media, but execution seems geared to achieve VAT optimisation and augment the group’s political influence – which may be needed as massive job cuts are planned