The UK continues to lead the EU5 in take-up and consumption of video-on-demand services, with close cultural alignment and a historic williness to pay for TV content making it a receptive home for US SVODs

Netflix dominates in most markets, benefiting from high-profile US imports and big-budget local productions. Local SVODs are struggling, with those operated by FTA broadcasters facing considerable challenges

Collaboration between local broadcasters and pay-TV platforms is essential if they are to hold at bay the threat of Netflix and co., with an increasingly favourable regulatory environment opening the door for unprecedented collaboration

The Competition and Markets Authority (CMA) halted the merger of the publishing assets of Trinity Mirror and Northern & Shell, and is inquiring into the merger’s likely impact on competition in the national newspaper market

The CMA will take into account efficiencies of £20 million in newsrooms, printing and advertising sales, which if realised could help sustain national news provision in a failing print market transitioning to digital services

Secretary of State (SoS) Matt Hancock has issued a Public Interest Intervention Notice (PIIN) citing newspaper public interest (PI) grounds, on concerns the TM/N&S merger may be contrary to the public interest

Trinity Mirror’s proposed acquisition of Northern & Shell’s newspapers (Express and Star) and magazines reflects a hunger for consolidation among corporate media, creating scale positions while entrepreneurs step back

The deal makes strategic sense for Trinity Mirror, with material cost savings in printing and back office, and some scale benefits in advertising: important developments if the industry is to generate a differentiated digital offering

DCMS’s announcement of a review to sustain quality national and local news provision sets some welcome mood music for the sector, but the Trinity Mirror acquisition may still face regulatory hurdles

Sky H1 results were very solid, maintaining 5% revenue growth and 10% EBITDA growth, with Sky continuing to support a widening product portfolio and more expensive core products with strong cost control and execution

Subscriber volume growth was a little weak at the margin, but this will be helped by all-IP products expanding the economically addressable base in new, and existing, markets 

There remain questions on content, with the outlook for premium football rights uncertain in the UK and Italy, and investment in Originals questionable given a mixed track record, but certainly with upside

21st Century Fox and Sky plan to notify their proposed merger to the European Commission, perhaps by March, and obtain clearance on competition grounds, as rapidly as in 2010.

The merger could also face, along the lines of 2010, a separate regulatory process in the UK on media plurality grounds, by a decision of Secretary of State Karen Bradley.

If the UK process happens, Ofcom will provide its advice on the merger’s impact on news and current affairs, whose consumption has shifted massively online since 2010.

FY 2016 has been an excellent year, with all three Sky markets showing improved performance as Sky delivered 7% revenue growth (5% after adjusting for 2016 being a 53-week year) and 12% increase in operating profit

The success reflects Sky’s commitment to product and service innovation and diversification in an increasingly fragmented marketplace combined with tight control of back office costs and focus on synergies

As a measure of its success, Sky has set new cost synergy targets of £400 million annual run-rate by FY 2020 and is aiming for continuing middle to high single digit growth in revenues, which should let it comfortably absorb the rising costs of Premier League and Bundesliga live televised rights under the next contracts

The award of the match packages in the 2017-21 domestic football rights auction in Germany is probably optimal for Sky (within the “no single buyer” constraint): it will broadcast about eight out of nine weekly fixtures including the top picks, while Eurosport’s package is complementary to Sky’s rather than substitutional

Sky will, however, pay a hefty price, with the new contract costing 80% more than the current one – although the new Bundesliga rights value is not out of line with other Continental leagues

We expect Sky’s German operations to briefly break even in fiscal 2017 before falling back into losses with a return to profit if other costs are kept under control. Management has made a bold statement of self-confidence: building scale is the priority

The decline in print display advertising in national newspapers accelerated to -16% in 2015, while growth in digital advertising is slowing, and will be unable to offset revenue decline for the foreseeable future.

We believe this decline is structural and irreversible, continuing at a sharper pace than before despite the recovery in the UK economy in 2013-2015, and very different from the cyclical decline of 2009.

Publishers must convince brands and agencies that in the mobile era their superior content environments have added value. If scale newsrooms are to survive, costs must be reduced through collaboration and outsourcing.

• The Commission proposes to require VOD services to implement a 20% share of EU works in catalogues, which Netflix already largely meets
• More impactful is the EU’s proposal for OTT SVOD services to provide access to the home service when subscribers travel in the EU, benefitting the UK’s 14 million subscribers
• TV broadcasters, which observe a 50% EU works threshold in their linear programming served on TV platforms and online players, will be able to opt-in to portability

At present, Sky exclusively holds all pay-TV domestic live rights to Germany’s top football league. The 2017-2021 rights auction will conclude in early June. It contains a new soft ‘no single buyer’ clause referring solely to online rights

Sky’s real threat comes from potential bids for the main TV packages by deep-pocketed telecom or digital platforms. This could see Sky losing games and shouldering significant cost increases

We think Sky’s German operations will break even by fiscal 2017. Beyond this, profitability is heavily dependent on the auction’s outcome. If it were to retain all live rights, Sky could afford to increase Bundesliga costs by up to 40% over the four-year period. Anything beyond this would lead to Sky making losses