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

egta insight over-the-top television services: a european perspective March 2015

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www.egta.com / / Defining OTT services figure 01: In the field of audiovisual services, egta has cho- Overview of linear & non-linear services in europe 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). services developed services developed services developed by newer entrants by telecoms This report considers OTT platforms and services by broadcasters that exclusively offer premium television pro- to the market providers gramming and/or movies. Services such as You- Tube, Dailymotion and other video sharing sites Netflix BBC iPlayer Telenet VOD do not form part of this report, although it should Zattoo Sky Go Numéricable VOD be noted that YouTube in particular has taken on Amazon Prime Instant Video 4oD Vodafone Videothek Voddler HBO Go Ziggo On Demand some of the characteristics of a premium OTT Apple TV apps MYTF1 Entertain service in the past couple of years, developing Google Play CanalPlay Proximus TV a presence in set-top boxes and other devices, executive summary Viaplay offering some original, professionally produced, Maxdome content and live streaming of sports and music Stievie events. RTL à l’infini This report addresses the landscape of over- NLziet 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 figure 02: 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 business models 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. Revenue Model 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 direct indirect 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; S-VOD T-VOD A-VOD direct funding, in which the user pays for access, subsidies mates, surveys of egta television members and Subscription Pay-per-view Advertising interviews with experts in the field. may be by subscription (as a standalone service

Page 2 © 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 The streams for NLziet subscribers have a higher Indirect funding takes the form of advertising (size of library, how recently the content was quality than the A-VOD streams. The list of avail- or subsidies, such as taxation or licence fees. In produced) able content on RTL, SBS and NPO’s own plat- some cases, the business model may involve a forms mainly depend on programme rights. • The availability or otherwise of HD and Ultra HD combination of direct and indirect funding, and On the NLziet platform, most of the programmes in the case of services provided by some public • The number of screens on which content can be are available for a whole year after they have been service broadcasters, their OTT platforms may be viewed simultaneously broadcast on their respective channels. On RTL, free to access and free of any advertising (figure SBS and NPO’s platform, they are usually only 02). Customer response to OTT service pricing can be very sensitive, as evidenced by the experience of available for 7 days. NLziet also offers some pro- The funding of OTT VOD may take the following Netflix in the US in 2011. Following a period of very NLziet (Netherlands) grammes in preview, and this service is part of the forms: strong expansion and growth in revenues, Netflix subscription fee. Niels Baas, Managing Director of NLziet, talked to altered its business model in the territory, splitting • Transactional VOD (T-VOD) – pay-per-view, or egta about a new service in the Netherlands, which egta: Which devices and viewing platforms can be its physical DVD rentals and streaming services “rental” of an episode/movie for a limited time was launched in July 2014. used to watch NLziet? 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 Niels: Currently, NLziet is available through PC payment for unlimited access to a library of TV subscribers amid widespread discontent, and browsers, mobile apps and Chromecast, allowing series, movies, etc. the New York Times reported that its share price egta: What is the strategy behind the subscription- viewing on two concurrent streams, in and out of slumped to $53 from just under $3001. based business model of NLziet? Why did you select home. The objective is to make the service avail- • Advertising-supported VOD (A-VOD) – access this route instead of an ad-funded model, for exam- able across as many devices as possible over time, to VOD content is free at the point of consump- The company has since turned its fortunes around, ple? and discussions are underway with set-top box tion, funded only by advertising notably by investing in original content and ex- providers, Smart TV manufacturers and others. panding into new territories, including Europe. Niels: NLziet is a Dutch service that resembles • Subsidised VOD – access to VOD content is Integration with Samsung SmartTV is planned by More recent price increases of $1 (US), £1 (UK) and Hulu in the US. As the platform involves all of the free at the point of consumption, funded only the second quarter of 2015, with other television €1 (NL) in 2014 have not resulted in noticeable de- main broadcasters in the Netherlands, bundling by subsidies such as television licence fees or manufacturers to follow. Apple AirPlay support is creases in subscription levels. this power together on the advertising market expected in Q3. other taxation could have led to competition issues. Therefore, In a further indication that direct-funding from the the parties involved chose a subscription-based – In some cases, content is made available in catch- egta: Can you explain how the broadcast partners are consumer’s pocket remains a difficult market to ex- and therefore advertising free – service. up free of charge for a set period, such as seven remunerated? 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 The service is priced at €7.95 per month, with a Niels: The duration of all streams is measured, per-view or rental as part of the channel’s VOD has brought viewers back to the country’s free-to- free month’s trial, and the subscription can be can- and NLziet divides the revenue to the broadcaster offer. air DTT channels. As a result, French households celled without a notice period. partners based on market share in viewing time. The pricing and subsequent positioning of European cut their average annual video budget from €95.8 egta: How does NLziet fit in into the context of the NLziet is an open cooperation, meaning that other subscription OTT services varies considerably, for in 2011 to €60.20 in 2013. The strength of terres- Dutch television market? linear broadcasters active on the Dutch market are example from €49 per year for Amazon Prime trial television in France, comparatively high costs welcome to join the service. (including Instant Video) in Germany to roughly €15 for paid video content and the long period of time Niels: Besides NLziet, each of the broadcasters per month for HBO GO in the Netherlands. Some that must pass before new cinema releases can be involved has its own platform, and these are oper- operators, such as Netflix, offer a range of prices, made available on S-VOD – 36 months as opposed ated independently. They could therefore be con- with its French pricing of €7.99/€8.99/€11.99 per to just 6 months in the US or UK – mean that the sidered “competitors to themselves” on the NLziet month being a typical example of the company’s French market is seeing something of an opposite service. The broadcasters’ own standalone plat- European offer. Broadly speaking, the pricing of trend to other countries. forms offer viewers A-VOD content sometimes OTT services is dependent on: combined with T-VOD. This difficulty in developing scale in paid services is further supported by data from Russia, where ad-

