The UK’s ‘zombie’ economy—largely flat since March 2022—is due to the cost-of-living crisis weighing on households, with this exacerbated in 2023 by the rising cost of credit. Real private expenditure growth will be weakly positive in 2024 before strengthening in 2025 as headwinds recede

Our 2023 forecast of a nominal rise but real decline in display advertising was realised, with TV’s revenues falling while digital display rose. Advertiser spend online is justified by the channel’s size and growth, worth an estimated £406 billion in 2023

For 2024, much lower inflation and mildly positive real private expenditure growth points to 3-4% display advertising growth, with a stronger recovery anticipated in 2025

Market revenue growth was robust in Q3 at 1.4%, but heavily supported by price rises whose effect will wane over the next year.

Broadband net adds remained negative, with pay TV and telephony more negative still, mainly thanks to strained consumer finances.

Declining volumes and waning price rise boosts are likely to lead the market into decline next year, with a recovering economy needed to reverse this.

CEO Bob Iger has announced that Disney is now in a "building" phase—indicating that the strategic turnaround is complete—however, upcoming breakeven of  streaming products owes much to cuts on programming spend

With the rest of Hulu soon to be acquired, Disney looks as if it is pulling out of India—this will make the company's presence outside of the US even more peripheral

In the UK, Disney+'s advertising-supported tier is now live, however, there are forces at play that limit Disney's ability to execute its tiering strategy as effectively as its biggest streaming competitor

Unable to match Netflix, financially-pressed Hollywood studios are cutting content output and reassessing the DTC model

Price rises are being forced through, however for challengers this is asking a lot from subs, who don’t see an improvement in product or usage

The corporate landscape is fluid—loss-making DTC platforms and revenue-plunging linear channels are candidates for M&A

Paid sharing and "price optimisation" are returning clear benefits for Netflix, with healthy subscriber growth (+8.8 million, up to 247 million) and an 8% YoY increase in revenue ($8.5 billion) in Q3. However, success of the advertising tier remains slow

In the UK, Netflix is growing revenues and ARPU, and although it is now a challenge to grow the subscriber base, there is a clear and large group of non-paying users that are now being targeted 

Netflix's per household engagement is materially higher than its direct competitors. However, this is plateauing and has implications for revenue levers such as advertising impacts and price rises

Market revenue growth surged to 2% in Q2, but entirely-and-more driven by price rises, with underlying trends negative across volumes and ARPU.

Broadband volumes in particular turned sharply negative, largely due to a post-lockdown hangover combining with weak economic conditions.

The outlook is bleak: price rise benefits are set to wane and then reverse, and weak volumes will feed through, with economic recovery needed for a return to sustainable growth.
 

Social tariffs have provided relief for some at a time of household income squeeze and otherwise unavoidable high inflation-driven telco price increases.

Adoption has risen but remains very low, limiting their effectiveness, and more widespread adoption would expose their shortcomings, with the risk of penalizing low cost operators and significantly increasing prices for non-adopters (by up to 20%).

A better approach might be to recognize that affordability issues are narrower but deeper than current social tariffs can address, with fuller, centrally funded subsidies targeted more narrowly at those most in need.

The three planks of Netflix's strategy to stoke growth are beginning to pick up pace: pricing optimisation, charging of non-paying users and advertising are returning benefits, if at different rates. For Q2, Netflix announced growth of 5.9 million subscribers (+8% YoY) with revenues growing but at a slower rate ($1.83 billion, +2.7% YoY)

Netflix's advertising tier remains predictably peripheral. However the restructuring of its product offering and an influx of potential new subscribers who find themselves kicked out of other accounts could result in the company beginning to present to advertisers what they really want: viewers that they cannot reach easily elsewhere, if not yet at scale

The published draft Media Bill does not appear to present major issues for Netflix from a compliance standpoint, however, a clearer understanding of what "appropriate prominence" for the PSBs means is needed to calculate the impact on the streamer's access to viewers

Channel 4 was resilient in 2022: highlighted by a 2% YoY drop in total revenues after a record 2021, a quickly growing digital business and a new high for content spend

With privatisation now off the table, in its draft form the Media Bill presents new opportunities and challenges: an “appropriate degree of prominence” on smart TVs and devices, the option to produce content for the first time, and a “sustainability duty”

The effect that these might have is murky without a body of interpretation and mediation, and indeed execution—it appears uncertain whether Channel 4 would begin to produce, with the optics concerning indie producers tricky and accumulation of the required operational skills a long process 

Market revenue growth turned (slightly) negative in Q1 2023, driven by weak demand and the waning of 2022 price boosts.

Next quarter will benefit from the high 2023 existing customer price increase, but this effect will wane across the year, and go into reverse next year due to lower inflation.

Other factors are mixed, with new-customer pricing tentatively rising, many smaller ISPs struggling, but altnet gains still likely to get worse before they get better.