the communications market report 2016 - home - ofcom...5 proportion of individuals (%) 71% 61% 27%...

Ofcom analyst briefing The Communications Market Report 2016

4 August 2016

1

Agenda

Market overview Jessica Rees, Researcher, Market Research

The telecoms industries Max Fernando, Telecoms Analyst, Market Intelligence

The audio-visual industries Stefan Webster, Media Analyst, Market Intelligence

Internet and online content Post Steven Cape, Senior Analyst, Market Intelligence

Introduction Jane Rumble, Director of Market Intelligence

2

Market overview

Jessica Rees, Researcher, Market Research

3

Source: Ofcom/ operators

40.6 39.5 39.4 38.2 37.3 37.5

11.8 12.4 12.5 12.8 13.2 13.6

4.1 4.1 4.2 4.2 4.3 4.2 57.6 57.1 57.3 56.5 56.1 56.5

0

20

40

60

80

2010 2011 2012 2013 2014 2015

Total

Post

Radio

TV

Telecoms

£bn Annual change

5 year CAGR

0.9% -0.4%

-2.0% 0.4%

0.0% N/A

2.8% 2.9%

0.5% -1.5%

Page 9 Figure 1.1

2015 UK communications revenues £56.5bn

4

Source: Ofcom / operators/ ONS

25.28 23.69 22.94 22.49 22.14 22.66

49.64 48.93 48.37 45.68 44.08 44.47

11.15 11.51 11.85 12.26 13.44 15.05

30.34 31.87 29.39 30.31 31.10 31.44

121.15 121.30 117.41 116.02 116.07 118.90

4.8% 4.9% 5.3% 5.1% 5.0% 5.1%

0%

1%

2%

3%

4%

5%

6%

0

50

100

150

2010 2011 2012 2013 2014 2015

Post

Radio

Television

Fixed internet

Mobile voice &dataFixed voice

% of total spend

£ per month (2015 prices)

Page 10 Figure 1.2

Average household spend grew in 2015

5

Pro

porti

on o

f ind

ivid

uals

(%)

61%

71%

27%

59%

5% 0%

20%

40%

60%

80%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

DVR

Smartphone

Smart TV

Tablet

Smart Watch

Internet-connected dongleor set-top box*

Source: Ofcom Technology Tracker

Increase in take-up of tablets, smartphones and smart TVs continues

Page 13 Figure 1.5

6


Pro

porti

on o

f hou

seho

lds/

adu

lts (%

)

95

86 86

81 79

66

4 0

20

40

60

80

100

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Mobile telephony

Fixed telephony

Internet connection

Total broadband

Fixed broadband

Internet on mobile(personal)

Mobile broadbanddongle or datacard

Two-thirds of adults access the internet on their phone

Page 12 Figure 1.4

Surge in IM and on-demand viewing

7

Source: Ofcom Digital Day 2016

Page 16

16-24s prefer recorded, on demand and online content to live broadcast TV

8


Proportion of time spent watching by activity (%)

63%

36% 48%

83%

17%

12%

20%

12% 6%

13%

10%

2% 6%

20%

12%

4%

6%

6% 2% 3%

14% 3%

0%

20%

40%

60%

80%

100%

Adults 16+ 16-24 25-34 65+

Short online videoclips

Physical video

Paid On-DemandTV or films

Free On-DemandTV or films

Recorded TV

Live TV

Page 58 Figure 2.4

9

The audio-visual industries

Stefan Webster, Media Analyst, Market Intelligence

Broadcast TV revenues up 3% YoY

10

Source: Ofcom/broadcasters. Note: Figures expressed in nominal terms. Page 67 Figure 2.12

