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. 

Virgin Media’s subscriber boom continued into 2021, despite a marked price rise in Q1, benefiting from lockdown and continued demand for higher speed broadband.

ARPU remained weak in Q1, suppressing revenue growth, but this will recover (somewhat) in Q2 as the price rise takes effect, countering the current disconnect between volume and revenue growth.

The merger with O2 is set to complete in June, with much operational pre-merger preparation already done, but the key strategic questions appear yet to be decided.

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.

Despite relying on a narrow IP base, US content production is booming, overwhelming other markets and seeking alternative distribution to cinema.

Responding to the rise of Netflix and Amazon Prime, studios seek to shift distribution from wholesale to retail—but only Disney may succeed.

Most content is likely to remain accessed by consumers through bundles. Provided they engage with aggregation, European broadcasters can adjust to the new studio model.

Market revenue growth sunk back to -3% in Q4 from -2% in Q3, with further backbook pricing and lockdown effects to blame .

Backbook pricing will improve with numerous price increases announced, but these will only start to take effect in Q2 2021.

Demand for broadband and ultrafast looks promising, but will also take time to filter through to revenue, with Q1 again lockdown-affected.

Ofcom’s full fibre regulation statement, released today, is largely as trailed, i.e. it allows BT’s Openreach considerable relaxation of wholesale pricing in return for building out full fibre.

On the longer-term regulatory prospects, Ofcom continues to be fair but more obtuse than it could and should be, unnecessarily dampening investor enthusiasm. Ofcom will decide on a case-by-case basis whether to allow Openreach to offer geographic/volume discounts, using slightly contradictory principles.

The publication and increased certainty may allow BT’s Openreach to extend its full fibre roll-out further, faster or even with external financing. The build plans of others will come under increasing question.

BT’s December quarter results were mixed, with revenue growth improving but EBITDA growth worsening, and next quarter will be hit by the effects of lockdown 3 on mobile, with B2B likely to be hit by business failures following the end of furlough.

BT has maintained/nudged up its financial guidance regardless, and there are plenty of positive longer-term signs, with subscriber growth strong in the quarter, pricing pressure easing, and full fibre roll-out and adoption progressing nicely.

Overall, we expect the road to continue to be bumpy, but a recovery by 2022/23 still seems very plausible, ultimately driven by the wholesale and retail benefits of full fibre, and perhaps helped if it can get ‘Digital’ right, a particular challenge historically for BT.

TalkTalk’s latest results were mixed at best, with ARPU and revenue growth improving off a low last quarter, but net adds worsening, EBITDA falling sharply and full year EBITDA guidance suspended.

Its outlook remains challenging, with the move to high speed still a drag on EBITDA, and the migration to ultrafast a further (even greater) challenge, although this brings opportunity as well, especially if the company can move away from its discount brand focus.

Its prospective new owners highlight the need to invest in brand, systems, and full fibre capabilities to meet this challenge, but it is not clear where the money to do this is coming from, and it is also not clear if the desire to ‘reposition the brand’ includes a move upmarket.

Market revenue growth fell in Q3 to below 1%, and may drop below zero next quarter as existing customer pricing comes under more pressure

New customer pricing is however rising, and average pricing should rise much further as ultrafast increases in availability and popularity 

Political enthusiasm for full fibre should be welcomed, although some specific plans are likely to do more harm than good if implemented literally
 

With pay-TV competition faltering, UEFA is aiming to stimulate demand for 2021-24 TV rights with early auctions, a possible relaunch of FTA broadcasts, and even, unrealistically, by considering an online service of its own

In the recently completed UK auction, facing no major threat from Sky, BT kept the rights at an almost flat price – probably missing a cost saving opportunity

In the upcoming auctions on the Continent, with former buyers such as SFR, Mediaset and Vodafone having cut back on premium sports, the major platforms’ bids will probably be unchallenged