Martin Flanagan: ‘i–Generation’ forces a smart reshuffle

Published on Wednesday 1 February 2012 13:40

MORE evidence of the constantly changing competitive dynamic of the media/technology/leisure landscape.

Only days ago came Nintendo’s shock trading statement that showed its old-style handheld products are being pasted by the new iPhone, iPad and social network generation. Yesterday came the news that BSkyB is to launch an internet‑only TV service to try and see off online rivals such as US giant Netflix, which launched in the UK last month, and Amazon’s LoveFilm.

Sky remains a highly profitable beast. And the latest interim results show the satellite broadcaster has, at least in trading terms, shrugged off the public relations damage to its chairman, James Murdoch, from his other previous job as the head of the publisher of the News of the World.

But, as with Nintendo and the “i‑Generation” threat, Sky is obviously worried that Netflix and LoveFilm’s movie downloading channels are a clear threat to its business model. Hence the new internet TV service.

The latest lacklustre growth in Sky’s subscriber numbers shows it may be right to have decided that anything potentially threatening across television, broadband and telephony has to be addressed pronto.

The group added a mere 40,000 TV subscribers in the three months to December, against 140,000 in the same quarter a year ago.

Customers signing up for broadband, home phone and high‑ definition TV were all down too. The problem for Sky is to decide how far such a deceleration in growth is due to cyclical economic pressures on consumers that will eventually ease; and how much it is down to systemic change, a constant convergence and cross-selling in the sector that is here to stay.

In truth, as with the older print media industry, both challenges are simultaneous. Satellite broadcasters are being hit by a severe cyclical downturn at just the time systemic change is happening in the way businesses are competing in the technology, telecoms and internet space.

The likes of Sky, BT, Google, etc are being forced to think laterally and look to the margins to fend off competition for their core offerings.

Take televised football, which is at the heart of BSkyB’s business. There is strong speculation that Al‑Jazeera (or even all‑conquering Apple?) could mount a bid for English Premier League football rights in the next auction. If Al‑Jazeera did come in, the least that could happen is that Sky would have to bid higher for the football prize that is in some ways the ubiquitous stormtrooper for its other televised offerings. That worries the City, always with an eye to profit margins.

Against the wider competitive threats, Sky has responded quite imaginatively, with a new internet TV channel allowing consumers to download films without a Sky contract or satellite dish.

The satellite broadcaster, like its rivals, is having to think fast on its technological and commercial feet.

Positives for Botin but a hard road ahead

BAD debts are down and business lending is up at Spanish banking giant Santander’s UK arm.

But chief executive Ana Botin is frank about the challenges facing the bank in 2012 as consumers are squeezed, many small businesses are deleveraging rather than borrowing, and Santander’s revenues and profit margins are under pressure. And while the 25 per cent lift in the bank’s lending to small businesses in 2011 will win Botin brownie points with Whitehall, such percentage rises must be seen in the context of the pretty low base Santander is coming from.

There will also be the positive this year that the bank, like its peers, will not see its results disfigured by major provisions for mis‑selling of personal protection insurance.

Its mortgage business is also performing decently, with the group now making one in six of Britain’s new home loans and its repossessions are well below the industry average.

In short, Santander is the de facto challenger to the Big Four banks in the high street, and is making a decent fist of it.

But yesterday’s substantial slide in annual profits and continuing pressures means Santander may still have to run quite hard to tread water in 2012.

Related Articles

• Film firms flex their muscles as US giant leaps pond

  ONE is the home-grown DVD rental service, the other is an American media giant that made its way on to British shores for the first time this week.

  0 Comments

• BT chairman makes wrong call

  IT PROBABLY seemed a good idea at the time. Use a guest column in a Sunday newspaper to outline BT’s strategic options, among them becoming a fully-fledged broadcaster like BSkyB.

  0 Comments

• BT and Sky's telecommunication breakdown

  CONVERGENCE is an often talked-about phenomenon in the technology sector, but few predicted that the telecoms and satellite TV giants, BT and BSkyB, would end up muscling in on each other's territory.

  0 Comments

• Virgin Mobile in merger talks with NTL

  SIR Richard Branson's Virgin Mobile telecoms group is in merger talks with British cable TV giant NTL - a move that could result in the biggest shake-up in the media sector for decades.

  0 Comments

• Changing ownership of UK firms gives investment landscape a foreign look

  EQUITIES have rebounded to levels unseen for four years and the bull market looks likely to run well into next year, largely on the back of merger and acquisition activity. However, there is a sneaking sense of disquiet that a number of long-serving British companies with proven cash flows and solid businesses are falling prey to Spanish, French, German, American or Asian raiders.

  0 Comments

Logged in as:

Comment here. Start typing your comment here:

Post comment

Please adhere to our Community guidelines

Your view

Please sign in to be able to comment on this story.