£5.0bn £5.4bn £5.5bn

£5.9bn £6.0bn £6.2bn

£3.5bn £3.6bn £3.5bn £3.7bn £3.8bn £4.1bn

£2.6bn £2.6bn £2.7bn £2.6bn £2.7bn £2.6bn

£0.7bn £0.7bn £0.7bn £0.7bn £0.7bn £0.7bn

0

1

2

3

4

5

6

7

2010 2011 2012 2013 2014 2015

Subscriptionrevenue

Net advertisingrevenue

BBC incomeallocated to TV

Other revenue

Growth 1 year 5 year

CAGR

3% 3%

3% 4%

7% 3%

-4% 0%

3% 0%

£11.8bn £12.4bn £12.5bn £12.8bn £13.2bn £13.6bn £bn

TV advertising revenues up 7% YoY

11

Source: Ofcom/broadcasters. Note: Figures expressed in nominal terms. Page 70 Figure 2.15

£2.1bn £2.2bn £2.1bn £2.1bn £2.1bn £2.2bn

£0.5bn £0.5bn £0.6bn £0.6bn £0.7bn £0.7bn

£0.8bn £0.9bn £0.9bn £1.0bn £1.0bn £1.2bn

£3.5bn £3.6bn £3.5bn £3.7bn £3.8bn £4.1bn

0

1

2

3

4

5

2010 2011 2012 2013 2014 2015

Commercialmultichannels

CommercialPSB portfoliochannels

CommercialPSB channels

Total

£bn 1 year 5 year

CAGR

7% 3%

15% 8%

12% 7%

2% 0%

Growth

12

Source: IHS

Online TV revenues grew 23% YoY

Page 68 Figure 2.13

£66m £75m £92m £121m £156m £159m £38m £57m

£81m £83m £104m

£207m

£318m £451m

£74m £113m

£145m

£190m

£241m

£283m

£180m £238m

£379m

£574m

£795m

£976m

0

200

400

600

800

1,000

2010 2011 2012 2013 2014 2015

FTV Adrevenues

Subscriptions

PPVtransactions

DTOtransactions

Total £m

Annual Growth

23%

18%

42%

3%

2%

13

Sports rights boost programme spend

Source: Ofcom/broadcasters. Note: Figures expressed in nominal prices Page 73 Figure 2.19

£2,448m £2,601m

£813m £763m

£818m £820m

£800m £819m £492m £507m £311m £316m £236m £215m £269m £299m £181m £188m

£6,368m £6,528m

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2014 2015

Channel 5

Commercial PSB portfolio channels

BBC portfolio channels

BBC Two

Channel 4

Other multichannels

ITV ITV/Breakfast

BBC One

Film/sport channels

£m 1 year

change

3%

4%

11%

-9%

2%

3%

2%

0%

-6%

6%

14

Source: BARB

0

50

100

150

200

250

2010 2011 2012 2013 2014 2015

Average minutes per person per day of broadcast TV viewing: Total TV, individuals 4+ 242 242 241 232 220 216

Broadcast TV viewing fell for the third consecutive year

Page 93 Figure 2.38

15

Source: BARB

Average minutes of viewing per day by activity: Total TV, Individuals 4+

225 219 216 206 193 188

17 22 24 26

27 29

0

50

100

150

200

250

2010 2011 2012 2013 2014 2015

Timeshift

TraditionalTVviewing(Live)

Traditional live TV drives the decline

Page 94 Figure 2.40

242 242 241 232 220 216

16

Source: BARB

342

297

239 216 194 162

124 111

0

50

100

150

200

250

300

350

2010 2011 2012 2013 2014 2015

Adults 65+ Adults 55-64 Adults 45-54 IndividualsAdults 35-44 Adults 25-34 Adults 16-24 Children

Average minutes per day of broadcast TV viewing by age group: Total TV

Fall most pronounced among under-45s

Page 98 Figure 2.44

17

Source: BARB

Main five PSB share: 55% 54% 52% 51% 51% 51%

PSB channels retain half of viewing

Page 101 Figure 2.47

21% 21% 21% 21% 22% 22%

7% 7% 6% 6% 6% 6%

17% 16% 15% 15% 15% 14%

6% 6% 6% 5% 5% 5%

5% 4% 4% 4% 4% 4%

18% 20% 21% 21% 21% 20%

27% 26% 27% 28% 28% 29%

0%

20%

40%

60%

80%

100%

2010 2011 2012 2013 2014 2015

All otherchannels

PSBportfolios

Channel 5

Channel 4

ITV

BBC Two

BBC One

47

37

23 21 20 20

11

59

45

35 29 28

35

15

54

42

25 25 22 21 13

37 32

13 15 12 10 7

19 17

4 5 5 3 2 0

20

40

60

80

ANY OFTHESE

Broadcastercatch-upservices

Clips throughwebsites (FB,

YouTube)

Free VODcontent

through TVservice

Browse online Onlinesubscription

services(Netflix,

Amazon etc)

Paid VODcontent

through TV(PPV)

All 16-34 35-54 55-64 65+

18

Source: Ofcom Media Tracker 2015.