Page 4 © 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 figure 04: of VOD is supported by advertising4. homes. The EU28 average broadband penetration ESTIMATED Netflix paying subscribers by country was 78% in 2014, with the Netherlands topping the / / Devices on which OTT services list at 95%, the United Kingdom at 88%, Germany at (000) are available 87%, France at 77% and Italy at 71%6. Central and Eastern European countries currently lag well be- OTT services are available via set-top boxes (DVR/ hind the more mature markets in the West. As the Country Launch date DEC 2011 DEC 2012 DEC 2013 DEC 2014 PVR), PCs, smart/connected TVs, smartphones/ rate of increase in broadband penetration is show- USA / 20,153 25,471 31,712 36,265 tablets and game consoles. On mobile devices, ing a slowing trend, this will naturally limit the ease International / 1,447 4,892 9,722 14,389 content delivery may be through the device brows- with which OTT services can attract new users. er or a dedicated mobile application, and some ser- Canada Sept 2010 1,138 2,050 3,180 3,475 vices also feature mobile app control. It should be Digital TV Research recently published a report that Latin America Oct 2011 309 857 2,942 4,854 noted that not every service is available across all forecast Pay TV subscriptions to reach 171.6 mil- Ireland Jan 2012 0 80 150 190 these screens and devices. lion in Europe by the end of 2014 (including Russia UK Jan 2012 0 1,400 2,250 2,850 and Belarus), having grown from 154.5 million in Denmark Oct 2012 0 120 245 420 / / Penetration statistics 20107 (see figure 03 for top ten pay TV countries Finland Oct 2012 0 85 205 400 in Europe). This indicates a large and growing ad- Television, whether delivered by terrestrial broad- dressable market of households that are accus- Norway Oct 2012 0 95 210 380 cast, cable, satellite or IPTV is virtually ubiquitous tomed to paying for television content directly and Sweden Oct 2012 0 205 440 800 throughout Europe, with household penetration in which Pay OTT services may offer an attractive Netherlands Sept 2013 0 0 100 700 rates typically at 95% or higher5. By contrast, alternative (or complement) to traditional Pay TV. fixed broadband connections – a pre-requisite Austria Sept 2014 0 0 0 30 Belgium Sept 2014 0 0 0 30 France Sept 2014 0 0 0 100 figure 03: Germany Sept 2014 0 0 0 125 top 10 european pay tv countries in 2014 Luxembourg Sept 2014 0 0 0 10 Switzerland Sept 2014 0 0 0 25

