Disney set to capitalise on self-isolation with streaming launch

With millions of parents and children scratching the walls searching for something to do, the launch of Disney+ today (March 24) couldn’t have been timed better.

Having launched in the US to much fanfare, subscriptions shot through the roof. During the earnings call in February, Walt Disney CEO Bob Iger boasted of 26 million sign-ups in the first six weeks to December 31, a rip-roaring debut for the Disney+ streaming assault, and it could be looking at another very successful campaign in Europe.

“In essence, this is a great time to be launching a new sought-after service in Europe,” said industry analyst Paolo Pescatore of PP Foresight. “I am expecting to see subscriptions to the annual service surge in the run up to launch.”

According to Pescatore, the challenge which Walt Disney will face is sustaining growth as the scene has been set for a very successful launch in the European markets. This relies on more than timing, as Disney+ will have to prove it can match up to rivals on user experience, content and performance.

Today, Disney+ will launch in several markets across Europe including the UK, France, Germany, Spain, Ireland and Switzerland, while services are planned in Belgium, Denmark, Finland, Norway and Sweden during mid-2020. That said, Walt Disney already brought the March 24 launch forward by a week and it would be tempted to do so in other markets.

COVID-19 does of course present significant problems to numerous businesses and individuals, but there are opportunities.

Microsoft, Visa, Mastercard, Ocado and Amazon are all companies who are benefiting from the circumstances, and Walt Disney could also. The majority of children will be at home for the foreseeable future, as will parents who will hopefully be attempting to do some work. It might be tempting to spend £5.99 a month to provide some more distractions. Not exactly parenting 101, but needs must occasionally.

It has the brand recognition, the contextual advantage and the right pricing point. This could be the challenge to Netflix which many have promised but failed to deliver on. And perhaps most importantly, it has the partnerships in place.

Pescatore pointed to the strategy of offering exclusive partnerships in individual markets with various telcos as a very effective way of establishing a subscriber base. The promotions being offered are of course an excellent way to gather momentum, though it is also the existing billing relationship which is incredibly valuable. Netflix faced sign-up challenges in the early years of international expansion, but Disney has learned these lessons, signing up local partners from the off.

In France, Disney has inked an agreement with Canal+, Deutsche Telekom will be the exclusive distributor in Germany, while Telefonica has bagged the rights in Spain. The UK is an interesting one, with Sky becoming the official partner from a fixed perspective and O2 for mobile.

“The big question is whether O2 can capitalise on the exclusivity of selling to its customers; the jury is still out,” said Pescatore.

O2 will have to go toe-to-toe with Sky to take full advantage of the partnership with Disney, which presents two problems. Disney has allowed Sky to embed its services in its existing platform, alongside its own content and Netflix, which is an attractive proposition. And secondly, O2 has cultivated its image as a ‘pure-play’ telco, only focusing on mobile; this messaging will have to change.

This is a good start in the turnaround for O2. The Disney partnership will add credibility to the telcos image as a service provider, as opposed to a commoditised, mobile-only telco. This business model is doomed to failure, though adding Disney in is an incremental step in the turnaround.

O2 has the foundations of a multi-service telco thanks to its heritage with Priority Moments though this scheme is a shell of its former self as the telcos placed the wrong bets on the convergence trends. However, it has the customer base, an existing loyalty platform and a new partnership with Disney+ to drive forward to bigger and better things.

Sky UK and Virgin Media both offer new Universal movies

Self-isolating brits will be able to watch the latest Universal movies without leaving the house via Sky and Virgin Media.

NBCUniversal announced its ground-breaking decision to make new movies available to stream on demand immediately, thus eradicating the cinema commercial window, earlier this week. Sky announced it would offer the facility to its UK customers almost immediately and now Virgin Media has decided to join the big night in party.

As with almost everything else right now, this move is being positioned in the context of the COVID-19 pandemic. Across much of the world schools are being closed, people told to work from home and families increasingly barricading themselves into their homes, emerging only to panic-buy bog roll and pasta. The assumption is that a lot of telly will be watched while this runs its course.

“We’re working hard at Sky to make sure we continue to look after our customers,” said Stephen van Rooyen, EVP & CEO, Sky UK and Europe. “We’re also introducing some things to help make life a little easier for anyone at home trying to work, stay connected to loved ones, or keep the family entertained.”

