“The worst is yet to come” for European TV
January 10, 2020
A major pan-European review of media stocks going into 2020 from investment bank Exane/BNPP gives high marks for Europe’s two major satellite operators SES and Eutelsat, saying that it sees a positive risk reward heading into the C-Band resolution at both SES and Eutelsat.
Elsewhere in Media the bank says it remains cautious on European FTA broadcasting and cites Mediaset and Proseiben (and AtresMedia and Mediaset Espana) as being “key underperforms”.
The bank reminds investors that the European media sector had a solid 2019, up 17 per cent, although underperforming (-6 per cent) the strong wider European market. “We note the relative market performance of ‘growth’ vs ‘value’ oscillated over the course of the year, with the increasingly ‘growth’ media suffering in the later third of the period as the rotation towards cyclicals gained traction.”
The report is blunt, and warns that TV is changing a lot “but the worst is yet to come”. The bank says: “The traditional TV advertising market has been relatively resilient over the past decade as the rise of Digital has largely eaten into only Print. TV price (CPMs) rises have offset to some extent audience declines driven by the medium’s promise of reach – a trend we view as unsustainable as audience fragmentation is set to accelerate. We see further downside risk ahead particularly in Spain, Italy and Germany. In France and the UK we see upside risk to consensus estimates as cyclical tailwinds are in our view set to more than offset structural headwinds.”
“Today >50 per cent of the time spent watching videos daily is dedicated to live TV, a proportion which has declined consistently over the past few years (>60 per cent in 2015). Video time itself has remained stable over the last decade in the UK at 5hours/day,” says the report.
“However, the number of video providers has multiplied. By 2023, Ampere expects broadcast TV to only account for 2h15m a day (from c3h in 2016) and total VoD (across all forms and business models) to represent 2h7m, pointing to further audience fragmentation. Cross platform audience measurement could potentially be linear TV’s saviour as it can attest to the power of broadcast TV and its mass appeal. However, building such audience systems is difficult in a world of changing technologies, device multiplication and shifting consumer behaviour. For instance, it took Médiametrie (the French audience measurement company) several years to formulate a way to measure linear TV viewing on devices other than traditional television sets, with the aggregated feature being available only since 2019.”
The report also says that the cable industry (ie pay-TV) many years before it started to disrupt traditional broadcasting. “Drawing parallels with the streaming industry, this suggests SVoD is at its starting blocks. Netflix, the global SVoD leader, only introduced streaming in 2007. We expect a meaningful step-up in video streaming as broadband speeds accelerate, 5G becomes the norm and connected TV penetration rises.”