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Egta Insight Over-The-Top Television Services: a European Perspective March 2015

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Egta Insight Over-The-Top Television Services: a European Perspective March 2015 egta insight over-the-top television services: a european perspective March 2015 Celebrating www.egta.com / / Defining OTT services In the field of audiovisual services, egta has cho- sen to work with the following definition for OTT: services accessible over the Internet via specific applications (on PCs, mobile apps, Smart TVs, games consoles or through hybrid boxes). This report considers OTT platforms and services that exclusively offer premium television pro- gramming and/or movies. Services such as You- Tube, Dailymotion and other video sharing sites do not form part of this report, although it should be noted that YouTube in particular has taken on some of the characteristics of a premium OTT service in the past couple of years, developing executive summary a presence in set-top boxes and other devices, offering some original, professionally produced, content and live streaming of sports and music events. This report addresses the landscape of over- the-top (OTT) television services, with an em- / / Overview of linear and non- phasis on the most digitally advanced Euro- linear services in Europe pean markets. The evolution of OTT subscribers and revenues is also placed into a wider global OTT services exist in a variety of forms context. egta’s objective is to allow readers to throughout Europe, with different funding and better understand the strategies of different business models in place. Broadly speaking they stakeholders in the delivery of OTT, including the can be classified as seen on the opposite page, response of broadcasters to evolving viewing with examples of each type listed in figure 01. patterns. OTT services may be linear or on-demand (video- Intended as an overview of existing services, the on-demand, VOD), and many offer a combination business and revenue models behind them and of both. The former allow live access to existing their actual and anticipated impact on the linear or online-only channels offered by broadcasters television industry, this report focuses primarily and in some cases telecoms providers or inde- on the French, Dutch, German, Belgian, United pendent companies. On-demand OTT services Kingdom and Nordic markets. In that respect, it allow viewers to choose from a library of movies is not an exhaustive examination of the rich and and TV shows. varied OTT offer currently available throughout Europe. / / Business models in place The report draws on multiple data sources, in- The business models behind OTT VOD services cluding published reports, forecasts and esti- can be broadly classified as direct and indirect; mates, surveys of egta television members and direct funding, in which the user pays for access, interviews with experts in the field. may be by subscription (as a standalone service Page 2 figure 01: Overview of linear & non-linear services in europe services developed services developed services developed by newer entrants by telecoms by broadcasters to the market providers Netflix BBC iPlayer Telenet VOD Zattoo Sky Go Numéricable VOD Amazon Prime Instant Video 4oD Vodafone Videothek Voddler HBO Go Ziggo On Demand Apple TV apps MYTF1 Entertain Google Play CanalPlay Proximus TV Viaplay Maxdome Stievie RTL à l’infini NLziet figure 02: business models Revenue Model direct indirect S-VOD T-VOD A-VOD subsidies Subscription Pay-per-view Advertising © Copyright egta 2015. All rights reserved. Page 3 or as part of a telecoms bundle) or pay-per-view. • The volume and quality of the content on offer Indirect funding takes the form of advertising (size of library, how recently the content was or subsidies, such as taxation or licence fees. In produced) some cases, the business model may involve a • The availability or otherwise of HD and Ultra HD combination of direct and indirect funding, and in the case of services provided by some public • The number of screens on which content can be service broadcasters, their OTT platforms may be viewed simultaneously free to access and free of any advertising (figure 02). Customer response to OTT service pricing can be very sensitive, as evidenced by the experience of The funding of OTT VOD may take the following Netflix in the US in 2011. Following a period of very forms: strong expansion and growth in revenues, Netflix altered its business model in the territory, splitting • Transactional VOD (T-VOD) – pay-per-view, or its physical DVD rentals and streaming services “rental” of an episode/movie for a limited time and introducing a sharp price increase. In the third • Subscription VOD (S-VOD) – monthly (or other) quarter of the year, the company shed 800,000 payment for unlimited access to a library of TV subscribers amid widespread discontent, and series, movies, etc. the New York Times reported that its