Radio faces challenges from Spotify and other online audio propositions, while the radio “dial” is challenged by smart speakers and global tech. UK radio broadcasters have risen to the occasion through innovation

New DAB stations have helped radio achieve record audiences and revenues. Combined digital listening is now over 50%, but FM remains the primary platform. The current mix of FM/AM and digital maintains radio’s relevance for the medium term

The long-term future is digital—a wide-ranging sector review is required to determine how to support digital radio’s growth and the question of a future switchover

Linear TV is ageing, and the largest channels are ageing fastest. There is an ongoing double-whammy effect of a growing older population, and the loss of younger viewers to social media and SVOD services.

The PSBs are suffering more than most, especially the BBC channels. 31% of the population is aged 55+, but over 60% of viewing to BBC1 and BBC2 is by those aged 55+.

The trend can be halted, and even reversed to some degree. There is no inevitability to this ageing process, but it will take concerted efforts to fight it.

Recorded music revenues in Japan are stuck in decline as physical sales sag, although 2017 marks the first year when streaming gained a foothold with 8 million subscribers. 

J-pop fans spend on 'experiences' with their idols including events, merchandise, CDs and DVDs, which streaming cannot replicate. Top native LINE MUSIC offers integration with a popular messaging app and bundling with mobile. 

Serving international repertoire, Apple Music claims more subscribers than Spotify in Japan, which is more localised, and has most users on the free tier. Amazon Prime Music is a looming constraint on the adoption of subscriptions. 

Online advertising became the majority of all UK ad spend last year, in step with China but ahead of all other major markets. 

Direct response has further increased its share to 54% of UK ad spend, fuelled by the self-serve platforms of Google, Facebook and Amazon, while content media nets just 11% of the online advertising pot.

We estimate that all online-delivered channels - including "pure play" online properties, broadcaster VOD, digital out-of-home and online radio - could account for well over 60% of UK ad spend by 2020, but only with improved commitment to industry governance. 

We interviewed the biggest hitters in the UK television production sector, asking them about the current issues affecting their industry, such as consolidation, Peak TV, and Nations and Regions quotas

Most pertinent, however, was the production sector’s relationship with the new buyers—Netflix, Amazon, Apple et al.—and how their approach to them differed for each one, as well as traditional broadcasters when pitching, negotiating deals or producing programmes

With views anonymised for candour, this report is an honest representation of an industry where quality and volume are both at an all-time high, despite the challenge of change brought about by these new players

Spotify is now the world’s first publicly listed on-demand music streaming service. Its global footprint generated €4 billion in 2017 from over 70 million paying subscribers and 90 million ad-funded users across 65 countries

As it expands, the service is steadily but surely moving ever closer to profitability, with a 2019 operating profit a very real prospect

So far and for the near future, Spotify’s global pre-eminence versus competition from Apple, Amazon and Google proves remarkably resilient. Plans to build upon its differentiating features will become ever more decisive as the tech titans will continue to wield their resources and ecosystems against the comparatively undiversified company

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

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

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

Northern & Shell has concluded the sale of the Channel 5 Group for the price of £450 million, a little over midway between the £103 million spent on acquiring Channel 5 from RTL in 2010 and the quoted target price of £700 million at the beginning of the year

Channel 5’s fourth place in the strong and buoyant UK advertising market, its PSB privileges and current audience and operating performance make it a rare and attractive opportunity for US groups like Viacom seeking to expand their international footprint

Among the challenges facing Viacom are the integration of the free-to-air Channel 5 Group reaching a broad audience with its own largely pay-TV channels aimed at the younger age groups. In the process, we expect Viacom to deepen its ties with Sky, including advertising sales, where further consolidation appears likely