The State of SVOD in Europe
In Europe, as in North America, the video-on-demand (VOD) market is overcrowding as major direct-to-consumer (DTC) platforms pressurise an already heated business.
Apple TV+ was first out of the box in November. It will be joined by HBO Max; short-form mobile VOD platform Quibi; NBCU Peacock, which uses the same user interface (UI) as Comcast-owned Now TV (Peacock is likely to be an ad-supported service, free to existing Sky customers in the UK); and Disney+.
Disney+ is already live in the Netherlands, where the service was beta-tested in September. The country was chosen because of a propensity of its population to pay for content. (Among its 7.5 million inhabitants, Netflix and Spotify both have 3 million subscribers, while Videoland, a competing local service owned by RTL, has 1 million subs.)
That there is growth in premium VOD has been reported by several analysts. While TV viewing remains dominant in Europe, revenue has been broadly flat over the past 5 years, and national networks have seen their audiences erode, according to Digital TV Research. Meanwhile, subscription video-on-demand (SVOD) figures are forecast by the analyst to reach 100 million subs in Europe by the end of 2021, with total SVOD revenue in the region expected to jump to $12.47 billion within 5 years.
Kantar's TGI Global Quick View data shows that 44% of consumers in Great Britain who pay for an online streaming service have at least two subscriptions, with 7% paying for four or more. The market could prove difficult for new premium streaming services as consumer attention—and wallets—only stretch so far.
"Whether people will sign up for multiple OTT services is yet to be seen, and there will be no one answer," says Steve Miller-Jones, VP of product strategy at Limelight Networks. "Pure cord cutters won't mind the idea of multiple subscriptions and will follow the content. There will be others who want everything wrapped up in one place alongside their TV and internet. To serve this second cohort of consumers, there will certainly be more integration of OTT and pay TV."
Disney+ launched in the Netherlands before it will in the rest of Europe, in part because of its residents’ propensity to pay for video services, such as the RTL-owned Videoland.
He adds, "One thing we can all be sure of is that competition in the streaming market is going to be fierce on all sides. After the initial hype dies down, and the first seasons of flagship shows end, the content war in the SVOD will really start as services look to prevent subscriber churn."
Kantar analyst Sushmita Jain suggests that the ever-increasing amount of available content and platforms "will lead to a paradox of choice. … [M]ore is not always better. Overwhelmed consumers will become more discerning."
It is widely expected that the streaming war will intensify into 2020, but Antonio Corrado, CEO of Mainstreaming, thinks the Apple and Disney challenge to Netflix and Amazon will benefit the consumer. "This could also mean that user experience and quality of service could become a real differentiator as these giants battle to gain market share," he says.
Netflix had a wide lead in market share as of October 2019, according to Goldmedia’s VOD-Ratings.
The arrival of Disney+ doesn't necessarily mean pay-TV operators will be excluded from carrying its content; "instead it heralds the beginning of a new commercial paradigm," David Sidebottom, analyst at Futuresource Consulting, writes in a blog post. "Disney will still be keen to maximise distribution and therefore will likely look to maintain relationships with pay-TV operators, seeking carriage of Disney+ as an app or through more sophisticated integration."
Netflix has made similar carriage pacts with Sky in the UK, Sky Italia, and Canal+ in France as defence against rival SVOD launches.
Netflix has an estimated 11.3 million UK subscribers compared to Amazon's 9 million Prime Video subscribers. Netflix, though, has a market share of 61% of daily SVOD usage, with Amazon Prime in second at 25% and Now TV in third at 11%. The figures are based on Goldmedia's VOD-Ratings for October 2019 as reported by Broadband TV News. According to that analysis, there are 2.6 users for every Netflix UK account, compared to 1.9 for Amazon Prime Video, which, in part, explains higher usage levels of Netflix. Now TV has 2.3 users per subscription.
Forging Alliances: Broadcasters Fight Back
To combat the threat from digital streamers, a number of broadcasters within and across European markets have allied to launch new online services. Although business models vary, they offer digital-first functionality like programme restart and content recommendations, with availability on as wide a variety of products and platforms as possible.
Some share a belief that ringfencing homegrown content is something that domestic audiences are crying out for. This concept is perhaps fatally undermined by the weak content budgets (in the low millions of euros) local broadcasters allocate for original content compared to the billions of euros of global SVODs.
Some have had to overcome anti-competition hurdles; others have been forced to get into bed with local rivals. Both dynamics have hamstrung speed to launch, ceding more advantage to SVODs.
Lovestv, a joint venture of Spain's three leading broadcasters, RTVE, Atresmedia, and Mediaset, went live in November 2018. Currently confined to smart TV devices based on hybrid broadcast broadband TV (HbbTV), it brings together catch-up VOD content and live rewind.
Spain’s Lovestv is a joint venture from broadcasters RTVE, Atresmedia, and Mediaset, but it’s limited to hybrid broadcast broadband TV (HbbTV)-based smart TVs.
German commercial broadcaster ProSiebenSat.1 partnered with Discovery to introduce freemium service Joyn to the German market in June 2019. It comprises 55 free-to-air TV channels offered as live streams, including those of public broadcasters ARD and ZDF; commercial broadcasters Viacom, Welt, and Sport1; and Bloomberg and CNBC. Its attraction is multi-screen availability (smartphones, smart TV, tablets) without prior registration and a content mix including curated theme channels and catch-up.
In November, it launched subscription layer Joyn PLUS+, costing €6.99, and plans to introduce the Eurosport Player by mid-2020. ProSiebenSat.1 also plans to roll out Joyn in other European markets.
German broadcaster ProSiebenSat.1 and Discovery joined forces to bring Joyn to the market in June 2019. The service offers 55 free-to-air channels from both public and commercial broadcasters.
The main terrestrial broadcasters in France (France Télévisions, TF1, M6) will finally launch Salto, a joint venture, this spring, with the intent to become the default streaming video destination for French premium video. Since its initial announcement in mid-2018, however, Netflix has become increasingly dominant, with CanalPlay shuttering in mid-2018, although Canal+ Séries launched in March 2019.
Netflix will lose market share despite adding 25 million subs in the next 6 years, says Digital TV Research.
Disney+ has helped SVOD revenues continue to rise on a steady pace, while COVID-19 has temporarily stunted AVOD's growth