The Need to Offer Quad-Play Services Drives a Round of Consolidation
We’ll cover today’s announcement that UK-based BSkyB is set to buy Sky operations in Italy and Germany in an Instant Insight later today. The deal reminded me that we’ve seen a huge amount of corporate activity in the media and telecom industries this year. Comcast bought Time Warner Cable (see Instant Insight: Comcast to Acquire Time Warner Cable), AT&T acquired DirecTV (see Instant Insight: AT&T to Acquire DirecTV), and European operators have been busy, too (see Instant Insight: Vodafone Acquires Ono).I think one of the major reasons underlying these acquisitions is the need for providers to have a far stronger quad-play offering.
Traditional TV providers have faced strong and growing competition over the past year from the likes of Netflix, which has lured subscribers from cable and pay-TV operators, especially in the US. Netflix’s growth has been phenomenal: it added more than 8 million streaming subscribers during 2013 in the US alone, taking the total to 33.42 million. And it attracted 2.25 million subscribers in 1Q14, the highest in any quarter over the past year. Its 2Q14 results saw its global total exceed 50 million subscribers. The company has already outlined that its launch into new European countries raises its addressable market to more than 180 million households. I believe it’ll accumulate its next 50 million subscribers far more quickly than it took to reach its first 50 million.
Netflix has shown there’s an appetite for these services. And companies without a video or pay-TV offering are realising that it’s becoming an essential requirement, prompting a lot of interest in stand-alone providers. Both sides of the equation are coming together, although at a variety of speeds. It’s amazing to think that some US pay-TV players such as Dish Networks have yet to launch an Internet-based TV service, for example.
I’ve no doubt we’ll see many more acquisitions on both sides of the Atlantic. BSkyB’s moves in Italy and Germany could open the door for a tie-up with Vodafone, with a possibility that the broadcaster could become a takeover target for Vodafone. There’s a good fit between both companies in these markets, and both players are aware of the need for a strong quad-play product. Alternatively, Vodafone may consider acquiring TalkTalk to allow it to offer fixed-line and pay-TV services in the UK.
In addition, consolidation is likely to have a negative effect on broadcasting content suppliers. Media owners and producers will be forced to merge and their revenue comes under pressure.
The quest to attract broadband and video subscribers is intensifying, especially as the opportunities are vast: the majority of households in many markets have yet to sign up to a pay-TV service. For some players the road ahead will be a rocky one, made even more difficult by the likes of Amazon and Google trying to gain a permanent space in the living room. Last year I predicted that some European free-to-air broadcasters would disappear by 2018 (see CCS Insight Predictions for 2014 and Beyond). Recent activity seems to support that view.
Twitter
Facebook
LinkedIn
Email