“In these challenging times, its great news for our customers that they won’t be missing out on the latest cinema releases,” said David Bouchier, Chief Digital Entertainment Officer at Virgin Media. “At a click of a button, friends and families can sit back, relax and enjoy the latest blockbusters from the comfort of their sofa.”

For once we’re not getting ripped off on the exchange rate, with movies like Trolls World Tour costing quarantined Brits £16, compared to $20 in the US. While it’s both understandable and desirable for entertainment providers to be doing their bit to maintain national morale, there may come a time when we don’t have the bandwidth to support this spike in demand. Now that really will be a crisis.

How UK operators are helping customers during the COVID-19 outbreak

With telecommunications now acting as the foundation for almost every element of society, how telcos react to the on-going coronavirus outbreak will be critically important.

Although the UK Government has stopped short of measures implemented on the continent, at least at the time of writing, this week has seen a much sharper response to the global pandemic. With movements becoming increasingly limited, the telecommunications networks will become more critical, but what are each of the telcos doing in reaction.

Each of the telcos have made slightly different concessions to customers, though we suspect the plans will looks remarkable similar in a couple of weeks. Each will likely learn from competitors as none will want to look like they are doing less for customers than rivals.

Vodafone

At Group level, CEO Nick Read announced a number of measures to be applied across the European footprint.

Capacity is being increased to deal with the new spikes in internet traffic, Vodafone has said it has seen a 50% increase already, while consumers accessing government-supported healthcare websites and educational resources will be able to do so without worry about data consumption.

In terms of working with the Government, Vodafone has said it will offer anonymised data, where legally permitted, to aid in tracking people’s movements and the spread of COVID-19. Government departments have also been offered the opportunity to deliver targeted text messaging where technically possible.

To assist its own supply chain, Vodafone has said European suppliers will be paid in 15 days, instead of the customary 30 to 60 days.

From a scientific perspective, Vodafone’s DreamLab, a specialist app that uses smartphones’ data processing capacity to help cancer research projects while users are asleep, will receive a £200,000 cash injection from Group to repurpose the app to support research into antiviral properties.

Elsewhere within the Group, Vodafone Italy Foundation has donated €500,000 to support the Buzzi Foundation and the Italian Red Cross, Vodafone Czech Foundation’s emergency app Zachranka is pushing out public health alerts to its 1.3 million users and the remaining business units are all creating initiatives to help young people gain access to their digital learning platforms.

Virgin Media

From March 23rd, Virgin Media’s postpaid customers will be offered unlimited minutes to landlines and other mobile numbers, as well as a 10 GB data boost for the month at no extra cost. For broadband, any data caps on legacy products will be lifted.

In terms of technicians and home visits, Virgin Media has now set-up procedures to protect its own employees. Three days before a scheduled visit to a customer’s home, a text will be sent to ask if anyone living at their property has been asked to self-isolate or has flu-like symptoms. If the answer is yes, the appointment will be re-arranged for two weeks later. 30 minutes prior to the appointment, the technician will phone the customer to ask the same questions.

Although this will come as little comfort to those customers who are in need of a technician, the precautions are completely understandable. In these cases, new customers will be sent a self-install QuickStart pack which will hopefully mean a technician is not needed. Vodafone has not responded to questions to what the plan is should a technician be the only option.

O2/Telefonica UK

Like many other telcos, O2 has said all NHS UK websites will be ‘zero rated’, meaning any data used on these sites won’t count towards a customer’s monthly allowance, while it will make efforts to help those who are not able to pay their monthly bill. Customers who are concerned about the impact coronavirus will have on their monthly income are urged to call 202 to discuss the situation.

Little has been said on what work will be done to ensure the network remains resilient during the period of heightened pressure. This seems odd, as the O2 network shut down in certain areas this week, not related to increased internet traffic or congestion. Some customers might want more reassurances considering the dependence on communications infrastructure over the immediate future.

Elsewhere in the Telefonica Group, the Spanish business unit has said it will add 30 GB of mobile data to all Fusion and Movistar convergence customers for the next two months.

BT/EE/Openreach

In response the potential of increased strain on the network, BT is seemingly not that worried; the following is an extract from the website addressing the immediate challenges:

We have more than enough capacity in our UK broadband network to handle mass-scale homeworking in response to COVID-19. Our network is built to accommodate evening peak network capacity, which is driven by data-heavy things like video streaming and game downloads, for example.

