Market revenue growth slowed to under 1% in Q4, driven by consumers economising in tough times through re-contracting and dropping add-ons.
Early 2023 is likely to be worse, with growth likely to turn negative again in Q1, again driven by ARPU with volumes more robust.
April price increases will give at least a temporary boost, but need to be managed very sensitively to avoid reputational damage and churn.
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.
60% of Chinese online ad spend is directly driven by ecommerce, compared to 40% in the West. The gap will close as content and ads move closer to transactions.
General search engines are not central to the customer journey in China: Baidu fell below 10% of online advertising last year, compared to Google’s c.55% share in the UK.
The Chinese model now has a vector to the rest of the world in the form of TikTok, whose parent company ByteDance added more retail GMV in China than Alibaba last year. TikTok wants to grow video shopping in the West, targeting a huge $470 billion in transactions by 2027.
Market revenue growth continued to accelerate in Q2 to reach 3%, but broadband growth worryingly dipped as the lockdown boost waned.
Differing pricing dynamics (among other factors) led to very different outcomes for the main players, with BT’s growth surging to 7% while VMO2’s revenue stayed in decline.
Underlying trends of weakening broadband growth, keener pricing and customer bargain seeking point to slower growth ahead … until the next price increase.
UK altnet full fibre rollouts are accelerating, with an aggregate build pace close to that of Openreach, but customer acquisition is not growing at the same pace, and overbuild in the most attractive areas is becoming a significant issue.
Altnet business models remain challenging and are getting worse as Openreach builds out, and (although there are some notable exceptions) most will need to rapidly achieve scale and turn around their performance to survive.
Consolidation is very likely, along with business failures, and while some market share loss for Openreach looks likely as serious scale players emerge, the downside is limited, and even more so for retail ISPs.
Whilst we remain sceptical of the churn reduction benefits of fixed/mobile convergence, the pandemic and a more astute approach from the operators is enhancing the case for it in the UK.
Creating the impression of a giveaway whilst minimizing the effective discount is key, as is extracting any loyalty and cost benefits.
Even if well executed, any upsides are likely to be modest. Operators are right to keep discounts to a minimum and to avoid M&A premia predicated on fixed/mobile convergence synergies.
TikTok has reached a billion users worldwide just four years after its global launch, much quicker than social media rivals, though its ban in India is a drag on growth.
TikTok’s popularity with under-25s has contributed to a hollowing-out of Meta’s active userbase. During the pandemic, TikTok also expanded its reach among older demographics, cementing its position within the mainstream and posing a further threat to Meta.
TikTok could earn twice as much revenue as Snap in 2022, making it the first app to break out of the mid-league in years, with a huge runway for growth backed up by ByteDance’s remarkable success in China.
The pandemic accelerated the print revenue decline of consumer magazines in the UK, plunging 12% in 2020; less than half of 2020 industry revenues are due to print. Larger publishers and established titles (e.g. The Economist) will survive the UK’s journey through the pandemic whilst ecommerce, a growing revenue stream for publishers, booms under work-from-home
Publishers now distribute content across multiple channels and reader touchpoints, blurring the lines of what a magazine is today. A focus on the reader economy has finally emerged, enhancing other revenue streams for brands in the right verticals. Execution relies on investment in the tech stack
Future is the UK star, led by its ecommerce revenues from surfacing products and services to readers. This prime position has allowed it to build further scale and consolidate titles from TI Media and Dennis. Despite Future’s successes, there is no single industry playbook as heterogenous titles and portfolios forge their diversified, digital paths
The press industry lost £1 billion off the topline from the calamitous decline in print revenues due to pandemic-related mobility restrictions, partly offset by gains on digital subscriptions, much harder to precisely size in revenue terms.
Trapped at home for the most part, online traffic to BBC News and news publisher services boomed. Popular news sites marginally grew digital advertising while the quality nationals attracted 800,000 new paying subscribers to reach nearly three million in 2020.
The outlook for 2021, in the transition to the ‘new normal’, is mixed. Consumer work patterns and news, information and entertainment habits are unlikely to ‘bounce back’ to pre-pandemic levels, placing free commuter titles at particular risk. Signs of confidence through online innovation are welcome.
With a lack of live sport, the lockdown weighed on incumbent pay-TV platforms’ subscriptions. SVOD providers leveraged their cheap positioning—Netflix and Amazon Prime Video now rank above other subscription services in Europe, and Disney+ had a successful launch.
Incumbents—Sky, Canal+, Movistar+—all pursue a twin-track strategy. They are positioning themselves as gatekeepers thanks to service bundles, while redirecting resources away from sports towards original series.
European productions are increasingly garnering audiences outside of their home markets, regardless of the production language. Netflix is a major conduit for European exports, due to personalisation of the interface and high-quality dubbing.