Kate Bulkley, Media Analyst.

Cable is key to streaming growth

By Kate Bulkley

Broadcast News

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For Broadcast November 21, 2019

Rising consumer demand for improved connectivity is driving investment, says Kate Bulkley

Last week, Disney staggered even the most media-savvy among us by revealing it had garnered more than 10 million sign-ups to the new Disney+ SVoD service in just 24 hours. That’s a stunning start and makes the goal of reaching 90 million subs to its new service by 2023 look easily attainable.

While Disney and its flagship show The Mandalorian were notching up subscribers, I was in Berlin at the 65th annual conference of the European association of cable TV operators.

The connection between Disney+ and a group of companies that provide broadband internet, digital TV services and telephony to 76 million customers across Europe is more profound than you might think.

“Cable, like the rest of the media landscape, is in transition as seismic consumption changes reshape the business”

Virgin Media is a member of this cable club and, as Sky is now owned by giant US cable operator Comcast, it also has a connection that could get stronger.

Cable, like the rest of the media landscape, is in transition as seismic consumption changes reshape the business. The growth of streaming services means consumers can choose to stop paying for big expensive bundles of channels they don’t watch.

Cable TV subscriptions across the EU declined by 275,000 in 2018 to 55 million, according to analyst IHS Markit. Yet video consumption continues to rise, driven by online platforms. In Europe, Netflix accounts for 49% of online subscriptions, followed by Amazon with 20%.

To stream multiple services, consumers demanding ‘anytime and anywhere’ access need faster broadband. That’s one reason cable M&A has increased significantly.

This summer, Vodafone secured an ¤18.4bn (£14bn) deal to buy cable networks in Germany, Hungary, Romania and the Czech Republic from Virgin Media’s owner Liberty Global. As a result, Vodafone controls 34% of Europe’s cable market, followed by Liberty Global with 22%, according to IHS.

All3Media co-parent Liberty Global has been selling assets but that doesn’t mean it sees highspeed broadband networks as bad business. Quite the opposite: it has been upgrading the Virgin Media network in the UK to provide even faster broadband at gigabit speeds.

Liberty Global is now talking to companies such as Sky about investing in a new business to build even more all-fibre networks in the UK.

The company’s chief executive Mike Fries recently said there are potentially 10 million homes in the UK that Liberty could reach “more quickly and potentially more efficiently” than competitor BT.

Meanwhile, private equity investors, Goldman Sachs and Carphone Warehouse founder Charles Dunstone are also gearing up to invest in UK fibre networks to help meet the growing demand for connectivity. In Berlin, the cable association changed its name from Cable Europe to Giga Europe to underline its aspirations.

However, concerns over the future emerged when the Labour Party added nationalising BT and offering free high-speed broadband for all to its election manifesto last Friday.

The announcement sparked fears of a broadband fibre investment freeze. TalkTalk postponed the proposed sale of its full-fibre broadband business, FibreNation, as it considers the implications of Labour’s proposals, while BT’s boss Philip Jansen said Labour’s plan would cost at least double the £20bn the party has proposed.

“Playing Russian roulette with the country’s future has become the new norm in British politics,” quipped one cable exec.

Talk of pipes and cables might sound dull, but as a senior Vodafone exec said in Berlin: “You simply can’t drive a digital Ferrari on copper roads.”

An investment climate that incentivises the building of fibre networks and regulation that allows the network consolidation to link them to fast 5G mobile networks is the baseline needed to meet both rising consumer demand for connectivity and to help keep European businesses, including producers and broadcasters, competitive.

So yes, we need to keep talking about cable. Boring just got interesting.

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