Younger viewers most likely to use their connected TV

Respondents (%)

Page 91 Figure 2.37

BBC iPlayer remains the most popular VoD service

19

Source: Kantar Media – TGI Base: GB adults 15+, all devices.

2

3

6

10

13

14

16

32

1

2

7

10

15

15

16

30

0 5 10 15 20 25 30 35

TalkTalk TV

BT TV

Virgin (all)

My5

ITV Hub

All4

Sky (all)

BBC iPlayer

H1 2014

H2 2014

H1 2015

H2 2015

Proportion watching VoD services in past 12 months (%)

Page 60 Figure 2.6

20


Proportion watching paid-for services in the last week (%)

Netflix is the most used paid-for VoD service

Page 62 Figure 2.8

18%

13%

5%

1%

5%

26% 23%

7% 4% 4%

0%

5%

10%

15%

20%

25%

30%

All paid-for services Netflix Amazon Instant Video Now TV iTunes

2014

2016

Subscribers most interested in back catalogue

21

Source: GfK SVoD Tracker. Base: All Amazon / Netflix / Now TV subscribers

Reasons for using Amazon Prime Instant Video / Netflix

Page 63 Figure 2.9

39%

38%

31%

27%

15%

28%

27%

19%

20%

12%

23%

23%

9%

18%

22%

To access back catalogue of TV programmes

To access back catalogue of movies

To watch original series made by provider

To watch at a time that suits

Cheaper than Pay TV subscription

NetflixAmazon Prime VideoNow TV

22

The telecoms industries

Max Fernando, Telecoms Analyst, Market Intelligence

Fixed voice

Fixed voice call volumes fell by 9% in 2015

24

Source: Ofcom / operators Page 146 Figure 4.10

82.8 74.6 69.0 61.7 55.0 49.5

6.7 6.5 5.9

5.0 4.4 4.0

11.8 10.3

9.4 8.6

7.6 7.2

21.7 19.7

17.9 17.2

14.6 13.4

123.0 111.1

102.2 92.5

81.6 74.2

0

50

100

150

2010 2011 2012 2013 2014 2015

Other calls

Calls to mobiles

International calls

UK geographiccalls

Billions of minutes

Usage of non-traditional communication services continues to increase

25

83% 78%

53%

35% 32%

14%

82% 80%

55%

40% 37%

17%

83% 79%

58%

42% 44%

22%

0%

20%

40%

60%

80%

100%

Mobilemessaging

Email Socialnetworking

sites

VoIP (voice callonly)

Mobile instantmessaging

Video calls

2014

2015

2016


Proportion of respondents


Business VoIP minutes up 19% in 2015

26

Source: IDC

6.4 8.1 10.1

12.5 15.1

17.9

0

5

10

15

20

2010 2011 2012 2013 2014 2015

Billions of minutes


The total number of fixed lines fell by 1%, due to falling business lines

27


Source: Ofcom / operators

23.8 23.9 24.5 25.0 25.5 25.6

9.7 9.4 8.9 8.5 8.0 7.6

33.4 33.3 33.4 33.4 33.5 33.2

0

10

20

30

40

2010 2011 2012 2013 2014 2015

Business

Residential

Millions

Stable fixed line retail voice revenue

28

Source: Ofcom / operators Note: Figures exclude VAT

Page 145 Figure 4.9

12.55 13.24 13.79 14.26 14.44 15.03

3.10 2.72 2.47 2.26 1.95 1.72 1.11 0.95 0.82 0.68 0.58 0.54 3.63 3.07 2.58 2.24 1.90 1.65

