The UK national press remains a ‘big beast’ in UK media, selling 7.2 million copies every day, supplemented by 1.6 million free newspapers; however, the decades long decline in print circulation and advertising has accelerated once again with the take off of smartphones and tablets.

Print still accounts for the vast majority of the nationals’ income, though revenue continues to fall due to declining copy sales and the structural shift of classified ads to the internet; there is also growing evidence that display advertising is declining by more than volume losses in some categories.

Digital is gathering momentum due to acceleration in digital advertising and a shift to pay models. In the UK, where print subscription levels are low, and home delivery lower still, publishers face the obvious challenges of digital transition and migration from a newsstand economy to a consumer relationship mindset.

2013 has seen yet another year of strong growth in consumer adoption of mobile devices and screens adding to the challenges facing traditional media. Press and radio have long been affected, but television is now starting to feel the heat

BT and Sky’s contest for premium pay-TV sports rights has intensified. August saw the launch of BT Sport, while BT’s acquisition of the European football rights in November was a clear statement of intent, spending half of Channel 4’s total programming budget on approx. 200 hours of content

The UK has seen buoyant advertising growth of around 4% in 2013, with similar growth expected in 2014, in the context of the strongest economic recovery in Europe

YouTube (YT) held its first Brandcast in the UK in October, as well as in France and Germany, after staging similar events in the US. Google’s ambition is to compete more directly for brand and TV advertising in these core markets

At this year’s Brandcasts, YT highlighted its position as a complement to TV content and advertising, emphasising unique advertising opportunities for brands to engage with viewers through sponsored YT native and dedicated brand channels, in line with its new ‘brand partner programme’

In direct comparison to TV, online video advertising and viewing remains small. We project UK online video advertising to reach £305 million for FY2013f, representing 8% of TV ad revenue. As the dominant players, Google/YT are well positioned to grow display revenue by securing a large share of brand advertising moving online

The launch of BT Sport and the acquisition of European Champions League and Europa League rights have set the scene for the fiercest of conflicts when the domestic live Premier League rights fall due for renewal by auction in 2015

The scale of BT’s ambitions when translated into spend per percentage share of total viewing across the year are staggering for a national TV industry generating circa £12 billion a year on programming spend of less than £6 billion. The current level of rights payments by BT imply a grand annual total of £100+ billion, if all other parties paid the same rate

So far, BT Sport has performed similarly to Setanta and ESPN in terms of audience share, and with little visible gains since launch in the total estimated base of about 3.5 million households taking BT Sport. However, BT has a long-term vision and 2015 promises to be a crunch year

UK mobile market service revenue growth improved on a reported basis in Q3 to -3%, but was unchanged on an underlying basis, still not a bad result after six consecutive quarters of underlying growth declining, albeit in the context of rapidly improving macroeconomic conditions

All four operators now offer 4G services, with O2 and Vodafone launching within the quarter and H3G in December. EE will nonetheless maintain its coverage and speed advantage for 2014, but others (most likely Vodafone) may challenge thereafter. H3G is offering 4G at no extra cost, reflecting its focus on unlimited data and meeting the capacity requirements for this, and O2 has recently cut its 4G tariffs to match those of 3G (but with a high minimum entry point), leaving EE the only operator with an explicit 4G premium

The overall outlook is mixed – we would expect some improvement to revenue growth into 2014 as the MTR impact wears off and the dilutive effect of unlimited tariffs wane, but this may be countered by a lack of mid-contract price increases, and while 4G is likely to benefit all as it drives data volumes and encourages package upgrades, the impact will be gradual

Revenues from traditional directory advertising products are continuing their rapid descent as social and mobile services become an increasingly popular tool in SME marketing activities as a supplement to online search

Hibu (formerly Yell) and other local media companies have responded to the shifting landscape by developing comprehensive marketing agency solutions for SMEs

In addition to these new service options, SME advertising spend will be effected by improving local service economies, rapid growth of mobile consumption and the continuing rise of e-commerce in the UK, while we believe that the decline of print has left a gap in local online display that is yet to be filled

The Court of Appeal held full day hearings on 5 and 6 December 2013 in response to the appeal by BT against the earlier verdict of the Competition Appeal Tribunal (CAT) published on 12 August 2012 that the core competition concerns that led to Ofcom’s Wholesale Must Offer (WMO) remedy were not justified by the evidence

Although it may take some weeks or months before the verdict is published, the hearing appeared to run in BT’s favour (contrary to what we had anticipated), as the judges seemed convinced that the CAT had made an important mistake in not assessing whether Ofcom’s price proposals were a reasonable response to Sky’s dominance in retailing premium pay-TV sports

It looks as though the Court of Appeal will send the case back, saying that the CAT must now properly examine whether Ofcom’s WMO price levels were set carefully and appropriately. The CAT will not redo Ofcom’s work but rather it will check that its methods were reasonable and well thought through

BT’s case that the Competition Appeal Tribunal failed to address the reasons why the premium sports market works badly will finally arrive at the Court of Appeal tomorrow. We think BT’s chances of success are low, though a win would substantially enhance its competitive position in its battle against Sky BT’s complaint is that it has always wanted to retail Sky Sports channels, however Sky has always been unwilling to wholesale them, thereby resulting in no prospect of effective competition in the provision of premium sports on TV Ofcom implicitly endorsed BT’s position when it introduced the Wholesale Must Offer remedy. However, Sky took its case to the Competition Appeal Tribunal, which overturned Ofcom’s WMO remedy on the grounds of misinterpreting the evidence, only for BT to retort by taking its case to the Court of Appeal, which is to deliver a final verdict on whether BT is disadvantaged by Sky’s alleged anti-competitive behaviour

In this presentation we show our analysis of revenue growth trends for mobile operators in the top five European markets (UK, Germany, France, Italy and Spain). The historical analysis is based on the published results of the operators, although they include our estimates where their data is inconsistent or not complete. A copy of the underlying data in spreadsheet format is available to our subscription clients on request

The UK residential communications sector again had a strong quarter for revenue growth, with reported growth from the top four operators at 5%, or around 4% excluding the one-off impact of extra BT Sport related revenues

Unfortunately cost growth was even stronger, with margins dropping at three of the four largest operators. The aggressive launch of BT Sport has driven up content costs, marketing costs or both for all of the operators

The main issue going forward will continue to be actual and potential disruption relating to BT Sport. Content and marketing costs have likely been set at a new higher level, with further increases possible up to and following mid-2015, when the next Premier League auction is due and BT takes over the Champions League rights