Europe’s Last Stand

Never known for adapting to changing markets, European companies are now forced to forge alliances in hopes of staying relevant after the well-timed onslaught of Netflix in Europe.

Now that Netflix and Amazon have more-or-less monopolized the European streaming market, several media companies are hastily throwing together new joint ventures before the introduction of several new services that will soon launch throughout the continent. These include Disney+, Apple TV+, and HBO Max.

However, none of Europe’s big national networks are looking to take direct aim at Netflix, Amazon, or Disney+. At this point, the best they can hope to offer are complementary SVOD services to their American counterparts.

The Pivotal Question

The pivotal question is whether European networks can unite fast enough in common cause. There remains robust demand for local content in Europe, which is an area national broadcasters have traditionally excelled in. However, scaling that local appeal into an online service across borders, languages, and cultures, is where the challenge lies.

At the end of 2018, Netflix controlled 52% of the SVOD market in Europe, followed by Amazon with 21%, while Sky, HBO, and Viaplay each had around 4%. A patchwork of local services accounted for 16%.

European broadcasters and content providers are pursuing partnership strategies in the online content delivery market to stave off further competition from Netflix, Amazon, and several upcoming services.

Netflix is still less dominant in Europe than in the U.S., although that is changing fast. This temporary dominance gap provides an enormous opportunity for content providers to establish homegrown online services without signing over their content to an outside service like Netflix or Amazon.

Pan-European Service

Last year Europeans watched two hours more of on-demand content per month compared to the previous year, and nonlinear video viewership grew by 21% year-over-year. With so many Europeans watching so much TV online, many international media companies and several European broadcasters are just now starting to pour resources into establishing online services.

Many competing European broadcasters and distributors are collaborating to launch joint services. These include France’s Salto, backed by TF1, France Television, and M6 and German-based Joyn, a joint venture between ProSiebenSat.1 and Discovery, which owns the European sports network Eurosport. There is also Britbox, which is a venture between ITV and the BBC, and in Spain, Loves TV is a collaboration between several content providers.

On May 29, Italian TV group Mediaset paid $368 million for around 10% of German commercial broadcaster ProSiebenSat.1, which could be the first sign of a pan-European service. After its investment, on June 7, Mediaset said it would set up a new holding firm, MediaForEurope, in the Netherlands to bundle its TV assets across the continent.

Europe is also following the leading media companies in the United States by pursuing more consolidation. On June 3, French media giant Vivendi offered a $2.37 billion bond to finance its European expansion. The debt offering will help fund a $1.1 billion deal by its PayTV division CanalPlus to buy Luxembourg-based M7 Group, which has three million PayTV subscribers.

A European Hulu

One bright spot for European content providers is the massive growth of online video advertising. Online advertising has expanded over 190% to $3.8 billion across Europe’s five top territories in the past four years, but only a quarter went to traditional broadcasters.

European broadcasters need to focus on building a pan-European similar to Hulu, which is an ad-supported service that was launched as a three-way partnership by the three largest studios. To put Europe’s delay in perspective, Hulu launched in the U.S. in 2008. Currently, Hulu has around 30 million subscribers and is now majority-owned and operated by Disney.

The traditional television business in Europe, which included Free and PayTV, still dwarfs the streaming market, but it has flat-lined in terms of growth. Over the past five years and the big national networks have seen their audiences erode, giving way to more online options.

First Casualty

The shuttering of CanalPlay last year was an embarrassment for the French media market, which was seen as the last bulwark against Netflix’s European encroachment.

In June 2018, Canal Plus announced it would shut down its SVOD service. CanalPlay launched in 2012 to preempt Netflix’s European push. However, since the introduction of Netflix in 2015, CanalPlay subscribers plummeted from nearly one million to 200,000.

When CanalPlus announced the company’s new Canal+Series service this April, it was made clear that the cheaper SVOD service would be complementary to Netflix, not in competition with it.

FilmTake Away

National media companies and niche providers are mounting challenges to Netflix’s global dominance with a focus on local and demand-driven content. Through combining and leveraging their libraries, European distributors can cooperate to offer services more attuned to local sensibilities.

However, by waiting until 2019 to mount a reasonable challenge will likely doom these new partnership services to fourth or fifth place behind Netflix, Amazon, HBO Max, and Disney+.