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.
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.
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.
Radio faces challenges from Spotify and other online audio propositions, while the radio “dial” is challenged by smart speakers and global tech. UK radio broadcasters have risen to the occasion through innovation
New DAB stations have helped radio achieve record audiences and revenues. Combined digital listening is now over 50%, but FM remains the primary platform. The current mix of FM/AM and digital maintains radio’s relevance for the medium term
The long-term future is digital—a wide-ranging sector review is required to determine how to support digital radio’s growth and the question of a future switchover
European mobile service revenue growth was sharply lower this quarter dropping to -0.7% after two years in positive territory, owing to weakness in the southern(ish) European markets of France, Italy and Spain
Iliad has strong momentum in Italy and we expect ARPU dilution to worsen into Q3, with the subscriber loss impact also growing. Any loss of traction for Iliad is likely to drive another round of price cuts
We expect continued north/south divergence in Q3 with the anniversary of the European roaming cuts boosting the UK and Germany in particular whilst the outlook for Southern European operators remains challenging
Recorded music revenues in Japan are stuck in decline as physical sales sag, although 2017 marks the first year when streaming gained a foothold with 8 million subscribers.
J-pop fans spend on 'experiences' with their idols including events, merchandise, CDs and DVDs, which streaming cannot replicate. Top native LINE MUSIC offers integration with a popular messaging app and bundling with mobile.
Serving international repertoire, Apple Music claims more subscribers than Spotify in Japan, which is more localised, and has most users on the free tier. Amazon Prime Music is a looming constraint on the adoption of subscriptions.
Many European telecoms operators are pursuing a fixed/mobile convergence strategy on the pretext that the addition of mobile reduces churn. We see no evidence of churn reduction from this strategy
Discounts required to encourage take-up of fixed/mobile services are often value-destructive, even before competitor reaction: a 10% bundle discount necessitates a 2ppt improvement in churn to wash its face economically. M&A premia on the basis of convergence synergies raise the hurdle even higher
Most UK operators offer very limited discounts on fixed/mobile bundles for now, sensibly focusing on enhanced services. Vodafone is the most aggressive, albeit less so than it is elsewhere. All UK players should hope that it stays this way
Online advertising became the majority of all UK ad spend last year, in step with China but ahead of all other major markets.
Direct response has further increased its share to 54% of UK ad spend, fuelled by the self-serve platforms of Google, Facebook and Amazon, while content media nets just 11% of the online advertising pot.
We estimate that all online-delivered channels - including "pure play" online properties, broadcaster VOD, digital out-of-home and online radio - could account for well over 60% of UK ad spend by 2020, but only with improved commitment to industry governance.