2.82 2.44 2.22 2.19 2.13 2.04

23.22 22.42 21.89 21.63 20.99 20.97

0

5

10

15

20

25

2010 2011 2012 2013 2014 2015

Total

Other calls

Calls to mobiles

International calls

UK geographiccallsLine rental &bundled calls

£ per month, per fixed line

Fixed broadband services

Fixed broadband lines up 0.9 million in 2015

30


Connections (millions)

8.0 8.2 7.7 7.1 6.6 5.9

7.5 7.9 8.7 8.9 8.9 8.6

4.0 4.1 4.3 4.4 4.5 4.7

1.1 2.3 3.6 5.4 19.6 20.7 21.8 22.8 23.7 24.7

0

5

10

15

20

25

2010 2011 2012 2013 2014 2015

Fibre

Cable

LLU-ADSL

Non-LLUADSL

37% of fixed lines were superfast in 2015…

31


1.0 3.1

5.3 7.1

9.2

0.9 5.0

14.3

23.2

30.0

37.1

0

10

20

30

40

0

2

4

6

8

10

2010 2011 2012 2013 2014 2015

Connections ≥ 30Mbit/s

As aproportion ofallconnections

As a proportion of all connections (%) Connections (millions)

32

… driving higher ARPU

Source: Ofcom, using data provided by SamKnows Page 151 Figure 4.16

Speed (Mbit/s) ARPU (£)

6.2 7.6 12.0

17.8

22.8

28.9

16.6 16.6 16.5 16.4 17.2 18.6

0

5

10

15

20

0

10

20

30

40

2010 2011 2012 2013 2014 2015

All connectionsincluding 'up to'2Mbit/s and less

Average revenue peruser

Superfast take-up driving fixed internet revenue growth

33


£0.1bn

£3.2bn £3.5bn £3.7bn £4.0bn £4.6bn

£5.1bn

£3.3bn £3.5bn £3.7bn £4.0bn

£4.6bn £5.1bn

0

1

2

3

4

5

6

2010 2011 2012 2013 2014 2015

Broadband

Narrowband

Revenue (£bn)

34

28 30 30 31 32 32

15 18 19 21 22 23 22 21 21 20 20 19 20 18 17 16 14 13 4 3 3 3 4 4 10 10 10 9 8 8

0

20

40

60

80

100

2010 2011 2012 2013 2014 2015

Others

EE

TalkTalk

Virgin Media

Sky

BT

Source: Ofcom / operator data

Retail fixed broadband market share (%)


Small shifts in fixed broadband market shares

Mobile telecoms

36

Use of mobile data services is increasing

Source: Ofcom Technology Tracker Page 175 Figure 4.45

52% 45%

39% 35% 34%

29% 25%

56% 51%

43% 41% 40%

32% 26%

61% 57%

49% 44%

47%

38% 33%

8%

0%

10%

20%

30%

40%

50%

60%

70%

Webbrowsing

Emailing Socialnetworking

Downloadingapps

Instantmessaging

Watch AVcontent

Watchingvideo clips

Contactlessmobile

payment2014 2015 2016

Proportion of mobile users using service

Almost 98% of premises have outdoor 4G mobile coverage from at least one operator

37 Source: Ofcom

4% 5%

18%

71%

2% One operator

Two operators

Three operators

All operators

No coverage

Proportion of premises with outdoor 4G coverage

Page 157 Figure 4.25 Coverage of at least one network – 97.8%

UK 4G subscribers near 40 million

38


2.7 12.9 15.8 19.2 23.7 27.0 30.8 34.5

39.4

2% 3%

16% 19%

23% 28%

32% 36%

41% 46%

0%

10%

20%

30%

40%

50%

0

10

20

30

40

50

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

4Gsubscriptionnumbers(millions)

4Gsubscriptionsas % of total

% of all subscriptions that are 4G 4G subscriptions (millions)

Total mobile subscriptions pass 90m mark

76.7 77 78.1 77.8 78.5 79.3

4.9 5.2 5.1 4.9 5.2 5.6 3.2 4.1 5 5.7 6.3 6.7 84.7 86.3 88.2 88.4 89.9 91.5

0

20

40

60

80

100

2010 2011 2012 2013 2014 2015

M2M

Dedicatedmobile data

Mobile handset

39

Source: Ofcom / operators .

