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Share performance showed time was right for Aviva CEO to go, analysts say

Energy

Power Forecast Briefing: Fleet Transformation, Under-Powered Markets, and Green Energy in 2018

Trading Of US Linear TV Advertising Shifting To Programmatic Trading

Every Industry Is Now A Technology Industry

Online Video Bolstering Consumer Home Video Spend, Spearheaded By Subscription Streaming


Share performance showed time was right for Aviva CEO to go, analysts say

Mark Wilson's exit from the CEO role at Aviva PLC, the U.K.'s largest insurer, comes as little surprise, according to analysts, because of lackluster share price performance and unclear profit growth prospects.

Aviva announced Oct. 9 that Wilson, who has been at the helm since January 2013, will step down as CEO immediately, although he will remain with the company until April 2019. The insurer said a search for a successor, expected to take four months, will start immediately.

Some have read the lack of an immediate replacement and the recent share price performance to mean Wilson was pushed out. Berenberg analysts in a research note described the move as "a swift departure with Mark Wilson effectively being relieved of his duties," while a source familiar with the situation told Reuters that Wilson had left after disagreeing with the board about how to improve the insurer's share price performance.

S&P Global Market Intelligence data shows that Aviva's share price has lagged the Stoxx Europe 600 insurance index for roughly three years.

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Strategic direction 'lost'

Analysts did have some praise for Wilson's tenure — Shore Capital's Paul De'Ath described his efforts to turn Aviva around as "very successful, while Panmure Gordon's Barrie Cornes wrote that Wilson did a "good job" at focusing the company on its largest and most profitable businesses. But several felt the time was right for a change.

Cornes said in a research note that following an initial bounce when Wilson first arrived, "the shares have flatlined for the last five years." He added: "Aviva seems to have lost its strategic direction in recent times and as such we believe the change will probably be well received."

Shareholders initially seemed to have reacted positively to the news, with Aviva up about 2% in early trading, although by late afternoon, shares were almost flat at 464 pence.

Aviva said it remains on track to hit its targets of delivering more than 5% earnings-per-share growth in 2018 and achieving a dividend payout ratio of between 55% and 60% by 2020. But Berenberg analysts said Wilson is leaving behind "a highly levered company with an unsustainable operating growth target and dividend growth rate," and they also contended that operating earnings had been propped up by one-off reserve releases and management actions "which are unsustainable in our view."

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Cornes said that, like other analysts, "we struggle to see where the growth will come from."

Investec's Ben Cohen agreed, saying: "[I]t is not easy to identify the catalysts for a step-change in performance from here, and [we] posit that this has played a role in Wilson's decision to exit."

UBS analyst Colm Kelly said that although he believes Wilson did a good job delivering his "cash flow plus growth" strategy, an investor survey the bank conducted showed that management execution ranked as the second-biggest concern.

"This indicates scope for improved investor confidence around execution could drive upside from here," he said in a note.

Next in line

It is not yet clear who Wilson's successor will be, and Aviva said it is considering both internal and external candidates. Kelly said UBS expects an appointment within Aviva's ranks, and Cornes noted that Aviva has "two strong internal candidates" in international insurance CEO Maurice Tulloch and U.K. insurance CEO Andy Briggs, who was head of Friends Life when it agreed to be acquired by Aviva in late 2014.

The new CEO would need to "improve quality of earnings over time, amplify long-term earnings growth and improve confidence in consistent book value growth that is sustainable through time," said UBS's Kelly.


Watch: Power Forecast Briefing: Fleet Transformation, Under-Powered Markets, and Green Energy in 2018

Steve Piper shares Power Forecast insights and a recap of recent events in the US power markets in Q4 of 2017. Watch our video for power generation trends and forecasts for utilities in 2018.


Technology, Media & Telecom
Trading Of US Linear TV Advertising Shifting To Programmatic Trading

Oct. 08 2018 — Both buyers and sellers of traditional linear TV advertising, not including connected TV or over-the-top video, are moving toward the adoption of programmatic trading. In 2017, Kagan estimates that $690 million or 0.9% of total linear TV spend was traded programmatically. Within the next five years, that figure is expected to climb to $9.76 billion or nearly 12% of total linear TV advertising revenue. MVPDs are forecast to trade the greatest percentage of their ad inventory programmatically in 2022 with 30% of ad revenue from programmatic trading.

Kagan defines programmatic trading as being automated and data-enhanced, not just one or the other. Trading may be through a private or open marketplace and does not have to be through an auction, which is more common in digital video advertising.

There are several issues holding participants back from programmatic trading. Unlike digital programmatic marketplaces, where there is a seemingly unending supply of ad inventory, linear TV has a finite supply. Demand for TV inventory exceeds the supply, so there is still an attitude of "If it isn't broken, don't fix it." TV ads are also bought well in advance, not immediately.

While many agencies have experimented with the programmatic trading of linear TV, not all are on board. Many of the advertisers and agencies are interacting directly with the supplier platform rather than going through a demand-side platform, or DSP, today. In their experiments, the agency needs to use separate platforms to aggregate inventory and tie it together, which is a lot of work.

