Another strong quarter of pay-TV subscriber growth, marked by record Sky+ HD sales, indicated continued resistance to recessionary pressures, supported by flat costs other than those associated with accelerated HD take-up

Results for the telecoms business again displayed strong volume growth in an increasingly difficult market. But original guidance for broadband subscribers, breakeven and standalone IRR looks challenging

Although the recession may yet take its toll on subscriber growth, the final outcome could work to Sky’s advantage due to the severe revenue losses being experienced by the free-to-air advertising sector. Constraints imposed by regulatory intervention remain a possibility, but unlikely to make a material difference over the next two to three years

As the UK recession deepens, economic factors are now dominant in the revenue growth of ad-supported media industries, as well as mobile and, to a lesser extent, fixed line telecoms industries – our subscribers will start receiving our informed research on economic issues

Faster GDP decline in Q1 2009 than in Q4 2008 indicates that the economy has yet to reach a bottom – expect downgrading of the Government, Bank of England and independent forecasts for 2009 GDP growth, with a 5% decline at the low end of the range

Our central case continues to be of a decline of GDP in 2009 of over 5% consistent with an 8% peak-to-trough decline for GDP, with a risk of deflation in the medium term

Google UK delivered solid performance in Q1, with gross revenues up about 8% YoY to £440 million; however, the huge growth of previous years has ended, due to a combination of recession and growing maturity in search

Key verticals (finance and travel) are being impacted by the downturn, but Google should continue to benefit from the secular shift of advertising to online and increasing advertiser focus on measureable ROI

We now estimate that Google’s UK gross revenues will rise by 4% this year to £1.66 billion, supported by volume growth in search, with little contribution from display and mobile still firmly rooted in the experimental phase

Friday’s Digital Britain summit generated more heat than light but nonetheless provided a useful forum for the articulation of the views of government and some other key players

There appears to remain a significant gap between government aspirations for a high speed broadband Britain and the commercial realities. All eyes are now on Wednesday’s Budget to see the extent to which the government is prepared to put its money where its mouth is

In online content, achieving an outcome that reduces piracy, avoids oligopoly and encourages continued innovation in content creation remains the key challenge for both industry and government

Confirmation of robust UK online classified growth in 2008 from IAB/PwC should not be interpreted as ‘business as usual’, with signs of severe turbulence emerging in the final months of the year for pro-cyclical activities like recruitment and property

Even online giants such as AutoTrader, Rightmove and Jobsite will be unable to offset the underlying collapse in their respective marketplaces in 2009, and we anticipate low levels of activity to persist into 2010 and potentially beyond

However, if the short-term prospects for online classifieds are less robust than many have assumed, the long-term consequences of the trends in classified will be devastating for local newspapers, with the shift in marketplace activities to national digital brands from the local press accelerating through the recession

Leading pay-TV operators Sky and Virgin Media (VMed) have shown little sign of recessionary damage in 2008 and the outlook for Q1 2009 remains positive. Difficulties are apparent at complementary pay-TV service provider Setanta

Ofcom’s pay-TV investigation enters its final stages in 2009. Ofcom faces a formidable challenge to devise a workable wholesale must-offer solution for premium film and sports content that fosters competition across all platforms

With prospects fading fast of a VMed sale of its UKTV and possibly VMTV assets to a BBCW/Channel 4 joint venture, Discovery looks an increasingly suitable candidate, as competition concerns could arise if Sky was the chosen partner

IAB/PwC released figures for 2008 showing that annual spending on internet advertising rose 19.1% to £3.35 billion, accounting for close to 20% of total UK advertising, far higher than in any other major market

The recession started to bite in H2 2008. As budgets are cut, display has been hit harder than search and classified, as a rising share of inventory (almost 50%) is sold by ad networks for discounted CPMs or on a performance-basis

Our revised forecast for internet advertising is for zero growth in 2009, with a low single digit rise in paid search offset by falls in display and classified

UK Digital TV (DTV) growth has finally started to slow significantly. By the end of 2008, 86% of TV homes and 91% of the population living in TV homes had DTV reception on one or more sets

Almost the only growth now is coming from the satellite sector, as Freeview digital terrestrial TV (DTT) reception reaches its upper limit prior to the full commencement of digital switchover (DSO) in spring 2009. This will see the digital technical household coverage of the main PSB channels extend from 80% to 98.5% by the completion of DSO in 2012. These forecasts update our previous forecasts issued in June 2008 (see UK DTV Homes to 2017 June update [2008-62])

Highlighting the challenges of the ad-supported digital music model, SpiralFrog, the first licensed service to launch in the US, collapsed recently in a sea of red ink and failed promises

Newly licensed ‘cloud’ jukeboxes like Spotify or We7 are struggling to make sense of the ad-supported model whose licensing costs far outweigh their potential revenue at present

Digital Britain’s proposed Digital Rights Agency could improve the licensing environment for cloud jukeboxes, but we expect copyright owners will take particular care to avoid substitution of music consumption from pay-for to ‘free’ (but ad-supported), unless the financial rewards are commensurate

Google’s announcement that it will offer ‘interest-based’ advertising to key partners on YouTube and its AdSense publisher network from next month, with a wider rollout later this year, raises the ante for behavioural targeting

Targeting based on users’ activity on publisher websites has become widespread, but concerns over privacy have slowed deployment of technologies that track users’ entire click-stream activity on the internet, such as Phorm

Exponents believe that behavioural targeting will boost the market for internet display, which we estimate was worth £650 million in 2008. In our view, its main impact will be to accelerate the shift to performance-based pricing