The German video market stepped up its dynamic transition in 2018, driven by subscription spending. Consequently, it is the 5th largest in the world with an estimated annual spend of circa €9 billion in 2018, up 6% on 2017, according to the latest Video Insights country report from Futuresource Consulting. Furthermore, with a robust pay-TV market, rapid progression of SVoD and with a growing acceptance of transactional digital video services; annual consumer spend is on course to exceed €10 billion by 2022.
SVoD is the key element of the German video market, which has shown impressive, continued growth. There are now over 10 million households subscribing to one or more service, which means that a quarter of German households are actively engaging with SVoD. “Amazon Prime Video remains the market leader, but Netflix continues to make strong gains, with 50% growth of subscriptions in 2018,” comments Tristan Veale, Market Analyst at Futuresource. “The two services are mostly complementary and there is room for both to thrive.
Moving forward, we expect multiple subscriptions per household to drive the market and, outside of these two streaming giants, there is a growing number of specialist services available directly, or via aggregators such as Amazon Channels. We also expect major D2C launches such as Disney+ in the longer term, along with broadcaster led initiatives in the near term, which will help maintain strong subscription growth. In 2019, the German SVoD market will have doubled in 2 years and is forecast to exceed €1 billion in 2020.”
“Consumer spending on pay-TV accounts for two thirds of the video entertainment market and growing, even though many European markets are seeing stagnation or even declines,” says Veale. “However, in Germany there is increased dynamism in the market, with an increased number of providers offering low cost, “pay-TV lite” services as a viable alternative to the entrenched Free-to-Air/basic cable plans and premium subscriptions from Sky which are currently available.”
Five years ago, packaged media accounted for 90% of spend on home entertainment video in Germany (Box Office and pay-TV subscription excluded). Fast forward to the end of 2018 and we expect it to have dipped below 50%, when the final year-end figures are confirmed, though Germany remains the shining light in Europe for Blu-ray.
“Some, but not all, of this deficit is being replaced by growth of digital purchasing or rental,” says Veale. “By 2021, we expect consumers to spend more on renting or purchasing digital movies and TV shows than they will on DVD’s and Blu-rays. However, transactional home video sell-through and rental is a declining market segment overall; spend is expected to fall by an average of 9% per year between 2018 and 2022.”
Smart TV is the springboard to premium digital video for many in Germany, and Futuresource expects German household penetration to have reached 82% at the end of 2018.
“Germany has one of the highest levels of smart TV ownership in Europe,” says Veale, “and these devices are central to the relationship that German consumers have with digital video. As Amazon Prime and Netflix are two of the most prominent services on television sets, this ownership is clearly translating into uptake, with almost half of German Netflix users watching the service directly on a Smart TV. Furthermore, friction free buying or renting movies via services which have apps on the Smart TV have been key in driving digital transactions.
As a result of all this action, the German market is in good health, and we’re seeing more obvious changes in consumer behaviour here than in many other countries. It’s an exciting time for many players in the German video entertainment market, as opportunities continue to present themselves.”
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