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Linear viewing decline continues in 2014

February 5, 2015

Research from Enders Analysis on the multichannel TV squeeze found that total daily average viewing time declined by a steep 5 per cent year-on-year in 2014. The younger demographic of 4-15 year olds as well as the content types catering to this audience (Children and Music) saw the strongest decrease with double digit declines.

Increasing connectivity as well as smartphone and tablet penetration are likely drivers of this, as are OTT platforms like Netflix which continued to grow its subscriber base in Q4, ahead of expectations.

Other media notes explore speculations around a possible acquisition of Mediaset Premium by Sky, as well as the relative safety of DTT spectrum in the 470-694 MHz being available to broadcasters until 2030, as Ofcom is likely to oppose alternative uses of core DTT spectrum for mobile broadband.

Multichannel TV facing the squeeze

In line with 2013’s downward trend, 2014 saw the continuation of a steep year-on-year decline of almost 5 per cent in total daily average viewing time. The decrease was greatest among younger age demos, especially among the 4-15 year olds, where the decline reached double figures. Connectivity as well as smartphone and tablets appear the main reasons of the decline across the main PSB, PSB family and non-PSB channel groups. Variations however exist for channel genres, as youth oriented content types like Children and Music see the strongest decline. Even though small in comparison to the primary availability of non-PSB channels on pay-TV platforms, DTT provides a significant audience and advertising contribution (ballpark estimate of £150-200 million per annum) to the small group of leading free-to-air non-PSB channels. These channels are also less constrained in developing their online initiatives than the mixed advertising/subscription non-PSB channels on the pay-TV platforms.

End of Netflix tightrope just in sight

In marked contrast to its Q3 2014 results, Netflix Q4 earnings showed strong paid subscriptions growth that was ahead of company guidance and consensus expectations, which lead to a jump in share price immediately after the announcement. Netflix heavily reinforced the positive developments in subscriber numbers with a plan to expand its global base from 50 to 200 countries over the next two years and to generate a material profit from 2017.

No information on international subscribers was given other than that the milestone of 5 million customers was passed in LatAm. For the UK, BARB data suggest that Netflix passed 4 million subscribers, while it is too early to assess the longer term potential of its September launches in France and Germany.

Sky and Mediaset Premium: to live and let die

Mediaset Premium, the DTT competitor to Sky Italia, has been the object of speculations regarding a possible acquisition by Sky. The platform is unprofitable and faces a 50 per cent cost increase this summer due to the start of new football broadcast contracts. A reduction in competition following a merger would allow Sky to raise prices, but this would come at the expense of new contracts as an additional burden. At best, if it kept the Premium subscribers on DTT to limit churn, Sky would have a small revenue upside. As the regulatory risk looks substantial, including mandated third-party access to the platform and wholesale of content, we believe that on balance it would be better for Sky to let the situation play out.

DTT is safe until 2030

The use of core DTT spectrum for mobile broadband at WRC-15 is likely to be opposed by Ofcom in November, in recognition of the importance of broadcasting. If this aligned UK and wider European position prevails at the conference, DTT spectrum in the 470-694 MHz band will be exclusive to broadcast until 2030. This would provide broadcasters and programme makers with certainty that would enable ongoing investment in the platform. Continued pushback is however expected from mobile network operators to expand the spectrum made available to mobile broadband earlier, and broadcast will need to remain as vibrant and competitive as it is today.

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