At a pivotal structural and cyclical juncture
We address the five key structural questions facing the European
broadcast industry: (1) Will cord-cutting destroy the European pay TV
industry? (2) What will US networks and major tech companies do? (3) What is
the triple and quad play opportunity? (4) Content is king, but is this enough in a
fragmented world? (5) Are audiences reaching an inflection point for
advertisers? As structural change evolves, companies with increasing content
ownership, product differentiation and progressive businesses should
outperform. With this report, Samantha Carleton assumes coverage of the
European Broadcast industry.
Our proprietary media buyers' survey suggests the UK has the greatest
short-term cyclical upside potential: UK media buyer expectations are for
5.8% growth in 2015, 30bp above consensus, implying 0.6% EPS upside for
ITV. On a five-year view, we see Spain and Italy as having the greatest upside
to mid-cycle ad revenues, representing a €1.5bn and €2.5bn opportunity
respectively.
Stock calls: We like content plays, restructuring stories and stocks exposed to
the UK, Spain and Italy. Our key calls vs the market are Sky (we upgrade to
Outperform from Underperform), Vivendi (we initiate coverage with an
Outperform rating) and RTL (we downgrade to Underperform from Neutral). We
like ITV (Global Focus List stock), Mediaset and Mediaset España (SMID Focus
List stock), all rated Outperform, and maintain our Underperform rating on TF1.
We are Neutral on ProSiebenSat.1 and Atresmedia (downgraded from
Outperform). We also revise our target prices and models for all stocks.