A look back at the biggest stories this week

Whether it’s important, depressing or just entertaining, the telecoms industry is always one which attracts attention.

Here are the stories we think are worth a second look at this week:


O2 and Virgin Media are merging to form BT-busting connectivity giant

Telefonica and Liberty Global have confirmed plans to merge UK operations, O2 and Virgin Media, to challenge the connectivity market leader BT.

Full story here.


privacyHalf of Americans approve of using smartphones to track infected individuals

Pew Research Center asked thousands of US adults what they thought about how personal data should be used to help tackle the COVID-19 pandemic.

Full story here.


CSPs are being cut out of enterprise 5G projects – study

A new bit of research conducted by Omdia and BearingPoint//Beyond has found that only a small proportion of B2B 5G deals are being done by operators.

Full story here.


Streaming venture leads Disney to 29% revenue surge

The Walt Disney company has reported a 29% increase for year-on-year revenues thanks to its streaming bet, but COVID-19 has forced the team to withhold dividend payments.

Full story here.


Silver Lake pays a premium for a chunk of Jio Platforms

Private equity firm Silver Lake has shelled out $750 million for a 1.15% stake in the Indian telco, which represents a 12.5% premium on the price Facebook recently paid.

Full story here.


Online gaming seems coronavirus proof, but is it recession proof?

Online entertainment and gaming companies are seeing COVID-19 surges in revenues, but are these businesses in a position to resist the pressures of a global recession?

Full story here.

Streaming venture leads Disney to 29% revenue surge

The Walt Disney company has reported a 29% increase for year-on-year revenues thanks to its streaming bet, but COVID-19 has forced the team to withhold dividend payments.

The impact of the coronavirus pandemic is clear over the last three months, as Disney has been forced to close all theme parks and the majority of retail stores, while there have also been supply chain disruptions. The launch of Disney+ has offset much of the negative, while the suspension of dividend payments should save the company somewhere in the region of $1.6 billion in cash. This saving will become very useful as the team continues international launches for the streaming venture.

“While the COVID-19 pandemic has had an appreciable financial impact on a number of our businesses, we are confident in our ability to withstand this disruption and emerge from it in a strong position,” said CEO Bob Chapek.

“Disney has repeatedly shown that it is exceptionally resilient, bolstered by the quality of our storytelling and the strong affinity consumers have for our brands, which is evident in the extraordinary response to Disney+ since its launch last November.”

Walt Disney revenues for Q2 2020 and H1 2020 (USD ($), millions)
Three months to March 28 Year-on-year Six months to March 28 Year-on-year
Revenues 18,009 21% 38,867 29%
Net income 475 (91%) 2,608 (68%)
Free cash 1,910 (30%) 2,202 (39%)

Source: Walt Disney Company Investor Relations

Looking across the business, Disney has been impacted quite severely by the coronavirus outbreak:

  • Cinemas are closed impacting theatrical release and delay to home entertainment revenue
  • Production for new content has been halted
  • Advertising for broadcast TV has been dampened, impacting ESPN and Hulu
  • Parks, hotels, experiences and retail footprint are closed
  • Construction and maintenance is on-hold
  • Benefits and synergies of $71 billion Twenty-First Century Fox acquisition delayed

There does seem to be light at the end of the tunnel for the parks and retail business unit with business returning to normal in China. The Disneytown shopping and entertainment complex has been reopened, while Shanghai Disneyland is scheduled to reopen next week. The team will hope these timelines are replicated around the rest of the world.

There will of course be negative consequences for every business during this unique period, however, Disney does of course have positives to point to. Most notably, the launch and expansion of its streaming platform, Disney+, and new content which has been released on other content platforms.

ESPN has seen viewing figures increase by 11% year-on-year, thanks to the release of Michael Jordan and the Chicago Bulls docuseries, The Last Dance, and the NFL draft, which took place virtually. But it is Disney+ which steals the headlines here.

Over the first five months, Disney+ has bagged 54.5 million subscriptions, vastly exceeding expectations, while there are still lucrative launches in Japan, the Nordics and Benelux over the next few months. The team is not providing much insight on when it plans to break into profitability, but adoption trends around the world are very encouraging to date.