Subscriptions (millions)


Total outgoing mobile call minutes increased by 3.9% in 2015

40

32 32 31 32 32 33

46 43 42 40 39 40

38 42 43 47 52 56

6 7 8 8 7 7

8 8 8 7 7 7 131 131 132 134 137 143

0

50

100

150

2010 2011 2012 2013 2014 2015

Other calls

International

Off-net mobile

On-net mobile

UK geographic


Billions


41

19%

27%

29%

11%

15% Vodafone (inc. Talkmobile)

O2 (inc. GiffGaff)

EE (inc. Orange and T-Mobile)

Three

Others

Source: Ofcom / operators Note: Excludes M2M subscriptions

Retail mobile subscription shares, Q4 2015

42


Average revenue per mobile subscription has fallen

28.15 27.50 26.71 24.38 23.12 22.11

15.60 15.74 16.14 15.60 15.37 14.97

6.23 5.91 5.81 5.38 5.00 4.75 0

10

20

30

2010 2011 2012 2013 2014 2015

Post-pay

Blended

Pre-pay

Average monthly retail revenue per mobile subscription (£)

Summary

44

9% 12% 19% 17% 20% 22% 24% 27% 27% 28% 27% 29%

3% 5%

7% 12%

16% 17%

16%

19% 21% 23% 25%

28%

7% 5%

5%

4% 4%

3% 3%

2% 2% 2%

2% 3%

2% 2%

1% 2%

2%

4% 3%

5% 5%

6% 9%

8%

6% 7%

8% 6%

7%

29% 29%

40% 39% 46%

50% 53%

57% 60%

63% 63% 68%

0%

10%

20%

30%

40%

50%

60%

70%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Other

Mobile and broadband

Fixed voice, broadband,mobile and TV

Fixed voice, dial-up and TV

Fixed voice and TV

Fixed voice and dial-up

Fixed voice, broadbandand TV

Fixed voice and broadband

Proportion of households (%)


44

Reported use of bundled services increased

Page 13 Figure 1.6

Total telecoms revenues rose 0.5% in 2015

45

Source: Ofcom / operators / IDC Page 143 Figure 4.6

£10.1bn £8.9bn £8.3bn £7.5bn £6.5bn £6.2bn

£12.6bn £12.5bn £12.5bn £12.6bn £13.0bn £13.5bn

£15.1bn £15.4bn £15.9bn £15.5bn £15.2bn £15.2bn

£2.7bn £2.8bn £2.7bn £2.7bn £2.6bn £2.6bn

£40.6bn £39.5bn £39.4bn £38.2bn £37.3bn £37.5bn

0

10

20

30

40

50

2010 2011 2012 2013 2014 2015

Corporatedata services

Retail mobile

Retail fixed

Wholesaleservices

Revenue (£bn)

46

Internet and online content

Steven Cape, Senior Analyst, Market Intelligence

Smartphones more popular than laptops

47

39%

71% 61% 64%

11%

59% 44%

31%

0%

20%

40%

60%

80%

2012 2013 2014 2015 2016

Smartphone

Laptop

Tablet

PC

Household take-up

Page 190 Figure 5.10 Source: Ofcom research

And the most important for internet access

48

Source: Ofcom research

Internet users (%)

36 56 56

35

12 28

37 40 42

29

23 21

31

36

35 28 24 28

20 11 15

24

25

20 20 24 17

12 7 4 9 23

14 12 9 10 3 3 3 2 4 3 2 3 3

0%

20%

40%

60%

80%

100%

UK 16-24 25-34 35-54 55+ AB C1 C2 DE

Age group Social group

Other

Desktop

Tablet

Laptop

Smartphone


Reflected in the time spent online

49


Average time spent online in March 2016 (hours)

Source: comScore

81.8

59.6

30.7

0

20

40

60

80

100

Total digital audience All smartphones (browser &app combined)

