Warner Bros. Discovery is grappling with declining legacy cable revenues and its $48 billion debt burden. DTC losses have attenuated but de-leveraging will be trickier post-2023 as many of the easier cost-savings have been achieved.

The US launch of its DTC offering, Max, attempts to dovetail IP from across Warner Bros., alongside Discovery's food, lifestyle and documentary programming, and soon, CNN. Adding sports may prove more challenging.

In Europe, WBD’s rational strategy would be to maintain a mixed distribution strategy, agreeing exclusive deals for its DTC platform with incumbent aggregators such as Sky.

With major studios arguably over-indexed on SVOD, the stickier experiences of interactive entertainment and the metaverse will eventually form a critical pillar of studio D2C strategy, boosting subscription services and tying in closely with consumer products and theme parks.

Disney’s appointment of a Chief Metaverse Officer is good first step, demonstrating a strategic interest in the space. But other major studios remain cautious and distracted, with limited capability beyond licensing to engage in the metaverse for the next 24 months and possibly longer.

Meta will need to provide a strong guiding hand creatively and technically to ensure its new partnership with NBCUniversal is a success, and to evangelise the metaverse and its revenue model across the Hollywood studio content space.

The Warner-Discovery and TF1-M6 merger plans have dramatically pushed consolidation up European commercial television’s agenda.

The first path—heralded by Bertelsmann’s RTL Group—would aim at creating

national broadcasters with the content scale to operate compelling online platforms.

An alternative path revives the never achieved idea of pan-European synergies,

leveraging increased international appetite for non-English language content—but

its champion, Italy’s Mediaset, lacks capacity to deliver. 

Advertising income has been the lifeblood of commercial TV for decades, but declining linear audiences—combined with digital video alternatives—mean the TV advertising model must evolve to ensure it remains as potent a medium for brands as ever.

Lack of effective audience measurement and somewhat opaque advertiser/agency/sales house relationships are hampering linear TV advertising revenues. Both issues need resolving to underpin a healthier ecosystem overall.

Flexibility is key to this evolution. A move to audience buys across most linear and BVOD inventory would provide greater flexibility and targeting for advertisers, and would sit alongside some premium context buys. A greater onus on volume deals would give broadcasters more certainty to invest in content and their advertising propositions.

In the UK, carriage on Sky Q will give the new service the opportunity to prove its worth to viewers. Without integration with the UK's biggest pay-TV platform, growing scale is difficult for nascent DTC services.

Elsewhere in Europe, Discovery seeks to bundle too. Unlike the US, where the company has a single model—basic cable—in Europe it operates both free-to-air and pay channels, and it also owns Eurosport.

Ultimate success will come down to whether Discovery's "real life content" is essential and defensible. Generally there is little evidence of people taking services that are not broad, while the barriers to entry for competitors wishing to commission "real life content" are lower than other genres.

The split of UKTV has been announced with the lifestyle channels going to Discovery, while the balance, along with the UKTV brand and VOD service, retained by the BBC, costing BBC Studios £173 million

In the same release, a new, global Discovery SVOD “powered” by BBC natural history and factual programming was announced, backed by a ten-year content partnership

The deal is a positive step for the BBC, which safeguards against flaky brand attribution internationally and the potential loss of revenues from Netflix, which is becoming more choosy when acquiring content

Across the EU4, pay-TV is proving resilient in the face of fast growing Netflix (with Amazon trailing), confirming the catalysts of cord-cutting in the US are not present on this side of the Atlantic. Domestic SVOD has little traction so far.

France's pay-TV market seems likely to see consolidation. Meanwhile, Germany's OTT sector is ebullient, with incumbents bringing an array of new or enhanced offers to market.

Italy has been left with a sole major pay-TV platform—Sky—following Mediaset's withdrawal, while Spain's providers, by and large, are enjoying continued growth in subscriptions driven by converged bundles and discounts.

Linear TV's decline continued into 2018, with an overall drop of 3% across the first 12 weeks YOY. However, overall TV set usage remained flat at 4 hours/day, as time spent on unmatched activities—which includes Netflix, Amazon and YouTube—continues to rise.

Within the ever-shrinking pie of consolidated viewing to the TV set, share of viewing (SOV) to the ten largest channels remains broadly flat. Across the whole of 2017 and the start of 2018 the best performer has been ITV (main channel).

Several big-name digital channels are showing surprising signs of recent decline, including UKTV’s Drama and Viacom’s 5USA. It is too early to tell if these declines are a blip or a trend. However, they reflect stalling growth from the long tail of digital channels in aggregate. 

In the UK, traditional broadcast television's future appears threatened, as technological developments increasingly allow people to access video content on demand, whether on TV sets or other screens, or from traditional broadcasters or online services.

This report examines the extent to which timeshift viewing, by which we mean personal video recorder (PVR) playback and viewing to catch-up services, has bolstered linear TV.

The linear schedule is still very relevant for both consumers and advertisers, maintaining television’s status as an effective mass medium for building brands.