Sky posted yet another set of solid results, with revenues up 5% and operating profits up 10%, despite weakening operating metrics in Germany & Austria.
Deals with Netflix and Spotify will enhance the customer experience, signalling Sky’s confidence in its platform, perhaps a sign of further deals to come.
A successful outcome from February’s Premier League auction sealed the prospect of a takeover battle for Sky, with Comcast launching its formal bid this week.
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.
BT Group revenue growth held steady at -1.5% during the quarter, but this was helped by some recovery in the (still declining) Global Services division, with weaknesses appearing in a number of other areas
BT Consumer is of particular concern, with revenue growth turning negative as a result of declining volumes and weak ARPU growth, which are driven by industry-wide trends that are hard for BT to avoid
Looking forward, the March quarter will be flattered by an overlapping price rise at BT Consumer, but thereafter pressures will resume, with few obvious sources of upside on the horizon
BT and Sky’s content cross-wholesaling deal much reduces their risks of losing packages in the upcoming Premier League auction, with most of the strategic platform value of exclusive sports rights now wiped out.
The PL auction structure offers more games but less value, with the two smaller packages particularly unattractive, which cleverly nudges BT to retain a more expensive package, and thus most of its spending, if it wishes to downsize.
While demand from all potential rights buyers appears weak, paying less money to retain the same position will be challenging for the incumbents Sky and BT given high minimum package prices, with courage necessary to force these minimums to be reassessed
The Premier league (PL) will be hoping for another huge increase in rights payments in the upcoming auction for the three seasons starting 2019/20.
Aggressive competition between BT Sport and Sky has led to hyperinflation of most premium sports rights. Sport now accounts for two thirds of multichannel content spend, but only 8% of its viewing.
BT’s current financial position makes it difficult to justify expansion or further hyperinflation of its PL rights portfolio, but it cannot withdraw completely.
BT had a reasonable quarter in its consumer broadband business given market pressures, and a very strong one at EE with continued growth acceleration. It had a good quarter for fibre adoption as well, helping its wholesale divisions stabilise their revenue, but business/IT was weak as expected
Regulatory pressure remains intense despite the (welcome) Openreach agreement, with price cap regulation proposed or due on a range of products, and a regulatory approach which is far from investment-orientated
Pressures in the business/IT market are likely to continue, and pressures in the consumer broadband market are likely to intensify, justifying BT’s current cautious approach to guidance and dividends
Our latest forecasts point to the continued strength of DTT within the UK broadcast market. We predict DTT-only homes will account for 42% of TV viewing ten years from now, up from 38% today.
Much of this is due to the UK’s ageing population profile, since DTT skews older. The number of over-45s in DTTonly homes is set to increase by 13% by 2026.
The other key factor is the continued growth of flexible pay-lite services—for example, Netflix and NOW TV— which are of greater appeal to younger audiences.
Enders Analysis co-hosted the annual Media & Telecoms 2017 & Beyond conference in conjunction with Deloitte, Moelis & Company, Linklaters and LionTree, in London on 2 March 2017.
This report contains the slides used by Tom Mockridge, Matthew Kirk, Andrew Griffith, and Geoff Moelis.
Enders Analysis co-hosted the annual Media & Telecoms 2017 & Beyond conference in conjunction with Deloitte, Moelis & Company, Linklaters and LionTree, in London on 2 March 2017.
The day saw over 450 senior attendees come together to listen to 30 leaders and senior executives of some of the most creative and innovative businesses in the media and telecoms sector, and was chaired by David Abraham.
This report provides edited transcripts of the presentations and panels, and you will find accompanying slides for some of the presentations here.
Videos of the presentations are available on the conference website.
The latest auction of UEFA Champions League televised UK rights has seen further high 32% inflation as BT renewed its ownership for the three seasons from 2018/19 for an annual payment of £394 million
Although BT annual payments are to increase by £95 million from 2018/19, the new contract offers added commercial attractions, though we expect BT’s efforts to monetise them will fall some way short of the cost increase
However, BT had to win to cement its position against Sky as a strong number two in UK premium pay TV and we expect weaker future inflation of premium football rights. For Sky followers, the focus is now on the UEFA auctions in Germany and Italy, where the outcome is far from certain