This report on Sky Italia and Sky Deutschland, News Corporation’s Continental Europe pay-TV assets, complements our coverage of BSkyB in the UK. We look at the market environment, including regulation and competition. The report also provides subscriber, revenue and earnings forecasts and SWOT analysis.
We forecast UK online advertising to grow by 8% CAGR to £5.1 billion by 2014, representing approx. 33% of total advertising spend, overtaking press
Search is the main growth engine, which we predict will reach £3.1 billion in 2014, due to its appeal and value to advertisers as a sales and lead generation tool
Growth in spend on social media and video networks will push online display to just over £1 billion by 2014; whilst classifieds will grow to £840 million
FT has put majority stakes in Orange Sport and Orange Cinéma Séries on the block, and claims to have held discussions with News Corp. We think it unlikely that an investor would be interested in entering the French pay-TV market, dominated by Vivendi’s Canal+
We believe FT could find a buyer for Orange Sport in Disney’s ESPN, which could prove viable if a cross-retailing deal is reached with Canal+. A Eurosport merger is another option. Orange Cinéma Séries could be viable under a new owner, if it widens it distribution to other platforms
Now officially on the way out of the pay-TV production business, a welcome decision in our view, Orange can focus on improving the consumer value of the basic TV offering on the triple play marketplace
Vivendi’s pay-TV unit Canal+ posted flat revenues in 2009, as international growth balanced domestic erosion
Driven mainly by growth internationally, we anticipate recovery to annual revenue growth barely above 2% by 2012, with a slightly deteriorating EBITA margin
Canal+ could do better if it invests in the latest generation of set-tops and, possibly, free to air television
France Télécom’s forthcoming Chief Executive Officer, Stéphane Richard, is considering a radical shake up and potential U-turn of Orange’s TV ‘content’ strategy, initiated and driven by CEO Didier Lombard
Orange could withdraw entirely from supplying premium pay-TV channels (sports and film) and distribute only third party content, as has been the focus of other broadband suppliers
A retreat of Orange from TV content would enable a more active cooperation with the Canal+ Group, benefiting both partners, who have largely overlapping subscriber bases