After ten years of top line decline, the total recorded music market stabilised in 2004 at $34.4 billion, but our view remains that specific factors rather than fundamental change in the key market and economic drivers explain this stabilisation. These specific factors included a 9% average retail price decline in the US leading to a 1.4% unit sales increase, a creative resurgence, and the adoption of digital sales by iPod enthusiasts. However, the CD format resumed its long-term decline in the second half of 2004 and we expect this decline to continue.

This price increase brings H3G much more into the fold of UK prepay pricing, putting its outgoing call prices on a par with Virgin Mobile, at a premium to easyMobile/Fresh, and at a much reduced discount to the larger operators.

Recruitment ad spend has led the growth of ad revenues of regional newspapers in recent years. Declining recruitment ad volumes in Q2 2005 and weak outlook for H2 2005 will significantly reduce ad revenue growth in 2005 from the 4.9% of 2004. This outlook will adversely impact groups that are more heavily reliant on recruitment ad spend, such as Northcliffe Newspaper Group and Trinity Mirror Group, and both have confirmed the challenging nature of the current trading environment in their results.

The competitive strength of Freeview is growing. Freeview is already in five million homes and increasing at the rate of about two million homes a year, far exceeding initial expectations at the time of its launch on 30th October 2002. At that time, there was muted demand for channel space on the digital terrestrial TV (DTT) platform carrying Freeview and no one except the BBC seemed to want to know. This was still the case a year later when Five sublet all its extra gifted capacity to the minipay service Top Up TV, which launched in April 2004.

Although Sky’s monopoly over UK Premier League football runs for only two more seasons, the jostling between other broadcasters eager to transmit top tier football matches has already begun. Persistent rumours suggest that broadcasters are trying to build a consortium to bid for Premier League matches. We believe, however, that such a consortium might well run foul of the competition law, and would in any case be fiercely resisted by the Premier League.

Although the service includes the latest features such as user-customisable channels and the ability to skip tracks, adoption will be limited by the widespread availability of cheap or free substitutes and the massive drain that it will place on the handset battery

In order to make the service affordable, data is priced at an effective 95% discount to current high-usage data tariffs, further highlighting operators’ difficulty in offering attractive data services at economic pricing levels

Ofcom will announce at the end of June the new terms for ITV to operate the analogue portion of its broadcast licence for ITV1. According to Ofcom's own statements, it is obliged to estimate the full value of ITV’s operation of the analogue ITV1 service and then extract all this value – bar some profit and other small allowances – in the form of annual licence payments. To do so, Ofcom has announced a methodology based on what the winning broadcaster would bid in a hypothetical competitive tender. In order to estimate the licence payments, analysts must grapple with the highly complex tasks of inferring the model from Ofcom's description and establishing the inputs.

An eventual merger is possible but difficult, especially given Hutchison Whampoa’s inflated view of H3G Italia’s value, considering it worth about the same as Wind itself, which is double the size and actually makes a profit (unlike H3G Italia)

Nonetheless, this does create a possible exit should H3G Italia’s planned Q1 2006 IPO fail, with the consolidation likely to benefit all players in the Italian market. H3G UK does not enjoy such an option, and is struggling more on a stand-alone basis to boot

The UK mobile market can give the unwary observer the impression of strong subscriber growth, dangerously high levels of competition for the incumbents, and high levels of consumer enthusiasm for both advanced handsets and advanced mobile data services. These impressions are however all incorrect or misleading, as our recent UK mobile user survey helps to show.

The success of Freeview has ignited demand from channel operators to jump on board. The lure of Freeview is exemplified by this week's decision of Channel 4 to broadcast E4 free-to-air. The enticement is the advertising promise of such a large potential audience. But, how big an advertising opportunity is it really?

Digital terrestrial TV (DTT) launched in France on 31st March. We expect significant enthusiasm for the wider channel choice available to the 15 million French homes (62%) served only by analogue terrestrial feeds and the roughly 40% of homes that cannot receive a satellite feed. 14 channels were launched on a free-to-air (FTA) basis, and low prices of entry-level STBs have led to brisk sales.

Analogue switch-off is of huge significance to audience share and thus advertising revenue of the existing terrestrial broadcasters (see Analogue Switch-Off [2004-26]). When switch-off occurs, ITV’s audience share will fall, thus affecting revenue from advertising, but its financial impact will be balanced to some extent by an end to ITV’s analogue licence fee payments (see ITV Licence Fees [2004-29]). Where do matters currently stand?

Our first report of 2005 deals with prospects for music download services to the PC and the mobile handset.