2014 has been a good year for total advertising, which we forecast to grow by 5.5% across the year; display advertising spend is also forecast to grow by over 6% year-on-year. This is largely thanks to a positive economic backdrop, where we have seen a significant rise in consumer expenditure over the last two years

Online advertising spend has been the biggest recipient of growing ad spend, with 20+% growth last year, this year and next. This has mostly been to the detriment of print revenues, where online classified search solutions, amongst other factors like declining circulation, have disrupted print marketplaces

Video has been the largest growth area in internet advertising as online video consumption increases. Up to now online spend has largely been accretive to TV budgets but we are starting to see some advertisers switch to online video spend. However we do not expect TV to suffer in the same way as press

Recently we attended the inaugural IABUK Digital Upfronts, in which 11 digital media companies pitched their wares to advertising agencies and advertisers.

UK growth in internet advertising is now powered by mobile, social and video, and these three areas were the focus of the Upfronts.

The Upfronts are symbolic of the rising importance of digital media in the UK and worldwide; while broadcast television remains the king of brand advertising, marketing and advertising are becoming less TV-centric.

ITV and Channel 4 have asked the regulatory authorities to review the case for legislation that would for the first time allow the commercial PSBs to charge carriage fees for their main free-to-air channels on the pay-TV platforms

To this end, ITV has presented a detailed analysis showing the great contribution to the US creative economy due to the introduction of Retransmission Consent Compensation for free-to-air broadcasters in the US, but without setting this against the very different market structure in the UK, where the commercial PSBs enjoy significant privileges

Any change to UK rules will require primary legislation and is not expected until after the May 2015 General Election. Should action be taken, the choice appears to lie between regulation (adding “must carry” rules) and deregulation of commercial PSB privileges, where the end result might not be what the PSBs wished

European mobile service revenue growth improved by 0.5ppts to -7.2% in Q2 2014, but all of this and more was driven by a reduced regulatory impact; underlying growth has been stuck at around 6% for the last four quarters, with progress in some areas consistently being countered by further pricing pressure

Industry consolidation has progressed to some extent, but would have had little impact in the quarter. Further in-country mobile/mobile mergers are more than likely but uncertainty driven by the changing European Commission may be delaying decisions to move forward

The UK example shows that consolidation is not necessary for market repair, but in the present environment the smaller operators in continental Europe have every incentive to be as disruptive as possible to encourage their acquisition, so further mergers cannot come soon enough

Older adults have always watched more TV than younger adults, and even more TV news. The gap has widened over the last five years following the rapid rise in online news consumption via websites or apps among the under 35s, where online is now used as widely as TV for getting news.

Recently published survey data by Ofcom (UK) and Reuters (10 countries) highlight the importance of online as a tool for accessing breaking news, whether search engines, news websites or social networks, along with an expanding field of news content.

Online, with its emphasis on reading rather than watching news stories is no direct substitute for TV. The BBC is by a large margin the most widely accessed online source in the UK, while the challenge for the other TV news providers is to develop commercial models that successfully integrate broadcast with online.

The commercial non-PSB sector saw strong growth in share of total TV viewing of close to 40% as the multichannel TV homes universe doubled in the 10 years between the launch of Freeview in October 2002 and completion of digital switchover in October 2012, and even higher 50% growth in SOCI (share of commercial impact) thanks to the higher commercial airtime quotas of the non-main PSB channels

Even during the growth years, non-PSB channels that were present in 2003 felt a squeeze on viewing share and suffered losses as result of numerous channel launches that added to the long tail (Squeeze 1), and strong growth in the PSB families (Squeeze 2), which saw the total PSB share among the Top 25 channels in multichannel TV homes rise from less than 80% to over 90% between January 2003 and January 2014

Today, both the PSB and non- PSB commercial channel groups face the challenge of internet connectivity and increasing population of portable screens (Squeeze 3), and they are experiencing similar rates of decline. Yet, even if overall trends look the same, non-PSB viewing trends show significant variation by channel group and genre, to be explored further in Part 2

Strong growth in the UK economy has created a very positive short term outlook for display advertising, with TV Net Advertising Revenues (NAR) expected to increase by 5% in 2014.

That bright prospect is nonetheless overshadowed by online video advertising, where 2014 is expected to add almost £200 million to the estimated £300 million spent in 2013. YouTube is leading the way, but the TV broadcasters also stand to benefit.

All the indicators point to yet more rapid growth in online video advertising over the next three to five years. So far it has had little apparent impact on TV NAR, but this should change from 2015 as TV and online video become more closely meshed.

European mobile service revenue growth again disappointed in Q4, dropping slightly from -8.9% to -9.1%, with underlying revenue growth dropping a little further from -6.0% to -6.3%, again reaching a record low

There had been hopes that improved GDP growth would drive a volume rebound, that price declines would start to annualise out, and that declining out-of-bundle usage would wane in its impact as this usage declined. In the event, ongoing price competition from smaller operators, MVNOs and quad play offerings, combined with surging use of OTT communications platforms, have dominated trends

In the medium term, the development of 4G and Vodafone’s Project Spring may bring some much needed network differentiation back to the market, allowing pricing power to return to the larger operators. However, it will be 2015-2016 before these factors come into play: in the short term, the main source of optimism is consolidation

The French Professional Football League (LFP) is to auction its 2016-20 broadcasting rights next month, one year earlier than expected. The anticipated auction (and short notice) increases pressure on rival LFP broadcasters – a failure to renew their existing rights deals would unsettle their position for over two years

Due to uncertainty over the future ownership of Canal+ and the political background of Al Jazeera’s beIN Sports we believe that both would prefer to maintain the status quo: the top two weekly games on Canal+ and the other eight on beIN Sports

The LFP rights are precisely packaged to prevent this, and to force the two to compete at least for one lot. As the market leader Canal+ has more to lose, while beIN Sports could sustain its current complementary positioning with fewer games

ITV has enjoyed an excellent 2013, which has seen the largest increase in total ITV revenues since the launch of the Transformation plan in 2010 and the fourth consecutive year of double digit growth in EBITA

2014 promises to be another strong year of growth, boosted by a sharp advertising upturn where ITV can expect to outperform the television advertising market, while Online, Pay & Interactive and ITV Studios maintain strong growth as their markets continue to expand

ITV nonetheless faces significant challenges to maintain the business it has built as viewing habits change in an increasingly connected TV landscape with multiple screens and the shape of the ITV Studios business as a result of its domestic and international acquisitions