By comparison, data requirements for work-related applications like video calls and daytime email traffic represent a fraction of this. Even if the same heavy data traffic that we see each evening were to run throughout the daytime, there is still enough capacity for work applications to run simultaneously.

This is a confident position to take, though the team has also said it will prioritise emergency calls and systems supporting emergency services such as the NHS, Airwave and the Emergency Services Network (ESN), critical national infrastructure and vulnerable customers, should the network come under intolerable pressure.

The BT Group has not unveiled any new measures for consumer customers yet, though it has put in additional procedures for enterprise customers due to the increased demand for home working.

The enterprise business unit has said it will work with customers to provide short-term upgrades for network capacity, increased virtual private network (VPN) connectivity, additional conferencing and collaboration tools, as well as call routing/forwarding solutions to divert calls to home phones or mobiles.

Three UK

Although Three UK does not seem to have introduced any additional policies in respect to the coronavirus outbreak, it does already have several initiatives which could prove to be quite useful. For example, free home delivery for customers and Three Store Now, which is a live stream to connect customers to in-store assistants for demos or to discuss potential purchases.

Sky

In response to almost all major sporting events being cancelled, Sky has said it will allow customers to ‘pause’ Sky Sports subscriptions without any additional charges. With the Premier League being suspended until early April, England’s cricket tour of Sri Lanka cancelled and PRO14 Rugby postponed for the foreseeable future, there will certainly be a shortage of programming for this element of the premium TV offering.

On the broadband front, although Sky has reiterated it believes its service will be consistent, it does not need to make any announcements regarding data caps, like operators in the US, as these limitations are very rare in the UK market.

NBCUniversal writes another line in the cinema’s obituary

The streaming revolution has changed our content consumption habits on multiple fronts, and now NBCUniversal could add further pain to the cinema by offering theatrical releases as in-home rentals.

Coronavirus has started to threaten businesses in the entertainment and retail segments, as more of us are compelled to stay at home for extended periods of time, but this move from NBCUniversal could further threaten the cinema’s place in society. Starting with DreamWorks Animation’s Trolls World Tour, new theatrical releases will be available for a 48-Hour rental period from NBCUniversal sister companies Comcast and Sky, as well as a range of on-demand partners.

For the moment, this is a temporary measure to ensure NBCUniversal can recapture some of the investments made in these titles, but should it prove to be popular, this could be another line added to the cinema’s obituary. Why shouldn’t direct-to-streaming be considered a valid distribution strategy?

“Universal Pictures has a broad and diverse range of movies with 2020 being no exception,” said Jeff Shell, NBCUniversal CEO. “Rather than delaying these films or releasing them into a challenged distribution landscape, we wanted to provide an option for people to view these titles in the home that is both accessible and affordable.

“We hope and believe that people will still go to the movies in theatres where available, but we understand that for people in different areas of the world that is increasingly becoming less possible.”

This is not a cheap alternative for customers, however. The 48-hour rental period will cost $19.99, or the equivalent in international markets. It is slightly more cost effective than going to the cinema, but whether this proves to be an adequate replacement from an experience perspective is unknown. But then again, who says the digital natives of tomorrow demand this cinema experience.

Looking at the statistics, annual admissions over the course of the last decade have remained relatively stagnant.

Year Annual admissions Year Annual admissions
2010 169.2 million
2011 171.6 million 1936 917 million
2012 172.5 million 1946 1.63 billion
2013 165.5 million 1956 1.11 billion
2014 157.5 million 1966 288.8 million
2015 171.5 million 1976 103.9 million
2016 168.3 million 1986 75.5 million
2017 170.6 million 1996 123.8 million
2018 177 million 2006 156.6 million
2019 176.1 million 2016 168.3 million

The numbers are steady, as you can see from the column on the right, the cinema does not command the same status as it has done for previous generations. Digital natives have demonstrated they are open to new experiences, perhaps explaining why the upward trend of cinema admissions from the 80s onwards has flattened; the new generations are perhaps not as interested.

Looking at an EY report on changing consumer behaviour, 54% of households spend more time on the internet than traditional TV, while 64% of 18-24 year olds state that streaming via the internet is the primary way they watch TV programs and films. This number declines to 30% for older demographics.

Like linear TV, the cinema segment could come under threat from new consumption habits and accessibility of content.

Ultimately, companies like NBCUniversal will not care about how the content is distributed, as long as the company grows revenues year-on-year. If there are greater profits, while also keeping the customer happy, in going directly to the living room like it is here, why would it bother including the cinema?

