European mobile service revenue growth strengthened very slightly to -0.3% this quarter but, with many positive and negative factors at play, it would be wrong to conclude that we evidenced a convincing improvement in momentum.

Most operators have reiterated their financial guidance in spite of COVID-19 but there is caution from Vodafone and those exposed to sports rights (BT and Telefonica).

The outlook benefits from continued lockdown measures (reducing churn and spin-down) and the annualisation of some financial drags from the middle of next quarter. However, competition in Spain remains intense and the sector is exposed to any economic downturn.

European mobile service revenue growth improved by 1ppt to -1.2% primarily as a consequence of diminished competitive intensity in France. Trends elsewhere were largely flat.

The mobile sector is playing an important role in tackling COVID-19 and is likely to be relatively resilient in the short term with a broadly neutral financial impact. Longer term it will be exposed to the fortunes of the economy.

There are reasons to believe that the improvement in trends evidenced in the last quarter may continue as churn reduction takes the heat out of some markets, cuts to intra-EU calls annualises out and for most countries, end-of-contract notifications will only begin to impact in 2021.

 

2020 promises a year of transition for the games industry: eSports and games broadcasting are competing with traditional programming; game streaming services are becoming meaningful platform competition; and new consoles are on the way.

While most in the studio and TV industries continue to struggle with the games market—neither understanding (or seeing) a strategic fit, nor showing a willingness to invest—expect explosive growth to power the industry for the next decade and transform all entertainment services, not just games.

The ‘free-to-play’ games sector requires oversight and regulation to protect children and the vulnerable; expect regulatory turbulence in the UK, Europe and China.

Recruiting 29 million subscribers in twelve weeks, Disney+ has stormed the US market. Furthermore, the two million gain achieved after the holidays and the completion of The Mandalorian, relatively high ARPU, and rising Hulu and ESPN+ subscriptions bode well.

Conversely, booming (but expected) losses of direct-to-consumer platforms—due to increase as Disney+ launches in Europe in March—are undermining group profitability.

But, with a total of 64 million direct subscribers Disney can now claim a size and momentum that puts it in the league of the pure digital platforms—crucially backing its stock market narrative.

Subscription game services will finally allow platform owners and developers to deliver truly accessible gaming experiences for all, across devices, at a lower entry price point, and curated to ensure consumer safety—both in terms of cost transparency and content types.

Consumer comfort with subscriptions should be embraced by the games industry and has already started in mobile. Apple’s Arcade subscription is the test case, providing focused all you can eat games that minimise exposure to violent gameplay, and the ‘free to play’ wild west.

Core gamers remain the most vital and profitable games customer segment, but they have been overserved and are an obstacle to broadening the reach of games. Now is the time to move beyond this group, to restructure, expand, and normalise the games market in the next decade.

Happy Birthday iTunes! It is just over a year since Apple launched iTunes and the media continues to talk up the second coming of the music industry, whose saviour appears in the form of affable Steve Jobs. iTunes sold a total of 70 million tracks online in its first year, well below its target of 100 million, but a respectable showing, especially since it spawned a small flock of competitors determined to out-sell iTunes.

Wanadoo just reported its H1 2003 results and the FY 2003 Group EBITDA target looks well in hand thanks to the outstanding performance of the directories division. The performance of the Internet segment has been less satisfactory for two reasons: Wanadoo France is facing stiff competition from Free on the 512k DSL segment; and Freeserve in the UK and Eresmas in Spain have seen very slow subscriber and revenue growth due to barebones customer acquisition activity. Wanadoo will be ramping up DSL customer acquisition activity from September onwards to achieve Internet segment targets and may reduce prices in the UK.

Wanadoo reached an important milestone in 2002, reporting its first (very small) positive EBITDA margin on its French Internet business, thanks to broadband-related revenue increases and lower narrowband and broadband access costs. In contrast, losses widened at Wanadoo's Internet properties outside France, in particular Freeserve in the UK and Eresmas is Spain, but these were more than fully offset by profits on the Directories segment. This note looks ahead to 2003, when Wanadoo expects to reach positive EBITDA on the Internet segment as a whole, thanks to continued improvement in France and tightly contained losses at Freeserve and Eresmas.