share price slumped to $53 from just under $3001. • Advertising-supported VOD (A-VOD) – access to VOD content is free at the point of consump- The company has since turned its fortunes around, tion, funded only by advertising notably by investing in original content and ex- panding into new territories, including Europe. • Subsidised VOD – access to VOD content is More recent price increases of $1 (US), £1 (UK) and free at the point of consumption, funded only €1 (NL) in 2014 have not resulted in noticeable de- by subsidies such as television licence fees or creases in subscription levels. other taxation In a further indication that direct-funding from the In some cases, content is made available in catch- consumer’s pocket remains a difficult market to ex- up free of charge for a set period, such as seven ploit, the consultancy firm Kurt Salmon2 found that days, after which it can only be accessed by pay- the price of VOD and pay-TV packages in France per-view or rental as part of the channel’s VOD has brought viewers back to the country’s free-to- offer. air DTT channels. As a result, French households The pricing and subsequent positioning of European cut their average annual video budget from €95.8 subscription OTT services varies considerably, for in 2011 to €60.20 in 2013. The strength of terres- example from €49 per year for Amazon Prime trial television in France, comparatively high costs (including Instant Video) in Germany to roughly €15 for paid video content and the long period of time per month for HBO GO in the Netherlands. Some that must pass before new cinema releases can be operators, such as Netflix, offer a range of prices, made available on S-VOD – 36 months as opposed with its French pricing of €7.99/€8.99/€11.99 per to just 6 months in the US or UK – mean that the month being a typical example of the company’s French market is seeing something of an opposite European offer. Broadly speaking, the pricing of trend to other countries. OTT services is dependent on: This difficulty in developing scale in paid services is further supported by data from Russia, where ad- Page 4 The streams for NLziet subscribers have a higher quality than the A-VOD streams. The list of avail- able content on RTL, SBS and NPO’s own plat- forms mainly depend on programme rights. On the NLziet platform, most of the programmes are available for a whole year after they have been broadcast on their respective channels. On RTL, SBS and NPO’s platform, they are usually only available for 7 days. NLziet also offers some pro- NLziet (Netherlands) grammes in preview, and this service is part of the subscription fee. Niels Baas, Managing Director of NLziet, talked to egta about a new service in the Netherlands, which egta: Which devices and viewing platforms can be was launched in July 2014. used to watch NLziet? Niels: Currently, NLziet is available through PC browsers, mobile apps and Chromecast, allowing egta: What is the strategy behind the subscription- viewing on two concurrent streams, in and out of based business model of NLziet? Why did you select home. The objective is to make the service avail- this route instead of an ad-funded model, for exam- able across as many devices as possible over time, ple? and discussions are underway with set-top box providers, Smart TV manufacturers and others. Niels: NLziet is a Dutch service that resembles Integration with Samsung SmartTV is planned by Hulu in the US. As the platform involves all of the the second quarter of 2015, with other television main broadcasters in the Netherlands, bundling manufacturers to follow. Apple AirPlay support is this power together on the advertising market expected in Q3. could have led to competition issues. Therefore, the parties involved chose a subscription-based – egta: Can you explain how the broadcast partners are and therefore advertising free – service. remunerated? The service is priced at €7.95 per month, with a Niels: The duration of all streams is measured, free month’s trial, and the subscription can be can- and NLziet divides the revenue to the broadcaster celled without a notice period. partners based on market share in viewing time. egta: How does NLziet fit in into the context of the NLziet is an open cooperation, meaning that other Dutch television market? linear broadcasters active on the Dutch market are welcome to join the service. Niels: Besides NLziet, each of the broadcasters involved has its own platform, and these are oper- ated independently. They could therefore be con- sidered “competitors to themselves” on the NLziet service. The broadcasters’ own standalone plat- forms offer viewers A-VOD content sometimes combined with T-VOD. © Copyright egta 2015. All rights reserved. Page 5 vertising-funded VOD outstrips paid VOD by 73% for OTT services delivered to a television screen – to 23% in revenue terms3, and Poland, where 99% are present in a smaller percentage of European of VOD is supported by advertising4.
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