What you have to consider today is how accessible content is becoming. Some streaming services are coming bundled into existing content offerings or pre-installed on smart TVs, while data tariffs are becoming cheaper each year. Accessing streaming services wherever, whenever is becoming almost second nature.

There will be those who suggest the death of the cinema is a preposterous idea, but once upon a time there were those who questioned whether there would be a future for mobile phones and personal computers or believed banks would be a permanent of the high street. Netflix killed Blockbuster and now with its streaming cronies, it could be squaring up to the cinema.

Another interesting chapter to this story is the acceptance of Netflix in the entertainment clique. In 2019, Netflix movie Roma caused quite a stir as it received several nominations for the 91st Academy Awards after an incredibly short run in the cinema. The traditionalists in Hollywood criticised the decision, which almost led to rule changes, though the Department of Justice intervened with the threat of an anti-trust investigation should streaming companies be treated differently to other content creators.

As it stands, to be eligible for an Oscar nomination a film only has to include a seven-day run in a commercial Los Angeles County theatre with at least three screenings a day. This is a minor box to tick and may not have a significant impact on the decision-making process for distribution strategies.

This is a very interesting development as it adds credibility to films which don’t have an extended run in the cinema. In years gone, straight-to-video was a dirty concept, but with Netflix collecting 24 nominations for the 92nd edition of the Oscars, has the idea of skipping cinema been validated?

The cinema industry looks to be one which is prime for disruption from those who think further ahead than tomorrow. The experience of the cinema cannot be easily replicated, but it is an industry which has not really changed over the last few decades and is becoming more and more expensive. It is losing its status in society, opening the door for new ideas. Skipping the cinema in launching new content might soon become a more attractive idea the digital era of tomorrow.

Some reading this article might not be convinced by the idea, but a more relevant question is how receptive digital natives, the primary audience of tomorrow, would be?

Sky grabs lucrative Disney+ partnership in UK

Partnerships are increasingly becoming the new way to do content in the telco world and Sky has landed what could be an attractive deal with Disney+.

With connectivity and content becoming increasingly entwined as the convergence business model becomes the norm, partnerships with the US streaming giants are very valuable assets. Sky has already inked a relationship with Netflix, even going as far as to embed the service in its content platform but adding Disney+ to the mix is another feather in the cap of the UK’s premium content leader.

“We’ve built a strong partnership with Disney over three decades and we’re pleased that our customers in the UK and Ireland can continue to enjoy their world-class content – all in one place on Sky Q,” said Jeremy Darroch, Group CEO at Sky.

“This is a great start to what is set to be another stellar year for Sky – in 2020 we’ll launch new channels and genres, start building Sky Studios Elstree and we’ve got brilliant new and returning originals coming too.”

If the mission is to have all the best content in a single window, Sky is looking like it is doing a very effective job. Sky already has some very attractive content, but with Netflix and Disney+ to bolster the offering, it seems few will be able to compete in a market which is becoming increasingly congested.

“Ultimately, the arrival of another service further fragments the market for consumers,” said Paolo Pescatore of PP Foresight. “There are too many video streaming services chasing too few dosh. It is becoming more important to be able to access all of these and future services on one TV platform. Here lies the killer feature, universal access!”

But while this is a win for Sky, Pescatore still thinks there is opportunity for a mobile player to cash in at some point.

“This partnership suggests an exclusive deal for a UK provider is still up for grabs. Highly likely that a mobile operator will secure this, mirroring Disney’s strategy in the US. Therefore, EE looks to be in prime position given its track record in securing key premium content partnerships. Disney brings the most sought-after breath of premium programming for all genres.”

Over in the US, Disney+ has proven to be an incredibly popular service. During the most recent earnings call for the Walt Disney Company, the team boasted of 26.5 million paid subscriptions, averaging $5.56 a month. These numbers were accurate to December 28, and considering the aggressive expansion plans, we expect these numbers to be considerably higher come the next earnings call in May.

What is always worth remembering is that these partnerships work both ways; Disney has as much, if not more, to gain.

For Sky, Disney adds depth to a content offering which is already market leading. It is a move to consolidate the position and add more stickiness to the service. It also allows Sky to add more value to connectivity offerings. It sounds like Sky is getting a lot, but then you have to consider what the opportunity is for Disney.

