Local Players Struggle As Netflix Leads Dutch Subscription Market

Publication date: 07 Jun 2018 Author: Max Signorelli Research Analyst, Media & Entertainment

Local players struggle as Netflix leads Dutch subscription market

Brought to you by Informa Tech Local players struggle as Netflix leads Dutch 1 subscription market

Dutch telco KPN is to close its over-the-top service KPN Play on 2 July. Another local on demand venture, Knippr from T-Mobile, closed officially on 1 June. KPN Play is offering its remaining subscribers the last month of service free of charge. Both services have struggled to make up ground against global online giants Netflix and Amazon. Local companies backed by free-to-air services have shown more resilience. Commercial broadcaster RTL runs both the online channel Videoland and the RTL XL premium virtual pay TV service. In April 2018, RTL launched a combined subscription to the two services. The hybrid subscription is equal in price to the standalone Videoland subscription at €8.99, and €5 more than a standalone RTL XL subscription. Our analysis

Locals lacking versus the American giants Virtual pay TV services such as Knippr, KPN Play and RTL XL generated less than 10% of Dutch OTT subscription revenue in 2017, according to IHS Markit. Meanwhile, Netflix maintained its place as the leading provider in 2017 with more than 75% of OTT subscription revenue, a position it has held for almost half a decade. Future pressure will come from Amazon following the launch of its bundled Prime package at the end of 2017. The Dutch Prime Video user base is set to grow rapidly with a CAGR of more than 100% until 2022 although this will still trail far behind Netflix’s subscriber count. Netflix’s success stems from well executed content strategy: Netflix managed to get Disney’s first window movie rights in Netherlands in 2013, as well as leverage its English-language original content. With Dutch standalone OTT subscriptions set to reach almost four million by 2022, competition for new subscribers will be tough and local providers will need to differentiate their content offering if they are to win over or share this highly developed market. T-Mobile and KPN pull the plug Despite both being virtual pay TV operators, Knippr and KPN Play operated somewhat different business models. Whereas Knippr offered a flexible a la carte subscription augmentation model to add individual and packaged linear channels to a core subscription of 16 channels (as required by Dutch law), KPN Play offered premium tiers with channels including the likes of HBO. Ultimately, these subscription offering did not prove successful however and neither Knippr nor KPN Play attained over 2% market share by subscriber count by the time of their closures according to IHS Markit research. High launch prices from both services (€10.99 per month for a core Knippr subscription and as high as €14.99 per month for KPN Play stymied growth in their early years and their subsequent growth was hindered by availability of better value virtual pay TV alternatives such as RTL XL and NLziet, an OTT joint-venture between public and commercial broadcasters RTL, NPO and SBS. KPN’s strategy took a hit in late 2016 when HBO withdrew their content across the Dutch market to be offered exclusively on local cable operator Ziggo’s TV platform. Losing premium channels helped facilitate a price decrease in early 2017, around the same time that KNIPPR also cut its core package price to €9.99. RTL’s service fusion adds significant value The value offered by RTL’s combined subscription makes it a strong competitor in the Dutch OTT market. At €8.99 per month, the new RTL bundle is competitively priced relative to its immediate competition and

ranks between the two global OTT subscription giants. It is cheaper than Netflix standard and premium tiers, but more expensive than the Prime Video monthly and annual options. RTL already operated from a position of relative strength and this has been fortified as of recently. According to IHS Markit, Videoland ranked second behind Netflix by 2017-end subscriber count and RTL XL’s closest competitors have now both dropped out of the market. NLziet is also enjoying relative success as the largest Dutch virtual pay TV service. RTL’s new move seeks to maintain and expand from this position of strength by providing both an upscaling option for RTL XL customers whilst also and improving the attractiveness to Videoland subscribers with access to additional content for no extra cost. Citation policy Request external citation and usage of Omdia research and data via [email protected]. Omdia consulting We hope that this analysis will help you make informed and imaginative business decisions. If you have further requirements, Omdia’s consulting team may be able to help you. For more information about Omdia’s consulting capabilities, please contact us directly at [email protected]. Copyright notice and disclaimer The Omdia research, data and information referenced herein (the “Omdia Materials”) are the copyrighted property of Informa Tech and its subsidiaries or affiliates (together “Informa Tech”) and represent data, research, opinions or viewpoints published by Informa Tech, and are not representations of fact. The Omdia Materials reflect information and opinions from the original publication date and not from the date of this document. The information and opinions expressed in the Omdia Materials are subject to change without notice and Informa Tech does not have any duty or responsibility to update the Omdia Materials or this publication as a result. Omdia Materials are delivered on an “as-is” and “as-available” basis. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in Omdia Materials. To the maximum extent permitted by law, Informa Tech and its affiliates, officers, directors, employees and agents, disclaim any liability (including, without limitation, any liability arising from fault or negligence) as to the accuracy or completeness or use of the Omdia Materials. Informa Tech will not, under any circumstance whatsoever, be liable for any trading, investment, commercial or other decisions based on or made in reliance of the Omdia Materials.