For the media and entertainment industry the dawn of the metaverse, and the word soup of acronyms that accompanies it, is the latest high-profile technology wave that threatens to simultaneously upend established distribution models and reinvent both the experience and the relationship with the audience.

Music is the media sector (outside gaming) that has moved fastest to experiment with metaverse applications, so far mainly on gaming platforms like Fortnite and Roblox, which provide a ready game-centric audience but offer little lasting innovation.

Music's metaverse potential beyond gaming is huge, led by artists who want a more dynamic online presence, though we anticipate a long trajectory towards mainstream applications as questions remain around formats, design, platforms, and monetisation.

The pandemic years boosted many businesses selling services on subscription in the UK: work-from-home gave people more time and money to widen the services they enjoyed in the home, such as gaming, entertainment and music, also boosting engagement with trusted news

The cost-of-living crisis dented the number of subscribers to OTT SVOD and news services in Q2 2022. Broadband and mobile are must-have; bundles of services (e.g. Sky’s pay-TV and broadband or mobile) are more resilient; yearly and multi-year contracts prevent churn relative to monthly contracts; and services that cater to passions (e.g. football) are always need-to-have

Subscription (or supporter) media and news services reaped the demand for trusted news through the pandemic, but now face a tough challenge to their toplines from the economic downturn—and also to transition to a sustainable business model for media audiences, while advertisers are also feeling the heat

BT Group’s revenue growth surged in Q1 to 1%, the first time it has been positive in five years, with a stronger than expected boost from the April price rises partially offset by the Virgin Mobile MVNO loss.

EBITDA growth, however, actually dipped to 2%, with little operating leverage due to cost pressures, although the company is still very confident in its full year EBITDA guidance (which implies 4% growth).

BT is far from immune to macroeconomic pressures, with pressure on costs, corporate revenue and signs of a sharp dip in broadband market growth, but it is well placed to deal with them given strong growth at Consumer and Openreach.

Streaming had a strong 2021 with royalties to rightsholders, labels and music publishers increasing by 24% to $16.9 billion (IFPI). Spotify drove the segment’s rise as the leading service by users and subscribers (422m and 182m) followed by subscription services Apple Music and Amazon Prime Music, while YouTube is both ad-supported and subscription

Spotify’s 2021 revenue growth of 22% was powered by user growth (+18%) around the world on the subscription (16%) and ad-supported tiers (19%). User growth represented a deceleration from the pandemic-induced exceptional rise of 27% from 2019 to 2020

Spotify reports royalties generated by artists on its Loud and Clear platform. The number of artists in 2021 generating material revenues—over $10,000—increased by 24% to 52,600. 28% are ‘self-distributing artists’ using services such as Distrokid, TuneCore, CD Baby—the number almost trebled since 2017

BT had a solid Q3, with some mixed results but key metrics all improving, and a (perhaps unsurprisingly) slow post-lockdown recovery the only negative.

The price increase in April should drive dramatic (for BT) revenue and EBITDA acceleration at Consumer, Openreach and BT as a whole, and easily cover pressures within BT’s own cost base.

Longer-term growth is dependent on FTTP performance, which continues to look promising with improving metrics across the board in the quarter, and no news is good news in terms of ISPs signing with competitor networks.

Epic Games, maker of mega-hit Fortnite, sued Apple over alleged antitrust violations around App Store rules and Apple’s 30% tax on in-app transactions. A decision could come soon, though it will be contested on appeal.

The implications of the case could be far-reaching, as Apple and other tech companies like Google design their platforms to extract high-margin revenue from the transactions they facilitate, including news subscriptions: a five-year basic in-app subscription to The Times costs £885, of which Apple takes £158. 

It comes in the context of a flurry of debate and decisions around tech antitrust and consumer protection: new laws may ultimately be needed, but regulators in the US and UK are proving they can be creative with their existing tools. 

Apple is bringing in privacy changes on iOS that could hurt ad-funded apps. 

Responding to platforms’ legitimate push for user privacy is a trial for regulators in the midst of building new online antitrust regimes. 

Antitrust rulings are chipping away at the App Store’s stringent terms of use, but reforms will keep it at the centre of the iOS universe. 

Spotify paid $5 billion in royalties last year to the music industry. Critics claim the $0.0038 per-stream average royalty rate is too low. However, this is largely due to high volumes of ad-funded listening, a core part of Spotify’s freemium model, and a defence against piracy. 

To silence the critics, the “Spotify Loud & Clear” site presents data on the distribution of industry royalties, which are heavily skewed to established artists. Only the top 5% of artists generate annual industry royalties above $1,000, though they take home less under their deals. 

The remaining 95% of artists on Spotify generate under $1,000 a year and use the platform mainly to reach fans that attend live gigs, their primary source of income, now halted by the virus. These artists’ problem is digital discovery, as Spotify’s playlists push hits rather than the midlist. 

BT’s revenue growth remained very suppressed in the September quarter at -7%, with a limited COVID-19 recovery chocked off by seasonal roaming effects and regulator-inspired pricing forbearance.

EBITDA growth did improve to -3% from -7% last quarter, mainly due to short-term cost actions and the early impact of its longer-term cost program, and the company has upgraded its short- and longer-term EBITDA targets.

The company is also optimistic on a longer-term return to underlying revenue growth, helped by a return to regular existing customer price increases and the impact of full fibre, but not until 2023, with a few bumps in the road before then.

Premium sports subscriptions are the primary sector weakness in the current crisis, and they look set to drive fixed operator revenues down 10% next quarter and Sky’s EBITDA down by 60%.

As lockdown eases, latent broadband demand can be more easily sated, and sports subscriptions will bounce back from the September quarter. A surge in working-from-home is likely to increase both the quantity and quality of home broadband demand, with ‘failover’ mobile backup also likely to be of greater interest.

Openreach will benefit from accelerated demand for full fibre, converged operators will be best-placed to offer mobile backup for broadband, and operators with a strong corporate presence will most easily target demand for home-working products.