Alphabet’s growth slowed in Q1, but search remains the premier advertising product: protected against privacy changes, and poised to grow on a return to travel.
Investors focused on YouTube’s disappointing growth. Its exposure to brand advertising has slowed it relative to search, and it now has to compete with an increasingly formidable TikTok. User subscriptions could be a hidden strength.
The US remains the core of Alphabet’s business as uncertainty and energy price jumps hit Europe.
Sky’s performance across 2021 significantly improved, driven in Q4 by a nice c.5% growth rate in UK consumer revenues and the advertising rebound, but effects of the pandemic are still being felt with EBITDA down 30% on 2019.
The decline in Group revenue accelerated in Q4 due to the severe shock to the Italian operation from its loss of most premium football coverage, although we see upsides in a possible rights reshuffle.
In 2022, Sky can leverage growth vectors including bigger content bundles, Glass, advertising innovations and broadband. Consolidating SVOD and telecoms markets may be more favourable to price increases.
A channel dedicated to personality-led opinion breaks from TV’s strong range of rolling news, bulletins and standalone debate programmes. Conceptually GB News is more like talk radio: audiences can dip in at any time of day to hear takes on stories.
A linear launch—especially one based on a new interpretation of Ofcom’s due impartiality rules—has generated headlines, but the stark commercial reality of sustaining TV news by itself remains.
Its own linear audience and paying member forecasts are optimistic for a service with limited prominence and a streamlined budget, though profitability may not be its only measure of success.
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.
The pandemic has caused an unprecedented demand boom and revenue windfall for the games industry, allowing developers to ease production bottlenecks, assist remote working, and spend more cash on games that matter.
Producing quality game experiences remotely—from greenlight through to release—has driven innovation and flexibility, and much needed change for game studios.
Most large game developers expect a return to in-studio development late in Q3 2021. Many workers hope a return will not also bring back toxic game production environments.
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The Creative Industries accounted for 6% of UK GVA in 2019, more than the automotive, aerospace, life sciences and oil and gas industries combined. The UK’s Creative Industries are the largest in Europe and are central to promoting the UK’s soft power globally.
At the core of the creative economy is the AV sector, which, in turn, is driven by the UK’s PSBs. In 2019, the PSBs were responsible for 61% of primary commissions outside London and are the pillar upon which much additional regional economic activity depends.
Going forward, only the PSBs are likely to have the willingness and scale to invest in production centres outside London with sufficient gravitational pull to reorientate the wider creative economy towards the nations and regions.
With a lack of live sport, the lockdown weighed on incumbent pay-TV platforms’ subscriptions. SVOD providers leveraged their cheap positioning—Netflix and Amazon Prime Video now rank above other subscription services in Europe, and Disney+ had a successful launch.
Incumbents—Sky, Canal+, Movistar+—all pursue a twin-track strategy. They are positioning themselves as gatekeepers thanks to service bundles, while redirecting resources away from sports towards original series.
European productions are increasingly garnering audiences outside of their home markets, regardless of the production language. Netflix is a major conduit for European exports, due to personalisation of the interface and high-quality dubbing.
Admissions and box office revenues in 2020 will be the lowest in over three decades. The pandemic forced the closure of theatres, putting pressure on cinema to a degree unlike ever before.
The reasonable success of the straight-to-TVOD releases under lockdown has some studios suggesting TVOD distribution will live alongside theatrical in the future. However, simultaneous releases are unacceptable for cinemas and TVOD’s sub-optimal financial reality means theatrical release will remain essential for most films.
TVOD distribution will temporarily play an expanded role, while SVOD will pursue its climb up the distribution chain and big studios will assert their increased power to negotiate more favourable terms with cinema owners.
Despite two decades of online disruption, the UK remains reliant on traditional platforms and brands across the media sector more so for older cohorts, but also for younger generations
13% of adults still do not use the internet and, in reality, an online only media ecosystem remains a distant prospect
Traditional providers, particularly within TV, radio and news, look set to endure for the long term , aided by the trajectory of the UK’s ageing population
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+.