Disney has an excellent brand in the UK, though it will struggle to go head-to-head with the trusted proposition which is Netflix. Through this partnership, Disney leans on the existing customer relationships with Sky to gain a direct link, its existing billing relationship and exposure through an embedded tab on the platform. These elements, plus the marketing dollars which Sky will push towards the launch, will give Disney the best possible start in the UK.

Sky and Liberty Global allegedly in talks for full-fibre investment

Sky is reportedly in discussions with Liberty Global to add further fuel to the full-fibre machine which is engulfing the UK at an increasing rapid rate.

After a new company, Liberty Fibre Ltd, was registered with Companies House in the UK last week, parent company Liberty Global has allegedly entered talks with Sky UK to add additional investment to the scheme. According to the Financial Times, with Sky moving away from satellite connectivity for its content proposition, the team are seeking more attractive wholesales terms, with Virgin Media providing a potential alternative.

As it stands, Openreach is the incumbent wholesale partner to Sky. The wholesale giant has enjoyed market dominance in recent years, though numerous ‘alt-nets’ and alternative providers are creating a much more competitive market. Sky is supposedly in talks with Virgin Media to use its fibre network to deliver its broadband and OTT content service, and the creation of another wholesale fibre business would further lessen the dependence on Openreach in the rural locations.

The new company, Liberty Fibre Ltd, will aim to deploy full-fibre networks in locations outside of the main urban areas, the primary focus for the vast majority of network owners. Virgin Media will become the anchor tenant of the network, though should the rumoured discussions continue as planned, Sky would become an investor in the scheme and a second customer.

For Liberty Global, attracting Sky as a customer would be a significant win.

Although it does not own any of its own network assets (fixed or mobile), Sky is one of the most successful broadband providers in the UK. Although Sky has stopped reporting total subscription numbers, most estimates put the total number of broadband customers between 6.2 million and 6.5 million. This would give Sky roughly a 20% market share, even with Virgin Media and second behind BT. Currently, Sky has a fibre penetration of 38%.

The commitment of a heavyweight such as Sky would certainly lesson the financial burden of deploying a fibre network in areas where ROI projections are certainly less attractive than the dense urban environments. The attractiveness of Sky as a customer only increases when you consider the increasingly popular OTT video drive and aggressive fibre broadband marketing campaigns.

Although Sky is still primarily known for being the premium satellite pay-TV content provider in the UK, the OTT proposition, Now TV, is becoming increasingly popular. After being acquired by Comcast, Sky is likely to attract additional advertising revenues from the parent-company to further consolidate an attractive position in the UK.

After years of neglect, the full-fibre market in the UK is gathering momentum very quickly. It is still years behind other nations across the European continent, but the creation of a new fibre wholesale player will add more fuel to the blaze as glass sweeps across the isles. Liberty Fibre Ltd is an interesting idea, and if it can nail Sky as an investor and customer, its prospects will certainly head north.

Unlimited data is inevitable with 5G, but try telling operators that

We’re quickly moving into the 5G era and many assume the concept of unlimited data bundles will be commonplace, but how will the telcos fare in this new world?

As it stands, the telcos are under pressure. This is not to say they are not profitable, but many shareholders will question whether they are profitable enough. Tight margins and a squeeze on core revenue streams are common enough phrases when describing telco balance sheets, but this could get a lot worse when you factor in unlimited data packages.

As Paolo Pescatore of PP Foresight pointed out, when you offer unlimited data you are effectively killing off any prospect of revenue growth per subscriber in the future. In some markets, there are still fortunes to be made, but in some, such as the UK where 4G subscription penetration is north of 100%, where are you going to make the growth revenues from when consumers are demanding more for less?

More consumers are seeking unlimited or higher data allocations but are not willing to pay for the experience. Some MNOs might be able to resist, but the more rivals who offer such tariffs the more the rest will be forced into line. It’s the race to the bottom which is profitable in the short-term, but growth will end quickly. The price per GB is only heading one direction and unlimited data allocations will end the prospect of upgrading customers.

O2 fighting for air

This is the conundrum which the telcos are facing in the UK right now. All four have announced their 5G intentions and all four are promising big gains when it comes to the next era of connectivity.

Starting with O2, the only one of the four MNOs not to have released 5G pricing to date, this is a telco which looks to be in the most uncomfortable position. Over the last few quarters, the management team has boasted of increased subscriber numbers, but this can only go on for so long in the consumer world. Soon enough, a glass ceiling will be met and then the team will have to search for new revenues elsewhere.

