Broadcast licensing revenues for football are likely to be ex-growth in the top five markets in Europe, with some limited upside from sponsorship and out-of-Europe rights. 

The broadcast revenue boom stoked the rise of super clubs with global fan bases, feeding player transfer valuations, and a potential downturn of the latter could magnify the impact of the revenue decline. 

The leagues in Italy, France and Spain are more exposed to the risks of broadcast licensing revenue decline, while the Premier League’s model looks robust.
 

The UK TV advertising market, in decline since mid-2016, could benefit from a liberalisation of advertising minutage if Ofcom reviews COSTA and decides to make changes

Broadcasters could gain from the flexibility to devote up to 20% of peaktime minutes to advertising under the EU’s revised Audiovisual Media Services Directive (AVMSD)

Ofcom could also level the playing field between PSB and non-PSB channels, although more minutes of advertising on TV is unlikely to inverse the medium’s decline

Sky’s Q2 results were encouraging overall, with significant subscriber growth swinging direct-to-consumer revenue growth back to positive. ARPU declined once more, since new streaming customers are taking lower-priced products, but total revenue growth accelerated to 2.4%.

EBITDA rose 20%, primarily due to the dropping out of some large one-off costs. Next quarter, Sky will begin making savings on the new Premier League rights contract, and increased football rights costs in Italy and Germany will have annualised out.

Having launched Sky Studios in June, Sky is focused on producing original European content, with ambitions to double spend over the next five years, in a calibrated response to the Netflix-led race for content.

Sky made a surprisingly weak start to 2019, with revenue growth decelerating to 1.9% (the first time below 4% since the European businesses merged in 2015), due to weaker ARPU trends.

However, Sky expects improvement to follow, blaming one-off factors in the quarter. The ARPU weakness drove EBITDA down 11.3%, but this should bounce back across the rest of 2019 as football rights costs turn from a drag to a positive.

Comcast highlighted collaborations with Sky across tech, advertising, content distribution and even news, stating it is on track to achieve the anticipated $500 million in annual synergies over the next couple of years.

After the heights that Love Island and the World Cup took ITV to in H1, the broadcaster held on over the tougher last few months of 2018 to see growth in ad revenue (0.8%) and total viewing (linear and VOD, 3%).

However, it was the announcement of the subscription video service BritBox—with the discussions around the “strategic partnership” with the BBC in its concluding phase—that garnered most interest.

ITV’s investment in the service is modest when compared to its global competitors—up to £25 million in 2019, £40 million in 2020 and declining thereafter—but it is a prudent low-risk entry into what is an expanding but difficult market.

Linear TV is still a mass market medium, watched by 90% of the UK population each week. However, our latest viewing forecasts predict broadcasters will account for two-thirds of all video viewing in 2028, down from c. 80% today, due to the relentless rise of online video services.

Total viewing will continue to increase as more short-form content is squeezed into people’s days, particularly on portable devices, but the key battleground for eyeballs will remain the TV screen.

The online shift has already had a huge impact among younger age groups, with only 55% of under-35s’ current viewing to broadcasters. Older audiences are slowly starting to follow suit, but have a long way to go.

The BBC’s consultation on rescinding free TV licences for all those aged 75 and over, in whole or in part, has sparked a heartfelt petition from key stakeholder Age UK to restore Government funding for the elderly, which we support.

The Government has put the BBC in the intolerable position of choosing between funding the remit, whose delivery is regulated by Ofcom, and free TV licences for the over-75s, a lose-lose for the BBC, its viewers and listeners.

In our submission to the BBC we highlight the human impact of reduced services and/or higher monthly expenses on the 2 million single-income households, 75% headed by women, for whom the BBC is a lifeline.

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.

Consolidated TV viewing continued its seemingly relentless decline in 2018, falling 5% year-on-year (YOY)—its worst drop since the phenomenon began in 2011.

Meanwhile, unmatched TV set use—which includes Netflix, Amazon and YouTube consumption, as well as gaming—continued its upwards trajectory across all age groups, now accounting for 20% of total TV set time.

Consolidated TV viewing is increasingly reliant on its core viewers, with half of all viewing accounted for by the 20% of people who watch the most, up from two-fifths in 2010.

A string of big, bold hits like Bodyguard, Killing Eve and Little Drummer Girl has reinvigorated the perception of the BBC’s drama schedule, with massive ratings and a coveted place in the public conversation

However, the lack of the broadcaster’s top dramas actually produced by BBC Studios—declining to just 4 of the top 25 in 2018—is cause for ongoing concern

At a time when the BBC is attempting to bulk up the iPlayer and programme IP has become the bedrock broadcasting asset, the BBC could be better placed