The dynamism of the subscription video sector has showed no sign of slowing in the first half 2019; with a high sense of anticipation for what is to come during the remainder of the year. Most of the current focus has centred around the potential Netflix dampening services which have yet to launch; namely Disney+, WarnerMedia and Apple TV+. However, within Europe a rising number of local joint venture SVoD initiatives are gathering momentum, this includes Salto in France (France Télévisions, M6, TF1) and BritBox in UK (ITV, BBC, with BT also looking to invest), with further business model experimentation also underway with the imminent launch of German AVoD platform Joyn (ProSieben and Discovery, with ARD and ZDF content also).
It is not the strategy of these players to necessarily compete with Netflix per se, but instead ensure a platform that offers a complementary service offering in the way of content – typically localised and/or genre specific, all fuelled by the fact that consumers are increasingly willing to take multiple subscriptions. In the UK, for example, households with SVoD take on average approximately 1.7 subscriptions, which will exceed 2 subscriptions per SVoD household in the coming years.
The key challenge for any localised service will be the sustained provision of high quality, exclusive content when compared to both Netflix and the existing TV landscape. Such services will also have to differentiate against their backer’s existing live and on-demand services. This will require significant additional budget if they are to establish themselves and keep subscribers renewing.
Netflix’s total content spend reached $12 billion in 2018, with the majority of this on original content. Compare this to one of the leading European broadcasters, BBC, who, whilst not an insignificant sum, spent under $2 billion. This may not be a fair comparison but given Netflix’s truly global reach and growing production output in Europe, it highlights the scale of the challenge local broadcasters face.
In addition to its continued impressive growth in subscribers, engagement amongst Netflix users is increasing, as it becomes a de-facto part of many user’s lifestyles. Those on the premium plan continue to grow, approaching one-third of all subscriptions in markets such as the USA, UK and Germany, whilst daily engagement now reaches 30% of all Netflix subscribers in a number of countries.
Recognition of scale’s importance, the pooling of content and aggregation of resources will be essential for smaller services’ success. Furthermore, broadcasters’ traditional domestic approach to content distribution is unlikely to be enough to secure satisfactory sizable audiences, with international reach expected to be critical for scale and return – a factor that will be aided by the wider media and broadcast consolidation occurring in Europe.
French joint venture, Salto, is to position itself with the above in mind, setting out to become the default streaming video destination for French premium video. It’s set to finally launch later this year, following a notable wait since its initial announcement in mid-2018. In the meantime, Netflix has become increasingly dominant in the French SVoD sector, with CanalPlay closing in mid-2018, although Canal+ Séries launched in March 2019.
ProSieben has had limited success with its SVoD service ‘Maxdome’, struggling in recent times as Netflix’s momentum continues. It is hoped that its alternative approach through Discovery JV Joyn will target the sweetspot between dedicated broadcaster catch-up TV services and an SVoD service. With content from leading broadcasters ARD and ZDF set to be included in the offering at launch on June 18th, it is targeting 10 million viewers within two years.
Ad-funded TV networks such as Pluto TV in the USA have gained significant user bases as they look to build revenue. It is now owned by Viacom and has over 12 million users. Viacom are looking to leverage this base and will likely develop the service to include paid-for elements, ProSieben is also expected to make available a premium version of Joyn by the end of the year, once the ad-funded version has had time to establish itself.
Beyond Netflix and Amazon Prime Video, the market is fragmented in many countries in mainland Europe. Many local players have struggled to grow as anticipated, therefore, to date, multiple subscription uptake has not reached it’s potential. However, new international and local services will help stimulate this if they are unique, affordable and able to lock-in subscribers beyond any initial binge viewing.
One thing is certain, whether it’s major global D2C brand launches from Disney, or local broadcaster joint ventures, consumers thirst for premium streamed video will continue to grow, driven by both increasing content and service choice.
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