Service revenue growth was flat at 1.9% this quarter—a reasonable performance considering waning boosts from roaming and UK price rises, and a challenging macroeconomic backdrop.

Looking ahead, operators in most markets are now implementing price rises, providing a welcome (albeit transitory) tailwind to revenue growth—although EBITDA momentum remains subdued.

We expect a consolidation deal to be announced between Vodafone UK and H3G in the coming weeks and a decision from the EC on the Orange/MásMóvil deal in August—crucial issues for the sector’s prospects.

Microsoft’s planned acquisition of Activision Blizzard is in trouble. US, UK, and European regulators may make the deal impossible for Microsoft—and a disaster for Activision and the wider industry. 

Sony’s late improvement in PlayStation 5 sales is only just enough to reach its target numbers for the year. It needs a more dynamic approach to a rapidly changing industry, and a less dogmatic message to consumers and regulators. 

Netflix Games is more than a trial—it’s on track to become a major games platform. 

Spotify’s strategy to invest massively in podcasts weighed on its costs and chewed up its operating profits, a bad combination that led CEO Daniel Ek to admit he 'got a little carried away'.

Spotify's podcast investment did not deliver the benefit of reduced music licensing costs on the premium tier.

Podcast investments in North America have not materially altered Spotify's slower post-pandemic subscriber growth in that geography, and do not travel outside their home country as readily as music.

Magazine publishers are at different stages of a transformation cycle, but a variety of external and industry factors are massively accelerating change.

Often described as the transition from page to screen, in reality transformation is a deeper redefinition of each brand’s community and purpose, and the use-case benefits it delivers.

Online advertising is evolving into a space where trusted consumer media can exploit their advantages of community engagement and premium context, rather than indiscriminate traffic.

Service revenue growth was up just 0.1ppts to 2.0% this quarter, as price rises in the UK and the peak of the roaming boost offset weakness elsewhere.

Price increases to combat inflationary cost pressures are gathering momentum—a potential revenue cushion as roaming tailwinds diminish and challenging economic conditions weigh.

Vodafone is battling strategic issues in most of its main markets—significant change in strategy will be required from the new leadership.
 

With major studios arguably over-indexed on SVOD, the stickier experiences of interactive entertainment and the metaverse will eventually form a critical pillar of studio D2C strategy, boosting subscription services and tying in closely with consumer products and theme parks.

Disney’s appointment of a Chief Metaverse Officer is good first step, demonstrating a strategic interest in the space. But other major studios remain cautious and distracted, with limited capability beyond licensing to engage in the metaverse for the next 24 months and possibly longer.

Meta will need to provide a strong guiding hand creatively and technically to ensure its new partnership with NBCUniversal is a success, and to evangelise the metaverse and its revenue model across the Hollywood studio content space.

Advertisers are rushing to create immersive virtual experiences to promote their brands, particularly on social gaming platforms with large built-in audiences. The interest shows no sign of waning.

We are in the very early days of metaverse marketing: formats are bespoke, costs are high and the data provided by platforms is rudimentary. Not all product categories are suited to a virtual incarnation.

The long-term promise is tantalising: advertising that is better than its real-world counterpart, that forges new relationships with customers, and that forms part of the product offering rather than just promotional activity.

For the media and entertainment industry the dawn of the metaverse, and the word soup of acronyms that accompanies it, is the latest high-profile technology wave that threatens to simultaneously upend established distribution models and reinvent both the experience and the relationship with the audience.

Music is the media sector (outside gaming) that has moved fastest to experiment with metaverse applications, so far mainly on gaming platforms like Fortnite and Roblox, which provide a ready game-centric audience but offer little lasting innovation.

Music's metaverse potential beyond gaming is huge, led by artists who want a more dynamic online presence, though we anticipate a long trajectory towards mainstream applications as questions remain around formats, design, platforms, and monetisation.

The pandemic years boosted many businesses selling services on subscription in the UK: work-from-home gave people more time and money to widen the services they enjoyed in the home, such as gaming, entertainment and music, also boosting engagement with trusted news

The cost-of-living crisis dented the number of subscribers to OTT SVOD and news services in Q2 2022. Broadband and mobile are must-have; bundles of services (e.g. Sky’s pay-TV and broadband or mobile) are more resilient; yearly and multi-year contracts prevent churn relative to monthly contracts; and services that cater to passions (e.g. football) are always need-to-have

Subscription (or supporter) media and news services reaped the demand for trusted news through the pandemic, but now face a tough challenge to their toplines from the economic downturn—and also to transition to a sustainable business model for media audiences, while advertisers are also feeling the heat

European mobile service revenue growth was positive for the first time in five years this quarter as a resurgent mobility boost combined with the return of roaming revenues.

Q2 is set to be a mixed bag, with inflation-plus price increases expected in the UK, an elevated boost from the roaming recovery, but also some weakness in the B2B market.

We are also seeing the early impact from end-of-contract notification rules, particularly in Germany, and we expect ARPU pressure and churn to pick up elsewhere as the impact becomes more widespread.