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.

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+.

Employment reached an all time high in 2019 of 32.8 million people at work despite slower GDP growth in 2017-19. The tighter labour market has helped real wage growth. A two-tier jobs market has emerged, with high-grade skilled roles evolving in a wide range of service sectors, and a large pool of low-grade, part-time work  

The heterogeneous labour market has ensured that in recruitment classifieds, unlike property and auto, no digital player has achieved absolute dominance. In the layer devoted to the recruitment of professionals, served by LinkedIn, rising demand for more specialised roles has expanded the number of agencies, intensive users of digital tools to locate recruits and crack the problem of "approachability" of those already in the job  

Online job portals are rushing to improve their AI and programmatic capabilities as specialisation prompts a shift from keyword search to smart matching, leading to a boom in recruitment tech M&A. Traditional agencies such as Hays are upgrading their own data capabilities through acquisitions and partnerships with LinkedIn, Google, Salesforce and other data/tech providers 
 

Comcast’s new, on-demand service, launching in April, is an attempt to break NBCU’s unsustainable dependence on sales to Netflix and other SVODs. Peacock provides a path of digital transition for advertising-funded TV with a revamped low-load, high cost-per-thousand model.

Reach will be built with a free online tier and distribution to Comcast subscribers. Peacock seeks carriage from other pay-TV operators, with which reciprocal deals would make sense (i.e. HBO Max on Comcast alongside Peacock on AT&T’s platforms).

In Europe, where Comcast has no existing major free-TV offering to transition, launching Peacock will be challenging but could present Sky with ideas to counterweigh Netflix on its own service.

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.

Wanadoo's results for the first half of 2002, detailed in the attached note, show that the company is well on track to make its target of positive EBITDA as the loss margin has been cut by half on the Internet side of the business. The targeted revenue increase of 30% also looks plausible as Internet access revenues have done well in France due to migration of the subscriber base to higher priced broadband packages. Wanadoo hopes to have 1 million broadband subscribers by the end of the year, and is counting on the rollout of a new lower speed (128k) and lower-priced broadband package in mid-October. The French Competition Commission has also permitted the company to again market its broadband packs in FT's network of shops, cutting customer acquisition costs. Margins will improve in mid-October due to wholesale broadband price declines mandated by the regulator ART.

We think that the business is worth about €6bn, rather less than the €7-9bn that the investment banks are projecting. The difference arises because we think that they over-estimate the value of Universal’s music publishing business and expect a faster upturn in recorded music sales. But Universal is clearly strongest of the major music companies and we do expect the company’s margins to recover from the low levels seen this year.

This note contains our latest update on Wanadoo, France's leading ISP and broadband service provider, following on from the report we issued in April. Wanadoo's Q1 2002 results are on target with the company's objectives for the year, despite sharp declines in portal and e-commerce revenues. The reason is Freeserve: a better deal from its network provider has raised ARPU to €5.7/month from €3.7/month in Q4 2001, and its PAYG customer base has expanded under continued marketing efforts.

Wanadoo is a business combining extensive interests in European ISPs with a strongly cash-generative directory business. Wanadoo's position as the leading French ISP is secure. Its position as an ISP in other markets is much less happy; in particular, Freeserve in the UK is not performing well. In this report, we address the underlying reasons why the French ISP business is healthy while the low ARPUs and poor or negative access margins in other countries are draining the company's profitability. Section A of the report provides detailed projections of 2002 for Wanadoo ISP operations. We try to show why the unmetered access model for narrowband ISPs is dangerous.

This note inquires into the difficult question of what really drives the capital expenditure of mobile operators. We try to show that since much capital investment is actually replacement of existing assets, the importance of the declining growth rate in call minutes in reducing capex is overstated. Our - very rough - estimate is that a mature European 2G operator will probably have to spend about 15% of sales on capital expenditure for years to come. This is in marked contrast to the more optimistic operators, who have publicly offered targets of below 10%. Similarly, we see little relief from 3G. While it is undoubtedly true that 3G provides more bits per buck, the costs of running a 3G network alongside a 2G infrastructure more than outweigh this advantage. Observers should also note that the capital efficiency benefits of 3G are largely illusory, since the savings in the network are wiped out by the higher handset costs.