Performance of Walt Disney media assets to March 28
Subscribers (million) Year-on-year Monthly ARPU ($) Year-on-year
Disney+ 33.5* 5.63
ESPN+ 7.9 359% 4.24 (17%)
Hulu (SVOD) 28.8 24% 12.06 (5%)
Hulu (Live and SVOD) 3.3 65% 67.75 29%

*Does not include April subscriber acquisition

This is a major growth asset for the business, especially under the current circumstances. Interestingly enough, there might be an opportunity to offset losses, by releasing certain titles directly on the streaming platform, cutting out theatrical release.

“As you know, we had seven $1 billion films in calendar year ’19,” said CEO Chapek. “But we also realize that either because of changing and evolving consumer dynamics or because of certain situations like COVID, we may have to make some changes to that overall strategy just because theatres aren’t open or aren’t open to the extent that anybody needs to be financially viable.

“So we’re going to evaluate each one of our movies on a case-by-case situation as we are doing right now during this coronavirus situation.”

Releasing in theatres is a big financial draw for Disney, but it also comes with a significant financial outlay. Marketing dollars will still have to be attributed to launches on the streaming platforms, but with content consumption trends shifting more to on-demand, in the living room and the real world, it might make more sense to skip the cinema for some titles.

NBCUniversal has already started releasing some titles on streaming platforms for an additional premium. It has been stated this is due to COVID-19, but it might not be a temporary trend for all titles. Not only is it likely to be cheaper, it satisfies consumer demand and makes the streaming platforms more attractive to subscribe to.

The content business unit is holding the Disney empire up as all the other pillars crumble in the background. Disney is not a company which will ditch its physical business, but success attracts dollars. Chapek has said he remains ‘bullish’ on international expansion of Hulu, while Disney+ is looking like a rip-roaring success. The Walt Disney Company could look like a very different organisation in a few years.

Disney+ gets off to a flier

Walt Disney executives might have believed the pieces were falling into place to a blockbuster debut, but perhaps even the biggest optimists would have failed to see this coming.

Having launched in the US to much fanfare and collecting 28 million subscriptions in the first six weeks, the team attempted to emulate this success across the pond. There is still a lot of room for growth for the streaming platforms in Europe, and Disney is certainly making a splash.

Five months after first launching the services, Disney is claiming to have secured 50 million paying subscriptions. Momentum should continue to gather over the coming months meaning it should easily surpass the self-imposed target 60 million and 90 million global subscribers by 2024. On this trajectory, it could hit the milestone by the end of year one.

By way of comparison, Netflix claimed to have 158 million subscribers at the end of January and took five years to get to 80 million subscribers.

“Disney is going to smash its own publicly announced subs target,” said analyst Paolo Pescatore of PP Foresight. “Disney+ is a blockbuster hit with users. The biggest challenge will always be keeping users entertained. It is fair to say that many users would have signed up to the annual offer or bundles on both sides of the pond. This will help maintain its total base steady for the first year.

“However, Disney and others are not immune to the current challenges of filming new shows. This will have a knock-on effect next year. All eyes are now on Netflix’s first quarter results to see if Disney+ has had a negative impact on subs base.”

As Pescatore states, the risk which Disney faces in the short- to mid-term future is a lack of new content. In terms of depth, it cannot compete with Netflix which has been investing billions in an incredibly varied strategy to create content for ever type of consumer, in every different market. With COVID-19 encouraging more consumers to stream content, the scrutiny will be on the services in ways executives might not have anticipated.

But for the moment, the numbers are encouraging.

“We’re truly humbled that Disney+ is resonating with millions around the globe and believe this bodes well for our continued expansion throughout Western Europe and into Japan and all of Latin America later this year,” said Kevin Mayer, Chairman of Walt Disney Direct-to-Consumer & International.

“Great storytelling inspires and uplifts, and we are in the fortunate position of being able to deliver a vast array of great entertainment rooted in joy and optimism on Disney+.”

What is unknown for the moment is the regional split of these subscribers. Disney+ has been launched in the US, eight European countries (UK, Ireland, France, Germany, Italy, Spain, Austria and Switzerland) and India.

If Disney+ collected 22 million subscribers in the US by Christmas, months before launching anywhere else, and has also acquired 8 million more in India, there are 20 million unclaimed subscriptions. These will be split between the eight European nations, but would also include US subscribers acquired post December 31.

We’re unlikely to find out these numbers in the immediate future, but it would be very beneficial to find out which of the partnerships in Europe are working better than others.

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.