Country Penetration (%) Country Revenues ($ mil.) Source: Digital TV Research estimates from Netflix totals, 2014 Netherlands 99.0% UK 7,845 Worldwide, subscription OTT VOD (OTT S-VOD) ed its European operations by launching in the UK, Belgium 96.3% Germany 4,609 currently stands at over 124 million households, Ireland and the Nordic countries, followed by the Norway 95.6% France 4,525 and this is projected to increase to 249 million in Netherlands. In 2014, the service was made avail- Malta 94.5% Italy 4,010 20188. North America makes up the largest share able in Austria, Belgium, France, Germany, Luxem- Sweden 94.0% Netherlands 2,366 of this base, with 59.8% of worldwide subscrib- bourg and Switzerland. As of early 2015, Netflix is Denmark 92.0% Poland 1,823 ers, followed by Western Europe and Asia-Pacific. present in about 50 countries, and the company Eastern Europe’s share is much smaller at 1.3%, al- stated that it had exceeded 50 million subscrib- Estonia 90.0% Spain 1,757 though it is expected to show dynamic growth over ers in July 20149. Although per-country subscriber Hungary 89.6% Russia 1,699 the next five years. numbers are not available, Digital TV Research has Finland 86.2% Belgium 1,572 made a number of estimates, including a forecast Netflix has made the greatest gains in Europe in Switzerland 86.2% Sweden 1,551 for TV household penetration in 202010. The accu- recent times. Having expanded from the US into racy of this longer-term vision is of course difficult first Canada and then South America, Netflix start- Source: Digital TV Research, 2014 to predict with any certainty.

Page 6 © Copyright egta 2015. All rights reserved. Page 7 figure 05: figure 06: ESTIMATED Netflix international subscribers by VOD subscription forecasts in 2018 for UK, Germany, country in 2020 France & the Netherlands (millions)

Subscribers TV households Subs/TVHH 10.0 Country Launch date (000) (000) (%) Austria Sept 2014 1,103 3,678 30% 8.0 Belgium Sept 2014 1,422 4,739 30% Denmark Oct 2012 870 2,559 34% 6.0 Finland Oct 2012 856 2,518 34% France Sept 2014 8,298 27,659 30% 4.0 Germany Sept 2014 11,325 37,750 30% Ireland Jan 2012 572 1,635 35% Luxembourg Sept 2014 71 237 30% 2.0 Netherlands Sept 2013 2,507 7,596 33% Norway Oct 2012 776 2,282 34% 0.0 Sweden Oct 2012 1,620 4,766 34% UK germany france netherlands Switzerland Sept 2014 1,308 4,360 30% Total 10.253 8.942 3.148 2.060 UK Jan 2012 9,495 27,128 35% International / 103,939 308,525 34% Netflix 7.235 3.557 1.472 1.647 Amazon 2.087 3.161 0 0 Source: Digital TV Research, 2014 Others 0.931 2.224 1.676 0.413 Other S-VOD platforms available in several mar- figures for the use of subscription, transactional Source: IDATE, Netflix en Europe, December 2014 kets include HBO Go and Amazon Prime Instant and indirectly funded OTT services is very difficult Video. The former launched in the Nordic countries to come by, as providers release limited data to the Worldwide OTT S-VOD revenues reached $8.4 bil- growing. Research consultancy MTM predicts the in 2012 and is now available in several Central market. lion in 2014, and SNL Kagan predicts that this will premium OTT market in the UK to grow from €150 and Eastern European markets. Whilst it currently 13 14 / / Revenues generated by OTT rise to $18.7 billion in 2018 . Western Europe fol- million in 2013 to about €490 million in 2017 . lacks the scale of Netflix in the markets where both lows North America as the second largest region Growth in the Dutch market is expected to be even are present, the application of ActiveVideo’s cloud platforms in terms of online video subscribers and revenues, greater, from €15-20 million in 2013 to €190 mil- virtualisation technology will allow HBO Go to be with a much smaller share of the global S-VOD lion in 2017, whilst the German market is expected Increasing investments in OTT services – either integrated into legacy set top-boxes, offering the market going to Eastern Europe (1.1% of worldwide to grow more modestly, from €30-35 million to through subscriptions, transactions or advertis- potential to increase adoption by users. Amazon volume). around €115 million over the same period. acquired LOVEFiLM in the UK in 2011 and folded ing – come at a time of slowing advertising growth the service into its Instant Video platform in Febru- across the wider television industry in 2014, with The arrival of Netflix in Europe has stimulated The report by MTM found Germany to be the ary 2014 and is estimated to reach 7% of UK online GroupM forecasting that traditional television other international OTT providers to increase their weakest of these three markets due to its relative- households11. would lose market share in the US for the first time investment in marketing their products to wider ly low “digital sophistication” and lower broadband 12 in 2015 . audiences, and the range of premium services is penetration. The report also states that Germans It should be noted that reliable and comparative