The lack of inventory is one factor holding back programmatic trading. The only way it takes off is to make linear TV inventory available in some type of buyer platform that can combine the various supply platforms. It is even more complicated when the buyer wants to bring in connected TV (OTT).

Agencies do like the automation capabilities of programmatic, particularly where the process takes a lot of time. An algorithm may do better in areas such as weighting estimation, the first pass at scheduling and the negotiation process as well as postings and billings. The process of buying inventory is not difficult, but computing where a buyer will be able to find its preferred audience is. Therefore, interest in automating the planning and analysis to find an optimal audience is high.

We forecast a gradual uptake for programmatic trading with continued testing in 2018. Broadcast stations and networks, cable programmers, and MVPDs need to add more inventory to programmatic platforms before agencies begin using it in earnest. It will take time for all parties to feel comfortable transacting in a new way.

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Technology
Every Industry Is Now A Technology Industry

Highlights

And every company is now a technology company.

Sep. 28 2018 — As machine learning (ML), artificial intelligence (AI), and robotics become commonplace and enter the operations of mainstream organizations, leadership teams are finding that failure to harness and leverage AI puts them behind the competition. Repeatable tasks are carried out by bots in a fraction of the time and employees are more focused on adding value, which means companies on the forefront of technology can be more reliable, more user-friendly, and faster to market.

In this highly disruptive environment, one traditional truth of business has withstood, or has perhaps even guided, these technological advances: above all, the customer experience is king. More than ever before, businesses have effective technologies at their fingertips to quickly and effectively address customer pain points, while at the same time dramatically improving their internal operations.

At S&P Global Market Intelligence, we strive to get beyond the buzzwords and truly deliver essential insight. And second to this, we strive to adopt real operational efficiencies into our delivery that are paralleled by the workflow efficiencies we promise to our customers. To that end, we are committed to remaining on the cutting edge of emerging technologies, first through optimization, then automation.

Download a recent analysis of how we’re applying new technology like natural language processing to structure data, robotic process automation to deliver insights faster, and predictive analytics to stay ahead of the market.

You can also view this analysis in Spanish, Portuguese, Mandarin, and Japanese.

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Natural Language Processing – Part II: Stock Selection

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Natural Language Processing, Part I: Primer

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Technology, Media & Telecom
Online Video Bolstering Consumer Home Video Spend, Spearheaded By Subscription Streaming

Highlights

The following post comes from Kagan, a research group within S&P Global Market Intelligence.

To learn more about our TMT (Technology, Media & Telecommunications) products and/or research, please request a demo.

Sep. 20 2018 — Spending on home entertainment is rising toward levels not seen since 2004, when consumers spent $24.37 billion building massive home-video libraries of DVDs and VHS cassettes. Since then, the optical-disc market saw more than a decade of significant declines as consumers shifted to digital entertainment. By 2012, total spending on home entertainment was down to $20.13 billion, with $4.13 billion coming from online video while DVDs and Blu-ray discs accounted for $12.88 billion and multichannel PPV/VOD contributed the remaining $3.13 billion.

Fast forward to 2017 and the mix of consumer spending has changed significantly. Consumers spent a total of $22.62 billion on home entertainment from multichannel, online and disc retail/rental sources. Online spending accounted for $13.00 billion of that total while spending on discs dropped to $6.84 billion and multichannel PPV/VOD shrank to $2.79 billion.

While the data might seem like good news for traditional providers of home entertainment, a key component of the growth in digital spending is the rise of subscription video on demand. The majority of online spending is going to over-the-top services like Netflix, Hulu and Amazon Prime, which increasingly have focused on creating original programming (mainly episodic TV) rather than licensing content from Hollywood studios.

Removing subscription streaming from the consumer spending pool paints a less favorable picture for traditional content providers. In 2012, consumers spent just $1.43 billion on non-subscription online video purchase/rental, and a total of $17.44 billion excluding the SVOD component. By 2017, while consumer spending on online video overall had risen to $13.00 billion, some $10.47 of that came from streaming subscriptions versus $2.53 billion from online video purchase/rental, and total home-entertainment spending was just $12.16 billion excluding SVOD.

Spending on sell-through home video peaked in 2006 when consumers shelled out $16.53 billion for DVDs and VHS cassettes. Since then spending has declined by hundreds of millions (sometimes billions) each year. In 2017, consumers spent $6.50 billion on DVD and Blu-ray sell-through and electronic sell-through. This seems to suggest that people are becoming less and less interested in adding to their home-video libraries and are turning to the more affordable streaming options. The story is similar for the home-video rental segment, which saw consumer spending peak in 2001 at nearly $8.45 billion before dropping to $2.87 billion by the end of 2017.

This has to be a somewhat unsettling trend for the major film studios, and is likely a key factor in shifting their strategy to focus on major franchise films and low-cost genre fare. The former tend to have broad worldwide appeal and can still move enough video units to help offset their high production and distribution costs. The low-cost genre fare, on the other hand, may be more risky and not sell as well internationally, but has a fair chance to break even. If the latter films lose money, the successful franchise films typically cover the losses.

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US Online Video Outlook To Eclipse $15B In 2018

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DVD, Blu-ray Spending Down $1B-plus For 11th Year In A Row

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