A hung Parliament now appears the most likely outcome of the UK general election on 6 May, giving the Liberal Democrats influence, in terms of votes and seats, over the next government

Because the Lib Dems are ideologically closer to Labour than to the Conservatives, we anticipate their influence will favour the policy and regulatory status quo in media and telecommunications in relation to the proposals made by the Conservatives

This influence would be strongest in a coalition of Labour and the Liberal Democrats, but also would persist in a Conservative minority government, reducing the likelihood of a new legislative framework for media as proposed by the Conservatives

The iPad is a beautiful device that offers new ways to consume and interact with content. It takes ideas that have been discussed for decades and turns them into a (fairly) practical consumer product

The iPad poses huge challenges for print publishers, since it
has the potential both to unlock the benefits of digital for them, but also to remove
the last remaining advantages of their physical products

However, the iPad costs at least $500 and is hard to see as essential
for anyone. While there is real money to be made here, it will take a long time
to match the scale that comes from 10m people buying a newspaper every day in the
UK

The outlook for ad-supported UK media businesses is brighter in the short term than in the medium term, irrespective of who wins the election, since fiscal tightening is inevitable early in the next parliamentWe expect the Conservatives, should they win, to favour commercial media (Sky, ITV) over the BBC in general and in particular in the upcoming negotiations on the licence fee settlement post 2013Super-fast broadband networks enjoy cross-party support, but Labour’s 50 pence landline tax was blocked by the Conservatives, who prefer to use a small portion of the BBC licence fee

Hulu’s postponed UK launch, and the inability of SeeSaw and MSN to get carriage deals with the BBC and ITV, underscore the difficulty for internet TV aggregators of acquiring mainstream content

In-stream video advertising is nascent – we estimate it was worth just over 1% of UK TV ad spend last year – giving major channel operators/rights holders little incentive to syndicate their programming to online services

The future for ad-funded internet aggregators continues to look highly challenging, aside from YouTube, due to its audience scale and Google’s deep pockets

Mobile content is moving to the centre of strategies for online
media. At MWC, the world’s biggest mobile conference, Google announced it now develops
all products ‘mobile first’ and Facebook reported a quarter of its 400m users access
the service through mobile

Three years after the iPhone 
launched, the handset industry is catching up, adding decent user interfaces
and mobile apps to colour touch screens and taking easy access to mobile content
beyond the iPhone

Beyond the self-selecting early adopter iPhone base, we found
real evidence of companies already successfully providing mobile content to much
wider segments of the population

Apple’s hardware-driven strategy for music recently passed two major milestones, with 10 billion paid track downloads and 250 million iPods sold

In 2009, Apple ‘returned’ to record labels and publishers roughly $1.9 billion, while generating gross profits in the region of $3.2 billion from the sale of iPods and music

Of wider significance to Apple is the music strategy’s contribution to building a mass market brand and expanding its customer base, helping to drive adoption of their computers and, more recently, the iPhone

Large parts of print media face existential problems from the structural decline of consumption and core advertising businesses, and the growth of an internet model of free content and large-scale disaggregation

Employment trends in US media underline the depth of the decline in sales of print media (no similar data is available for the UK), across newspapers, periodicals and books

Publishers are being forced to search for business models that align with new patterns of consumer behaviour –and which make money

The BBC Trust has given its provisional approval to the BBC Executive’s proposals for Project Canvas, the JV between the BBC and five partners that aims to enable DTT homes with broadband connections to access IPTV content on their TV sets

Canvas promises to enrich greatly the DTT platform; however, it is likely to encounter fierce opposition during the coming consultation from equipment manufacturers and the pay-TV platform operators, Sky and Virgin Media, especially in relation to its attempts to prescribe the user experience (UX)

We think that the BBC Trust will give its final approval, subject to the conditions specified in its provisional statement, but further delays seem likely and we do not expect Canvas devices to appear in the shops before 2011

The BBC Executive has fleshed out many details of Project Canvas in response to questions raised by the BBC Trust: Canvas being the proposed joint venture between the BBC, BT, ITV and Five that aims to solve the challenge of realising the seamless convergence of linear broadcast TV and internet video to the TV screen in the living room

For Project Canvas to succeed, it is likely, in spite of its merits, to have to address competition concerns in the areas of company structure, stifling innovation and editorial controls over who gets to participate

Stifling innovation – whether to do with creative restrictions, marginalisation of competing players or undue prominence given to the traditional public service broadcasting (PSB) model – appears the most problematic issue facing Project Canvas, whose success will depend on its ability to convince the rest of the industry that it is stimulating, not stifling innovation

Steep declines in CD sales in major recorded music markets continued in 2009 as we had forecast last year (Recorded Music and Music Publishing [2008-39])

Sales of recorded music continue to be decimated by physical and online piracy, plus the disintermediation of the album purchase by the digital purchase of ‘cherry-picked’ tracks

A further knock-on effect on CD sales is the reduction in retailers’ shelf space devoted to music, including as a result of the bankruptcies of major chains (Circuit City, Woolworths and Zavvi) – what we have called the ‘perfect storm’ for the CD