Wednesday, 27 April 2016

Sky quarterly results paint picture of fast changing consumer entertainment market

Solid results from Sky again with high numbers of new customers, a fairly stable ARPU and churn of around 10% suggest steady as she goes. A slight uptick in churn was explained due to a reduction in heavy discounting - albeit light touches in the tiller.

However, great levels of resource appear to being spent on pan European integration to generate economies of scale, upmarket services like Sky Q and products for other demographic groups like Now TV as well as substantial investments in mobile. This perhaps suggests that the plain vanilla UK Pay TV model is not proving very robust in the new digital age and Sky are moving as fast as possible to diversify before this is generally perceived.

 In a fascinating comment during the earnings call Jeremy Darroch referred to evolving relationships with content partners which were closer to co-productions which allowed flexibility during the period of a rights contract rather than a very rigid structure set in stone at the outset (such as the Premier League for example). He suggested that where partners did not want to take a flexible approach Sky would seek to make cost savings.

BT's next set of results will show how BT's move into entertainment is going and Premier League clubs must be keeping fingers and toes crossed that it is going well for BT to avoid a one horse race at the next rights auction with Sky dominating the European picture.

Wednesday, 20 April 2016

NetFlix up 100% in 2 years NewsCorp down 23% - internet vs traditional TV

With NetFlix hitting over 80 million subscribers the nights are drawing in for the traditional operators. Below, in no particular order, are some of the key differences between the 2 distribution models which while mostly irrelevant to the consumer make an impact on the business models.

1. Internet delivery is by default global while traditional TV has always been highly regional.
2. Barriers to entry for internet TV are very low indeed while merely getting an EPG slot for traditional TV is difficult and expensive.
3. Traditional TV infrastructure is command and control based with a limited level of true interactivity. Internet delivery is far more open, difficult to control and with very high degree of potential interactivity.
4. Traditional TV remains a more stable platform for the delivery of very high volumes of live content. Once multicasting is fully enabled on IP networks this will probably change.
5. Micro payment for content is far easier and cheaper on internet TV.
6. It seems that the monthly price point for internet TV is under £10 per month while traditional TV manages to edge up to £50 per month at the moment.
7. Internet TV requires virtually no installation and it plug and play. It does require a high speed broadband connection.
8. Advertising rates on traditional TV are significantly higher.
9. Audience metrics are capable of being far more accurate on internet delivered TV as the return path is in place.

For those who believe the market is never wrong the judgement is clear - a mainly traditional operator such as News Corp has seen its share price fall 23% over the last 2 years while NetFlix has seen its share price increase by 100%.

Tuesday, 19 April 2016

NetFlix hits 81.5 million subscribers worldwide

The shares may have fallen @15% in trading on weaker forecasts but it is a big win for NetFlix to hit 81.5 million subscribers for an internet only streaming service.

In the USA Netflix has more than twice the number of subscribers as Comcast and it makes Sky in the UK on 12 million subscribers look like a tiddler.

With Amazon launching monthly subscriptions the battle is well and truly on but NetFlix would be a very attractive merger partner for an old style media company who missed the boat initially on the digital age. Good news for the internet streamers but there are bound to be more casualties in the traditional TV world.

Thursday, 7 April 2016

Linking to Pirate Content may not be communication to a new public

Perhaps a slightly dull headline but in the world of copyright infringement and piracy this preliminary ruling today from the European Court of Justice CLICK HERE FOR THE FULL TEXT makes life more difficult for the copyright owners.

In essence, and only on the facts of this case, if material is freely available already, then no new communication to the public occurs when it is published / linked to again without permission. This echoes Svensson and Bestwater.

Without a communication to the public there is not on the face of it copyright infringement. Other remedies such as trademark infringement and conspiracy to defraud still stand however.

This is not really ideal particularly when it does not seem to matter if it is obvious that the "source" material is not itself authorized. Copyright legislation really needs a bit of a re-boot.

Wednesday, 6 April 2016

Good night Vienna for (client) confidentiality

There is a really strong moment in Jurassic Park when the character played by Jeff Goldblum delivers the line "they were so pre-occupied with whether they could they didn't stop to think if they should".

Whoever is the current (or maybe former by now) head of IT / Security at Panama law firm Mossak Fonseca must be wishing nostalgically for the days of typewriters and attractive people reaching for the bottom drawer of the metal filing cabinet.

According to reports the data breach which is by some measurements the largest ever at 2.6 TB of data with documents going back to the 1970's was achieved through a breach of the security on the email server leading to the download of its entire contents. Since 1970 was pre-digital the decision must have been taken to digitize hard documents and add them to the servers.

One might expect a massive download of this type to be picked up by network monitoring systems and therefore it seems likely that the external hackers had some internal assistance - but that is speculation. The alternative is that no network monitoring was occurring which might leave you wondering what the IT dept were up to (other than watching dodgy online content and surfing social media).

As none of the documents were encrypted once breach had occurred it was very much "good night Vienna"  both for the clients of Mossac Fonseca and the concept of confidentiality between lawyer and client.

As a broader issue medical records and all other digitally stored content that is not encrypted must now be considered semi-public.

While 3TB may seem large (maybe 10 million docs) portable storage for this can be bought off the shelf for about £115. Any unhappy person in any IT department can simply walk out the door with sensitive data.

The ethics around the actions of Edward Snowden and the hackers involved in the Mossak Fonseca case are not clear cut and unless you are an ends justifies the means merchant they will always be in a grey area.

The key thing to now accept is that the old adage from Benjamin Franklin rings true "Three people can keep a secret, if two of them are dead."