Sky has withstood the consumer crisis better than its telco peers, but owners Comcast are stepping up pressure nevertheless.
No buyer for its German unit has yet emerged. In Italy, the outcome of the ongoing Serie A rights auction will shape that company’s growth prospects.
Looking forward, Sky has built a solid content supply line and is likely to strengthen further from the deflation following the end of the SVOD bubble.
Recorded music streaming revenues rose 11% in 2022 and we estimate Spotify’s contribution at 1/3—Spotify added 25 million Premium Subscribers in 2022, growing its recording and publishing payouts to the music industry to $8-9 billion.
Spotify’s Loud & Clear resource shows that the long tail of artists generating royalties between $1,000 and $10,000, of which many are self-distributing, rose 16% to 175,500—75% of all those generating over $1,000.
Spotify’s open platform for uploads grew the long tail to over 100 million tracks in 2022. Major labels are seeking to change the pro rata royalty payout model on Premium to address the siphoning of royalties by fake music, clips and bots—a looming threat to creators is AI-generated music.
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.
Consumer tech revenue growth ground to a halt by the end of 2022.
Changes in technology and user behaviour are creating risks for incumbents.
Shareholder pressure is driving efficiencies, but high costs are an inevitable response to growing challenges.
Providing home broadband connections via a mobile network (FWA) is gaining traction in certain markets where local conditions make it a viable alternative to fibre, such as New Zealand, Italy and the US.
FWA is a time-limited opportunity for most, with mobile traffic growth absorbing capacity for it and fixed traffic growth depleting the economic case. An ultimate shift to fibre is the best exit strategy.
In the UK, H3G's spare capacity could support up to 1 million FWA customers on a ten-year view—enough for a meaningful revenue fillip for H3G, but not enough to seriously disrupt the fixed market.
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.
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.
A combination of factors drove the worst quarter ever for big tech growth, though the secular shift online of the economy and society will continue.
Advertising demand is down, reflected in lower prices. Ads did better the closer they are to transactions, with variability by category.
Efficiencies and AI are the investor-soothing buzzwords going into 2023.
This report is free to access.
Cross-party support for an 11th hour amendment to the Online Safety Bill’s Commons report stage has forced the Government to agree that a new criminal liability for tech executives will be added in the Bill’s passage through the Lords.
The proposed amendment cites faulty precedents, including in financial services, and a new, not yet established Irish online safety regime that is lengthy in procedural steps before criminal sanction.
The introduction of criminal liability will not strengthen the safety objectives of the bill. It is at odds with the approach of the wider regulation, and is practically unworkable.
The amended Online Safety Bill contains sensibly scaled back provisions for “legal but harmful” content for adults, retaining the objectives of removing harms to children and giving users more choice. However, this comes at the expense of enhanced transparency from platforms.
News publishers have won further protections: their content will have a temporary ‘must-carry’ requirement pending review when flagged under the Bill’s content rules. Ofcom must keep track of how regulation affects the distribution of news.
The Bill could be further strengthened: private communications should be protected. Regulators will need to keep up with children’s changing habits, as they are spending more time on live, interactive social gaming.