This is of course assuming it plans to go down the route of unlimited data, it might want to stick with the status quo. That said, if everyone else does, it will not be able to fight against the tide for fear of entering the realm of irrelevance.

The issue here is one of differentiation. The idea of attracting new customers by offering ‘bigger, meaner, faster’ data packages will soon end and telcos will have to talk about something else. O2 does have its Priority loyalty programme, but with rivals launching their own version this USP will fade into the noise.

Differentiation and convergence are two words which have been thrown around a lot over the last few years, though O2 has thus far resisted. Last year, CEO Mark Evans suggested he was not bought into the convergence trend and would continue as a mobile-only telco, though this opinion does seem to be softening.

If O2 is going to be competitive in the almost inevitable era of unlimited data, it will have to source growth revenues from somewhere. It is making a push into the enterprise connectivity world, which will bring new profits to the spreadsheets, though does it want its consumer mobile business to stand still?

Bundles of fun

This is where the other telcos in the UK have perhaps got more of a running start in the 5G era. EE has its connectivity assets in broadband and wifi to add value, as well as a content business of some description. Three is already known as the data-intensive brand, while its FWA push will take it into some interesting connectivity bundling options. Vodafone also has FWA, a fibre partnership with CityFibre and is arguably the leader in the enterprise connectivity market. The rivals are offering more than mobile connectivity as a stand-alone product.

Looking at Vodafone to begin with, the recent announcement is certainly an interesting one. The innovative approach to pricing, tiering tariffs on speeds not data allocation, will attract some headlines, while it is also super-charging its own loyalty programme, VeryMe. It has secured content partnerships with the likes of Sky, Amazon, Spotify and gaming company Hatch, while its FWA offering also includes a free Amazon Alexa for those who sign-up early enough.

Combining the FWA product or its fibre broadband service, courtesy of CityFibre, also gives them the ‘connectivity everywhere’ tag, a strength of BTs in recent years, to allow them to communicate and sell to customers in a different way. Perhaps it is missing a content play to complete the convergence bundle, but it is in a strong position to tackle the 5G world and seek additional revenues should the unlimited craze catch.

The same story could be said of Three. With the acquisition of UK Broadband, it has forced itself into the convergence game and kicked off the ‘race to the bottom’ with an unlimited 5G data offer. As long as you have a Three 4G contract, you can get 5G for no additional cost, assuming you have a 5G compatible phone of course.

Three’s strength and weakness lies in its reputation. It is known for being the best telco if you have an insatiable data appetite, this works very well for the 5G era, though it is also known for having a poor network. Three regularly features at the bottom of the network performance rankings, especially outside of the big cities where it has not done nearly enough to satisfy demands.

This will of course change over the next couple of months. Three is working to improve its network with additional sites and a new Nokia 5G core, however it will have to do a lot to shake off the reputation is has acquired over the last few years.

EE is perhaps the most interesting of the four. It has lost its position as the market share leader when it comes to 4G subscriptions, but it does have the reputation for being the best in terms of performance throughout the country. It is regularly the fastest for download speeds, but its 5G pricing is by far the most expensive to be released so far.

That said, with the BT assets it has for wifi and broadband, as well as the content options, there is plenty for the consumer to be interested in. Should BT be forced to readdress the pricing conundrum, it might not have the fear regarding a glass ceiling on revenues as there are plenty of other products to engage the consumer. It will be able to find additional revenues elsewhere.

MVNO no you didn’t

Outside of the MNOs, you might also start to see some competition. MVNOs are nothing more than ‘also rans’ today, but Sky has officially entered the 5G race. This is an interesting competitor, one who could cause chaos to the status quo.

Firstly, understand mobile is not the primary business for Sky. This is an add-on, where it is seeking to drive additional revenues and attract more customers through bundled services. It is the leader in the UK when it comes to premium content and has a thriving broadband unit also. Sky can add services on top of connectivity to make itself seem more attractive than the traditional mobile service providers.

Then again, there are only a couple of MVNOs who can pose this challenge. Sky is one, while there are persistent rumours Amazon wants to get involved with the connectivity game and Google has its own Fi service. These are also companies who are at the mercy of the MNOs in terms of the commercial agreement with the MVNOs, so damage is likely to be limited unless one network owner decides to go down the wholesale infrastructure route.

