Market revenue growth plummeted to -2% in Q1 2020, with a lack of premium sports pay TV revenue the biggest factor.
The lockdown is also reducing churn and firming up pricing, but it is unclear how long this will last post-lockdown.
Pay TV revenue trends will continue to dominate next quarter; thereafter the battleground will move to ultrafast.
The COVID-19 crisis is compounding the already grim revenue prospects for upcoming football rights sales in continental Europe.
The financially weakest leagues in Italy and France are especially exposed. Serie A is exploring deals with private equity firms, with the pros and cons finely balanced.
There is a window of opportunity for Sky and Canal+—the adults in the room—to build coalitions with selected clubs to nudge leagues towards needed reforms including longer licence terms, reducing the number of clubs and more equal revenue splits.
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+
BT’s March quarter appeared to have been going reasonably well until COVID-19 hit, with full year guidance still being broadly met, but the new financial year will be hit harder, with BT Sport, SME and new fibre connection revenue particularly vulnerable.
BT’s full fibre roll-out has been temporarily slowed by COVID-19, but it is accelerating its ambitions regardless increasing both its 12-month (4.0m to 4.5m) and longer term (15m to 20m) coverage targets.
BT is suspending and then rebasing its dividend, in part to cover the above costs. While we regard BT’s fibre investment as a good one, investors and analysts alike have been frustrated by a lack of clear multi-year guidance of the benefits, perhaps as a result of BT not wanting to reveal its negotiating hand to the regulator, government and retail partners.
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.
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.
Amazon aired its first set of Premier League matches in December, with proxy figures supporting reports that it attracted up to 2 million concurrent viewers
Amazon Prime penetration soared in Q4, backing up Amazon’s claims that record numbers of new members signed up on the first two days of its football coverage—an encouraging sign at the time of year when ecommerce spend peaks
As long as Amazon remains principally an online retailer, bidding for premium packages of Premier League rights cannot be justified. In fact, it could retrench from Premier League football altogether after wringing out the value over three seasons
At the Enders/Deloitte Media & Telecoms 2020 and Beyond conference the economic and policy importance of telecoms infrastructure was a major theme, particularly in the current climate.
Operators envisage a pricing environment that will continue to be very challenging.
Help is required to secure infrastructure investment, deliver the economic upside from 5G, and level the playing field between sub-sectors.