Page 8 © Copyright egta 2015. All rights reserved. Page 9 launched in Belgium, there was a very small drop figure 07: in the number of customers, but these were re- Market size forecasts for premium OTT in 2017 placed very quickly, suggesting the services are essentially complementary. On the one hand, Net- flix offers a greater volume of older content, whilst 2017 on the other RTL à l’infini has a smaller library of € 490 mil. more recent content. 500 Marc Lellouche, Head of Digital Sales & VOD at 400 IP Belgium, the sales house for RTL, explained to RTL à l’infini (Belgium) egta that the platform is currently operated by the telecoms distributers (Proximus TV, Telenet, 300 VOO, Numericable, etc.) under a revenue share  34% 2017 model, and that RTL’s strategy is to some extent € 190 mil. RTL Belgium has two main monetisation models 200 2013 dependent on the telcos in terms of strategy and € 150 mil. 2017 within its OTT VOD offer: Transactional and Sub- € 115 mil. technical development. However, the broadcaster scription VOD. Long-form content is only avail- is considering opening the service on the Internet 100  able through set-top boxes, whilst some extracts 2013 80% 2013 in order to allow it to manage the service end-to- € 33 mil.  € 18 mil. 37% of shows as well as news, weather and political end. Content – particularly recent American series 0 programming can also be accessed free of charge – is expensive to acquire, and he does not believe through OTT platforms. RTL offers access to TV UK NETHERLANDS germany this part of the business would be sustainable series and RTL programming, but it does not cur- under an advertising-funded model. “Viewers will rently offer movies. pay for quality content, and the €4.95 we propose Source: MTM, 2014. Prospects for Premium OTT in Western Europe for Series Pass is a reasonable price, the lowest T-VOD includes both programmes (immediately on the Belgian market. Today, advertising is not are traditionally more reliant on the high quality after broadcast) and series (catch-up and previews / / Advertising formats on OTT my preferred model of VOD funding, certainly for free-to-air TV content that is widely available and three weeks before they are due to be broadcast). services series, although it could be a model for other types less inclined to pay for content. This is highlighted S-VOD is split into two packages under the RTL of programming.” by the discrepancy in the size of the German and With some notable exceptions from the UK and à l’infini brand, comprising Sélection and Series UK Pay TV markets, which are worth €3.7 billion France, advertising forms a secondary funding Pass. Priced at €5.95 per month, Sélection offers and €6.3 billion per year respectively. stream for the majority of commercial OTT servic- RTL’s programmes, such as magazine, entertain- es in Western Europe. However, video advertising A forecast by the European research and consul- ment shows, comedy, sports programmes, etc., as a sector is growing quickly, offering digital media tancy organisation IDATE projects that by 2018 whilst the monthly subscription of €4.95 for Se- buyers a high quality, premium alternative to online Netflix will hold a quasi-monopoly of S-VOD rev- ries Pass allows viewers to watch US series just display. Engagement with online video advertising enues in the Netherlands and the UK (80% and after they have been broadcasted in the States as is high, and data-driven, programmatic trading of 70% market share respectively), and it will be the well as current and catch-up viewing. All paid VOD this inventory is fast becoming a European reality. market leader in France and Germany (46.8% and content is free of advertising. 15 39.8% market share respectively) . IDATE expects Advertising may take the form of pre- or mid- rolls, The RTL à l’infini package has proved very popu- Amazon to be the main challenger in the UK and with or without interactivity, as well as a range of lar with consumers, with usage increasing month Germany, whilst locally developed offers will put innovative social, sponsorship and banner formats. by month and reaching more than 3 million VOD up strong resistance in France. The advertising that had been inserted into the views in 2014. From this, about 60% were for Se- terrestrial broadcast of a given programme is usu- ries Pass, and the majority of these views come ally removed when accessed via Paid-VOD, as the from S-VOD rather than T-VOD. When Netflix user is in a premium environment.

