SVOD Accounts Triple in Europe, Pay TV Accounts Nearly Flat
There's a lot of growth in European TV subscriptions, but nearly all of it is coming from subscription video on-demand (SVOD) services. Data released today by Digital TV Research shows the number of SVOD subscriptions roughly tripling from 27 million in 2015 to 76 million in 2018. During the same period, the number of pay TV subscriptions is increasing from 178 million to 186 million.
As most households appear to be holding their pay TV accounts while adding online services, their monthly home entertainment expenses are growing. Can this trend continue for long?
"Homes are paying more overall than a few years back. Europe hasn't experienced the level of cord-cutting that the U.S. has (in fact several countries are still gaining subs)," explains Simon Murray, principal analyst for Digital TV Research. "There are still quite a few analog cable subs (especially in Eastern Europe), some of which will convert to (more expensive) digital pay platforms but some will take FTA DTT [free-to-air digital terrestrial television]. However, traditional pay TV subs moving to bundles means lower pay TV revenues."
Digital TV Research's data shows strong differences in adoption between Eastern and Western Europe. While Eastern Europe has a solid base of pay TV subscribers, growth is flat. In Western Europe, pay TV is growing slightly better. But the bigger difference is with SVOD services, which are popular in Western Europe but see little traction in Eastern Europe.
"SVOD penetration in Eastern Europe is a lot lower than in Western Europe partly due to lower broadband penetration, lower disposable income, fewer credit card holders, little local language content, and the reluctance to pay in a foreign currency," Murray says. "However, I think that the main reason is that the SVOD platform for the likes of HBO is free to pay TV subscribers (so we don't count them as paying SVOD subs). Also, no Eastern European countries have Amazon Prime (and therefore free access to Amazon Prime Video)."
For more data, Digital TV Research's European TV Datatbook report is available for purchase.
BARB's best guess of growing SVOD viewing habits is that Netflix, Amazon, and Sky Now are the cause, accounting for 19% of total activity in 2018
While OTT is growing rapidly, don't look for it to eclipse pay TV until 2027. Netflix's domination of the SVOD market will only get bigger.
Look for the U.K. to be the biggest spender on OTT services, while Norway will have the highest proportion of subscriptions per household.
It's a good news/bad news scenario for pay TV operators in Western Europe, according to Digital TV Research. Subscriptions are set to rise slightly, but revenues will be down $2.11 billion by 2023