Laptop and desktops

Internet ad spend has reached £8.6bn

50

Source: AA/WARC Expenditure Report, April 2016

Advertising expenditure (£ millions)

592

1,059

1,861

2,636

5,095

702

175

238

592

1,059

1,861

3,338

5,270

8,606

0 5000 10000

Cinema

Radio

Out of home

Direct mail

Press brands

TV

Internet

Non-digital

Digital


Half of digital ad spend was paid for search

51

Source: IAB/PwC Digital Adspend 2009 - 2016

Expenditure (£ millions)

772 1,051 1,280 1,479 1,825 2,421 3,033 658 718 759 818 882 1,050

1,115

2,097 2,245 2,708

3,087 3,471

3,768 4,355

3,559 4,097

4,822 5,448

6,258 7,335

8,606

0

2000

4000

6000

8000

10000

2009 2010 2011 2012 2013 2014 2015

Other

Paid for search

Classifieds

Display


Mobile display ad spend grew 59%

52

Source: IAB/PwC Digital Adspend 2011 - 2015

Expenditure (£ millions)

137 365 581 800 1,306

60 153

424

812

1,297

203

529

1,021

1,631

2,627

0

500

1000

1500

2000

2500

3000

2011 2012 2013 2014 2015

Other

Display

Search


53

Post

Steven Cape, Senior Analyst, Market Intelligence

54

£4,084m £4,059m £4,156m £4,233m £4,252m £4,168m

£3,936m £3,905m

£3,993m £4,062m £4,055m £3,989m

£2,856m £2,635m £2,552m £2,568m £2,543m £2,449m

£1,080m £1,270m £1,441m £1,494m £1,512m £1,540m

£142m £150m £157m £160m £161m £173m

£6m £4m £5m £11m £35m £7m £0,000m

£1,000m

£2,000m

£3,000m

£4,000m

£5,000m

2010 2011 2012 2013 2014 2015

Totalmarket

Royal Mailtotal

Royal Mailend-to-end*

Royal Mailaccess

Accessoperators

End-to-endoperators

Revenue


Page 229 Figure 6.7

Slight fall in addressed letter revenues …

55

15,567 14,598 13,482 12,874 12,681 12,211

8,650

7,423 6,236 5,633 5,455 5,075

6,906

7,166 7,228 7,185 7,068 7,069

11 9 18 56 159 68 0

6,000

12,000

18,000

2010 2011 2012 2013 2014 2015

Total mail

Royal Mail end-to-end*

Royal Mailaccess

Other operatorsend-to-endletters

Volume (million items)


Page 228 Figure 6.6

… and an increase in volume decline

56

Access now a higher share of letter mail

Proportion of access in total letter volume

Page 230 Figure 6.8 Source: Ofcom / operators

44% 49% 54% 56% 56% 58%

0%

10%

20%

30%

40%

50%

60%

2010 2011 2012 2013 2014 2015

Year on year growth rate of access volumes 13.1% 3.8% 0.9% -0.6% -1.6% 0.0%

Online shoppers prefer home delivery

57

% of respondents stating each feature

Page 224 Figure 6.4 Source: YouGov Reports, Innovations in Retailing 2016

1%

1%

2%

3%

5%

12%

68%

0% 20% 40% 60% 80%

Other

Delivery to Post Office

Delivery to relatives/friends/partner’s home

Delivery to parcel locker or parcel shop

Delivery to where you work

Click and Collect

Home delivery

58

Many have heard of faster delivery services

Source: YouGov Reports, Innovations in Retailing 2016

Page 225 Figure 6.5

Proportion of respondents (%)

17% 28% 24%

50% 38%

37% 42%

29% 34%

25% 24% 13%

11% 9% 10% 9%

0%

20%

40%

60%

80%

100%

Within the hourdelivery

Sundaydelivery

Same daydelivery

Next daydelivery

Don’t know

No, and I’m not interested in using this

No – but I’d be interested in using this

Yes (I have used this)

59

Questions?

the communications market report 2016 - home - ofcom...5 proportion of individuals (%) 71% 61% 27%...

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