Page 10 © Copyright egta 2015. All rights reserved. Page 11 / / Measurement of OTT subscription from Pay TV are likely to face higher Metrics from IPTV are now delivered by measure- platforms charges for online access, and the compounding ment body Médiamétrie on a daily basis, offering cost of multiple standalone subscriptions may yet better profiling of the inventory. 54% of MYTF1 Whilst it may be a key concern for the industry, the protect the cable and satellite distributors against viewers on IPTV are between 25-49 years old, measurement of television across all platforms – further erosion of traditional viewing. and 65% are women, making the MYTF1 audience including broadcast and online – is in its infancy, highly attractive for advertisers. Currently, European operators of advertising-sup- both in the US and Europe. The establishment of ported VOD offers can only take their own data to There are historic reasons for this advertising- robust hybrid measurement methodologies that the market, rather than the independent metrics supported VOD model in France, as the strategies will allow broadcasters to effectively monetise on which the television industry has been built. The of Internet service providers (ISPs) in France has their content across all screens and devices will pressure to introduce fit-for-purpose measure- MYTF1 (france) been to include free catch-up within their bundled be the subject of a future egta report, and the is- ment regimes for television content beyond linear telecoms and television offers, and this type of ac- sue has been the main focus of egta’s AV Currency has therefore become acute. cess is now a basic expectation of French viewers. Working Group since 2011.

Measuring television content beyond the first / / Audience figures and usage MYTF1 is a multi-platform OTT service that offers screen has been brought sharply into the spotlight data live streaming and VOD across a range of screens in the US in recent times. In response to viewership and devices, including IPTV set-top boxes, with ac- Independent OTT providers are extremely reluctant declines of 18% for Viacom, 17% for Nickelodeon cess free to viewers at the point of consumption. to provide viewership data. Ted Sarandos, Netflix’s and 14% for MTV in the fourth quarter of 2014, IPTV is highly developed in France, with about half Chief Content Officer, stated in January 2015 that coming just after a weak upfront for television, the of homes using an IP box to deliver triple play sub- there was “no real business reason to report those American television industry is now putting pres- scription services. numbers.” The company plans to keep these data sure on ratings provider Nielsen to capture digital unreported as long as it can, and even withholds Fabrice Mollier, Deputy General Manager, Strategic and non-linear viewing more effectively16. Whilst it from the creators of its most popular shows and Marketing Innovation at TF1 Publicité explained to Nielsen is launching new tools to address this is- its product placement partners, such as AB Inbev. egta that MYTF1 has two revenue streams: sue, the announcement of several new OTT platforms – including offers from Verizon, Dish/Sling Even if the true extent of streaming cannot be • On IPTV: B2B revenue from Internet service TV (including ESPN), CBS, HBO, Sony and Nickel- known, the US has seen a 3% decline in television providers (ISPs) odeon – suggest that content providers will seek a viewing in the final season of 2014, as reported by • Advertising: pre-rolls and mid-rolls delivered direct route to the consumer’s pocket when weak- David Poltrack, Chief Research Officer at CBS. Re- via an ad server nesses in audience measurement start to trans- search by CBS has found that a significant share Catch-up has proved to be highly successful in late into lost advertising revenues. of Netflix viewing is of popular current television France. MYTF1 has 15 million monthly unique series, including from NBC, whilst less than 10% visitors across all screens, and in February 2015 The announcement of standalone OTT services by of adult viewing was for Netflix’s own original se- the platform registered 7.5 million unique viewers Dish, HBO and Sony are particularly significant, as ries17. on IPTV – its fastest growing platform – with an they reflect a marked change in the way people can average daily viewing time of 1h07. access television channels in the US. Access to HBO The data and research available from European and ESPN has long been considered a key reason markets suggest that streaming in its various IPTV (via a set-top box) represents 45% of MYTF1 behind Americans keeping their Pay TV bundles, forms is seeing significant increases whilst there viewing, PC 41% and tablets and mobile 14%. Rev- so uncoupling these channels from traditional is evidence of declining viewing of linear television enues are growing strongly, with a 30% increase cable and satellite subscriptions clearly opens the in some markets. for 2014 over the previous year. Driven by an im- door for an increase in cord-cutting, and a younger proved marketing offer and roadshows in agencies generation of cord-nevers that have never, or will A November 2014 report from the Institute for In- to show ratings, this performance has increased in never, subscribe to traditional TV may emerge. formation and Media Science at the University of the first two months of 2015, with a 60% increase However, consumers who unshackle their Internet Bergen identified that 25% of Norwegians watch over the same period in 2014.

