‘Scale is crucial and incumbency is powerful’ in European OTT market

MTM study looks at how the competitive web-TV market is evolving in the U.K., Germany and the Netherlands.
November 27, 2014

Since Netflix expanded its European presence earlier this year, questions have been raised about whether it can become the streaming service of choice among consumers across the region.

“Only large, established enterprises able to support sustained investment will be able to launch and grow successful large-scale services.”

Challenges around culture/language, industry regulations and barriers in technology have come up in markets like France and Germany. But Netflix is smart to assert its presence across the continent where the OTT market is poised to experience “rapid growth” by 2017, if a study evaluating the opportunity for growth in three key European markets is to be believed.

Research by consultancy firm MTM involving 30 OTT service providers in the U.K., Dutch and German markets shows that despite barriers to entry, there will be steady growth of premium OTT services in these particular regions.

In the U.K., the market is expected to be worth £390 million in 2017 (U.S. $616 million), up from £110-130 million in 2013. The Dutch market is expected to grow to €190 million (U.S. $238 million) in 2017, up from €15-20 million last year. Slower growth is expected in Germany: the industry worth is expected to grow to €117 million in 2017 (U.S. $146 million), up from €30-35 million in 2013.

However, MTM’s research indicates industry participants also have reservations about the growth opportunity for mass-market streaming services.

“Barriers to entry remain high – content licensing costs are increasing fast and subscriber acquisition requires significant investment. As a result, scale is crucial and incumbency is powerful – only large, established enterprises able to support sustained investment will be able to launch and grow successful large-scale services,” the report, published this week, states.

Other key findings:

  • The U.K. is the most mature market for premium OTT in Europe, with Netflix estimated to be in 16% of connected homes and Amazon Prime in 7%. With a high willingness among consumers to pay for subscription services, niche VOD players built around sports, music or kids entertainment have a high chance of success, according to the study.
  • Respondents also said bidding on content that has traditionally gone to pay TV providers will be an important turning point in the digital video industry, but when that will happen is uncertain. “At some point the big digital businesses will start acquiring sports rights – but will it happen outside the USA?” one respondent said.
  • Because the Netherlands is a small market, only a few SVOD players will dominate, according to the study, but ad-supported services may be more likely to find success. The unbundling of pay TV services and increase in telecom players moving towards “quad play” offerings (combining internet access, TV and phone with wireless service provisions) are expected to have an impact over the next few years in the country.
  • Germany is considered the “least sophisticated” of the 3 western European markets the report examined, with low willingness to pay for digital entertainment and a high appreciation for local content.
  • According to respondents, Germans also like being able to “own physical products” and this consumer habit extends to content: “In the USA and U.K., the days of owning large DVD collections are ending, but it’s not the case in Germany,” one respondent said. “SVOD will never replace new release films, it’ll replace back-catalog.”

The report, titled “Prospects for Premium OTT in Western Europe” was commissioned by Ooyala, a video analytics firm, and Vindicia, a subscription-billing service provider.

Image: Netflix handout

About The Author
Melita Kuburas is the editor of StreamDaily. You can reach her directly at press[at] or on Twitter @melitakuburas


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