Netflix had an excellent first quarter in 2020 with the tail end encompassing lockdown and likely eliminating churn, as usage exploded
Looking forward, there are lessons to be learnt from Netflix's performance in the US market, which is maturing and stabilising: we model strategy around pricing, content spend and subscription-tier mix
However, differences in other markets remain stark—such as the varying propensities to absorb price rises, and the attachment to locally-produced content
The slow recovery in UK mobile continued this quarter with a 1ppt improvement in service revenue trends.
In spite of operator guidance to the negative, the sector is likely to remain relatively resilient in the face of COVID-19 in the short term, with its various impacts affecting operators differently depending on their business mix.
The outlook is relatively robust with the impact of some regulatory initiatives muted by lockdown measures and the annualization of some financial drags from the middle of next quarter.
For an unproven service to attract 1.3 million active users in its first five weeks is impressive. But by its own account, Quibi’s launch underwhelmed.
Sizeable subscriber targets—7 million by year one and 16 million by year three—justify a level of spend never seen in short-form video, but are ambitious for an experimental start-up with limited brand equity.
The service’s failure to recognise the social side of mobile media, restricted use case and, critically, lack of a hit show increased scepticism of product/market fit. Now Quibi must adapt the product with knowledge of user preferences and reassess its targets, provided it can afford to do so.
Sky posted understandably weak results for Q1, amid the ongoing COVID-19 crisis. Revenue fell by 3.7% year-on-year, with most sports subscriptions on pause and advertising markets in shock
The company has guided to a 60% fall in EBITDA over the next two quarters, as it bears the extra costs of a very condensed sporting schedule, but much will depend on what level of rebate it negotiates from the rightsowners for the disruption
On screen, Sky faces similar production issues to other broadcasters, but it has continued to enhance its platform gatekeeper role and strong content offering, most recently by integrating Disney+
The UK lockdown since mid March has boosted TV time to levels not seen since 2014, with broadcast TV and online video each growing by nearly 40
minutes/person/day
While trends vary significantly by demographic, news consumption has been a common catalyst for linear TV’s growth, benefitting the BBC above all. Although Sky News has also flourished, Sky’s portfolio has been seriously impacted by the lack of live sport
2019 extended many of the long running trends of the last decade, but, notably, online video’s growth rate appeared to slow among youngsters, in contrast to older demographics. 35-54 year olds watching more VOD will have significant implications for linear broadcasters down the line
When we look back at consumer expenditure on pay-TV and alternative entertainment options during past economic downturns across major countries, we find a broad confirmation of the industry’s comparative resilience.
Also found are variations between services sold through annual contracts and cancel-anytime rivals, a negative impact on big-ticket products, and opportunities for substitutional services.
Unique features in the current crisis include the suspension of sport broadcasts and an SVOD-rich offering which widens consumer options. If hardship persists, incumbents like Sky could face tougher times than during the financial crisis.
European mobile service revenue growth improved by 1ppt to -1.2% primarily as a consequence of diminished competitive intensity in France. Trends elsewhere were largely flat.
The mobile sector is playing an important role in tackling COVID-19 and is likely to be relatively resilient in the short term with a broadly neutral financial impact. Longer term it will be exposed to the fortunes of the economy.
There are reasons to believe that the improvement in trends evidenced in the last quarter may continue as churn reduction takes the heat out of some markets, cuts to intra-EU calls annualises out and for most countries, end-of-contract notifications will only begin to impact in 2021.
Demand for telecoms capacity is booming, and the networks can (broadly) cope, with the increase primarily in off-peak demand. However, as the crisis continues, maintaining resilience becomes more challenging.
In the short term, the demand for ample, reliable connectivity coupled with reduced churn will add resilience to operator financials, although there may be significant weak spots especially in business markets.
However, as the crisis goes on, the pressure on capacity and network maintenance may grow, and the impact of the dramatic economic slowdown on consumers and businesses will also put pressure on financials.
In a likely scenario, the suspended football season could be concluded in empty stadiums in a June and July rush, nevertheless with severe financial consequences.
Pay-TV incumbents like Sky face limited risk—at worst they lose four months of subscription revenue for games already paid for. No-contract services such as DAZN must anticipate a more severe shock.
To limit disruption, pain will have to be shared across the supply-chain with players’ pay first in line. But fast coordination in a continent-wide, multi-layered industry is challenging; in places, the issue may turn political.
The UK mobile market was steady this quarter at around -2% ahead of out-of-contract notifications hitting from February.
The mobile sector is playing an important role in tackling COVID-19 and is likely to be relatively resilient in the short term with a broadly-neutral financial impact. Longer term it will be exposed to the fortunes of the economy.
Elsewhere, there have been green shoots of positivity in the outlook: some good regulatory news; a degree of price inflation; Carphone Warehouse’s retreat is a positive for the operators, and some financial drags will drop out as the year progresses.