Sky is coping reasonably well with the shock of retrenching consumer spending, with revenues almost flat in Q4 2022.
However, profits are under pressure, as the increases in Sky’s costs cannot be fully passed on to customers, and the product mix is rebalanced towards telecoms and variable costs.
Management continues to leverage Sky’s brand strength and its critical mass of consumers to enter new markets, this time with home insurance.
In a transformative upgrade of its content subscription offering, Google is buying the rights to live Sunday NFL games for $2 billion per year for 2023-2031.
YouTube can leverage its massive reach to challenge existing video aggregators, including pay-TV platforms and Amazon, as a gatekeeper to consumers.
Google will likely deploy a similar strategy in Europe, eventually competing with Sky, Canal+ and other incumbents—a hopeful development for football leagues.
Revenues were stable year-on-year in Q3, with UK growth offsetting Continental decline. All three markets posted positive customer net adds across the quarter.
Underlying profitability is improving, and although World Cup-related changes to the football schedule depressed net income in Q3, they will lift it in Q4.
A possible sale of Sky Deutschland would make sense if it helps the buyer reach superior scale within Germany.
With viewing to traditional broadcast TV continuing to shrink rapidly, especially among under-45s, our latest forecasts revise a new low for broadcasters’ audiences: falling to just half of all video viewing in 2027, down from 63% today
Long-form, broadcast-quality content will increasingly be viewed on SVOD-first services (e.g. Netflix, Amazon, Disney+) as online habits solidify, especially among older audiences. Platforms offering different content (e.g. YouTube, Twitch, TikTok) will continue to grow their share and will also expand total watch-time
We forecast that under-35s will spend just a tenth to a fifth of their video time with broadcasters’ traditional long-form content five years from now, versus a third to a half for 35-54s and 85% for over-65s
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.
Revenue decline accelerated in Q2 as the cost-of-living crisis appears to be impacting UK sales, but profits remained strong thanks to last summer’s Continental sports rights reset
In Italy, DAZN will return on Sky’s platform just in time for the new Serie A football season, filling a key gap in its aggregation strategy
Looking forward, thanks to its enhanced profitability, Sky has the flexibility to respond to the economic downturn using pricing and content
Global SVOD operators are expanding their sports content offerings. Amazon just bought UK Champions League rights, Apple signed US baseball and global football (soccer) deals, Paramount and partners won the Indian Premier League cricket auction, while Netflix unsuccessfully bid on the US Formula One licence.
In the US, streamers feed an already very competitive market, while in Europe they could potentially relaunch inflation for rights after a period of stagnation. Next moves by Warner Bros. Discovery (BT Sport and Eurosport) and Disney will be critical. Sky and Canal+ could be facing upward cost pressures.
If rights fragmentation were to increase, deeper aggregation and bundling may be necessary to avoid shrinking the consumer pool while the pressure to consolidate may intensify. Intriguingly, global rights deals may become more likely.
Reportedly, BT Sport is about to seal a deal to extend its coverage of the revamped Champions League until 2027. Amazon is going to step in with a weekly game, and the BBC will get the rights to the highlights.
In France, Canal+ has outbid Amazon to claim the full rights package thanks to a bid that has grown the total value of the rights by 28%.
With Canal+’s football content secured, the upcoming Ligue 1 auction may struggle to find bidders, a fate threatening other short-sighted leagues.
With more clubs, more games and no long Christmas break, the revamped Champions League (CL) will test its value to broadcasters with a tender that has just been released in France, over two years before the cycle begins
UEFA is banking on the rivalry between Canal+/BeIN, the ongoing rights-holders, and Amazon, broadcaster of Ligue 1 in France, and of the CL in Germany and Italy
Prime’s economics point to Amazon sticking to cautious, ‘value’-driven bidding in France. It could expand its limited sports line up in the UK and Spain with the CL, but only if current licensees BT/Warner Bros. Discovery and Telefónica take a step back from 100% coverage
Sky continued to grow its UK revenue thanks to price rises, mobile customer additions, and a rebound from lost hospitality business in early 2021, but this was still outweighed by the recent reset of its Italian operation
Aggregation remains a core focus, with Paramount+, and Magenta Sport in Germany, added to Sky’s bundles, while fibre rollout will intensify with the launch of Sky Stream puck as a standalone device later this year
Declining buying power raises uncertainty over consumer behaviour: in previous recessions, pay-TV performed well, but today subscribers have more video options than ever before