But you cannot ignore these companies. They are cash-rich, constantly searching for new ways to make money and have incredible relationships with the consumer. They are also the owners of platforms and/or services which are very attractive to the mass market; bundling could be taken into a new context with these firms.

Diversity is our strength

This is of course only looking at the services which are common throughout telco diversification plans today, there are other options. Orange has launched a bank, has experimented in energy services and is making a move towards the smart home in partnership with Deutsche Telekom. Over in Asia, gaming is an important element of many telcos relationships with consumers and this trend is becoming much more prominent in the European markets also.

Elsewhere, the smart home could certainly offer more opportunities for telcos to add-value to an emerging ecosystem, while the autonomous vehicles offers another opportunity and so does IOT. The issue which many of these telcos are facing is competition from the OTTs. Arguably, the battle for control of the smart home might already have been won by the OTTs, though the same could be said for autonomous vehicles and IOT.

In many of the emerging segments, telcos will remain a connectivity partner though they certainly need more than that. This will remain a consistent stream of revenue, though it will also sleepwalk telcos to utilitisation. In IOT, as an example, the major cloud players are crafting business units to engage enterprise businesses for edge and IOT services; this is a market which the telcos would love to capitalise on for both enterprise and consumer services.

Security is another which is increasingly becoming a possibility. The concept of cybersecurity is generating more headlines and consumers are becoming more aware to the dangers of the digital world. Arguably, the telcos are in the strongest position to generate revenue from this segment; there is trust in the brand and they have largely avoided all the scandals which are driving the introduction of new regulation.

Unlimited data is certainly not commonplace today, but with the services of tomorrow promising to gobble up data at an unfathomable pace, it would surprise few to see more people migrating to these tariffs. The question is how you make money once you have migrated everyone.

Diversification and the acquisition of new products is not a simple task, but then again, it is becoming increasingly difficult to imagine how single revenue stream telcos will be able to survive in the world of tomorrow.

 

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Sky becomes first MVNO to join the UK 5G race

Sky has become the first MVNO in the UK to join the 5G race, making use of the O2 network.

While Sky Mobile is little more than an ‘also-ran’ at the moment there could be some potential for the brand to cause headaches for the established players, both MNOs and MVNOs. As the leader in the UK premium content market and a healthy broadband business, there certainly are some gains to be made in terms of convergence.

“We will be the only mobile operator to be able to combine the launch of next generation superfast 5G connectivity with Sky Mobile’s unique features including Roll, Swap and Watch,” said Sophia Ahmad, Commercial Director of Sky Mobile.

All of Sky’s current data plans come with the Roll feature, allowing any unused data to be rolled into the next month, while Swap will allow any consumer to upgrade phones without changing contract. The Huawei Mate 20 5G X and Samsung Galaxy S10 5G will be available to customers in November, the target for the 5G launch.

“The mobile network operators need to watch out as this move poses a considerable threat,” said Paolo Pescatore of PP Foresight.

“It is becoming harder for telcos to differentiate on connectivity beyond price alone. Sky armed with its innovative mobile features and breath of content is very well placed to compete head on. For now, from an overall services perspective it seems to be in pole position.”

As we have mentioned before, the success of 5G will largely be reliant on the experience offered to customers as well as the price and value-add services. Relying on O2’s network to deliver its 5G offering might prove to be a weakness for Sky as the MNO has regularly featured at the bottom of rankings when it comes to customer experience.

Interestingly enough, this could create an entirely new dynamic in the connectivity segments.

Sky is not primarily a mobile business and never will be. Its mobile offering is an element of the wider convergence strategy to attract and retain customers, therefore profitability on connectivity is not the only concern. It will be a consideration for the management team, but lower margins can be accepted if there is a greater gain in the bigger convergence picture.

Traditional players have been trying to shift away from being overly reliant on mobile revenues for years, with some success stories but most of the time a maintenance of the status quo. As Sky profits are not primarily reliant on mobile a potential loss-leader position could be created to cause havoc and grow profitability in other business units as well as the overall Sky business.

With all four MNOs and now Sky to offer 5G services to consumers by the end of the year, the UK is set to become one of the most interesting markets to watch worldwide.

Sky saves the day at Comcast

Comcast managed to misplace 224,000 customers over the last three months, but this oversight was compensated for by the 304,000 net gain in subscribers which Sky brought to the party.

The cable cutting revolution might be causing some pain in the US, but in Europe, Sky is looking as strong as ever. The European premium TV leader might have seen revenues decrease by 3.3% year-on-year, but with the customer gains and EBITDA increasing 13% for the quarter, Comcast executives will be pleased with the returns this acquisition is delivering.

Total revenues for Comcast over the second quarter totalled $26.8 billion, a 23% year-on-year increase due to the inclusion of Sky, while EBITDA stood at $8.7 billion.

“Our company’s consistent, profitable growth is fuelled by our leading scale in direct customer relationships and premier content,” said Brian Roberts, CEO of Comcast.

“We now have nearly 55 million high-value direct customer relationships, including the 456,000 net additions in the second quarter, and a vast library of intellectual property and new productions that are extremely popular across generations and geographies. Our teams throughout the company continue to collaborate to make themselves and each other even stronger, and I’m excited about our growth opportunities ahead.”

Looking at the Comcast business, aside from cord cutting generation causing a bit of a headache, operations are holding strong. Broadband demonstrated growth, albeit at a slower rate, adding another 209,000 subscriptions to take the total up to 24.4 million consumer and 2 million business customers.

Although this would not be the worst earnings call to deliver to shareholders and the team did beat market expectations, it isn’t the most of comfortable positions. TV losses are going to start to weigh heavily on the business before too long, while internet subscription growth is starting to slow. The latter concern might well be heightened with more CSPs adding FWA offerings to their portfolio.

Which pans UK broadband leaders for woeful service

Consumer publication Which has slammed the UK broadband scene, pointing towards the unacceptable and consistently poor performance of market share leaders for customer service and performance.

According to its latest broadband satisfaction survey, BT, Sky, TalkTalk and Virgin Media supply broadband services to almost nine in ten of UK broadband customers, but these are the worst performers when it comes to meeting customer expectations. The satisfaction score has been built on whether customers are satisfied with their current service, and whether they would recommend it to anyone else.

The satisfaction score for TalkTalk and Sky stood at 50%, while BT was only marginally better at 51% and Virgin Media collected 54%. Year after year the heavy-hitters of the broadband segment have shown customer satisfaction is a low priority, with these results just emphasising the point.

At the top of the list, Zen Internet collected the plaudits while Utility Warehouse sat in second place. The challenger brands clearly recognise there is an opportunity to secure customers through customer service and experience, as opposed to competing in the dangerous race to the bottom or over-promising on speeds.

“It’s outrageous that the biggest providers are still letting their customers down with shoddy broadband, especially when we know that longstanding customers are the most likely to be overpaying,” said Natalie Hitchins, Head of Home Products and Services at Which.

“Anyone who is unhappy with their current provider should take back control and switch to a better deal – you could get better service and save hundreds of pounds a year.”

This is perhaps what is most frustrating about the status quo. With the telco industry geared towards aggressive customer acquisition as opposed to building a successful business through retention, profits must come from somewhere. Customers are lured into the traps with the promise of under-cutting current providers on price, but it is the loyal customers who are getting punished with price hikes.

Looking at performance, 27% of TalkTalk customers said they experienced slow speeds, below the telco’s promise, while this number was 22% for Sky customers and 20% for BT. 20% of BT customers also said they experienced network drop-offs, while 17% of Virgin Media customers said they had been left without a connection for hours or days at a time.

While the tendency to favour new over existing customers is unlikely to change at any point in the future, Ofcom is currently working on new rules which will force telcos to be more communicative with their customers when it comes to contract expiration and is also considering pricing practises. Both of these factors could have a big impact on the business with many customers already stating they will switch providers.

The other factor to consider is the emergence of alt-nets around the country. In days gone, customers dissatisfied with a poor performing provider would only have the option of other poor performing telcos, though there is increased competition emerging. The likes of Vodafone, making use of CityFibre’s fibre networks, Hyperoptic and Gigaclear are growing quickly, providing alternatives with satisfied customers.

“Unfortunately, the UK broadband industry is notorious for awful customer service, mid-contract price hikes, and poor value for money,” said Richard Tang, founder of Zen Internet. “Too many providers in this industry put short-term profit ahead of the customer, but at Zen we continually work to ensure that consumer happiness comes first and to reward the loyalty of our existing customers.”

The market leaders are seemingly happy in their current position. Many will state customer service is a critical aspect of their business, but year after year customers are dissatisfied. These numbers suggest no-where near enough is being done to evolve the profit-centric organisations or there is a level of incompetence present when devising new strategies.