Page 12 © Copyright egta 2015. All rights reserved. Page 13 market, with over 60,000 titles to choose from, figure 08: an offline mode to allow viewers to watch pro- TV viewing times (from official TAM organisations) grammes when on the move, previews of new US series before they go on air (unique to maxdome) from 2004 to 2014 (minutes) and integration across a wide range of devices and screens. This includes integration with all the main smart TV manufactures, meaning that maxdome Sweden (Age 3+) Norway (Age 12+) is available on virtually every OTT device in Ger- Denmark (Age 3+) Finland (Age 10+) man households. The ProSiebenSat.1 Group has a maxdome (Germany) significant advantage over its international com- 200 petitors, as it has a long history of knowing exactly what works on the local market. Great German content, a strong image on the market and the power of advertising support through the group’s maxdome – a premium OTT service from the Ger- terrestrial channels also reinforce this position. 150 man ProSiebenSat.1 Group – was the first S-VOD to launch in the world. The broadcaster’s portfolio The Live pay-per-view offer in partnership with Norway: includes free-to-air and pay-TV stations alongside WWE (Worldwide Wrestling Entertainment) is an Nov 2013: integration of online TV viewing into TAM a wide range of digital platforms. maxdome has a interesting example of a specific product for a par- very strong position in Germany, holding the high- ticular target group that is both very loyal and has 100 est market share of subscription VOD in the coun- a high affinity for paid online events. 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 try at 40% (full year 2014) and the highest aware- ness among consumers. In 2014, maxdome almost doubled its subscriber Note: TV-meter-data, yearly averages. numbers over the previous year, and the platform Sources: TNS Gallup Danmark, Finnpanel, TNS Gallup Norge, MMS Sweden. The service has four funding models, comprising is delivering increases in video usage of over 150% T-VOD to buy or rent films and series, electronic year-over-year. Linear TV viewing in Germany has Netflix at least once a week, which is equal to the became the first country in the world to integrate sell-through (EST) purchases, S-VOD for unlim- remained stable in recent years, whilst overall usage of NRK’s popular online platform18. Be- web TV viewing into its TAM, with reporting start- ited library access priced at €7.99 per month video usage is continuously growing. tween 2009 and 2013, the channels of the main ing from 1 November of that year. The result- (with a month’s free trial) and Live pay-per-view. broadcasters – with the exception of SBS Discov- ing positive impact on viewing figures highlights maxdome does not use advertising as a funding Höfer sees that in the long term the German mar- ery’s Norwegian channels – have all seen declines the importance of measurement evolution to the stream, as all access is paid. ket will consolidate, and the broadcaster expects in viewing time per household in the age groups health of advertising-supported broadcasters (see maxdome to be a top-three player through to 12-19 and 20-34, as measured by TNS Gallup. A figure 08). For Thomas Höfer, Director Business Develop- 2020 and beyond. number of other services, such as HBO, Viaplay, ment at maxdome, the reason for a paid model Denmark’s DR Media Research estimated that TV3 Sumo and TV2 Play also attract significant au- over advertising is straightforward. “Within the Danes actually watched as much television and diences, but this report puts them some distance ProSiebenSat.1 Group we have three very strong television-like content in 2014 as they did in 2013, behind Netflix and NRK Nett-TV. A-VOD assets, which are MyVideo, 7TV and the but that traditional viewing decreased at the ex- multi-channel network Studio71, so we have the It should be noted that whilst all of the Nordic pense of streamed viewing, which rose to a 17% free segment covered. An A-VOD model would be countries registered declines in TV viewing times share of television viewing from 12% the year be- insufficient for very premium studio content with over the whole of their populations from 2012 fore. leading blockbusters and leading series we pro- to 2013, the story from 2014 is mixed: Denmark vide on maxdome.” This picture is matched in the UK by BARB’s fig- and Sweden saw further falls, but Norway saw its ures for 2014. Daily TV viewing declined by 4.5% viewing time bounce back, and Finland enjoyed its maxdome differentiates itself from its competi- in 2014 over the previous year, a fall of some 10 highest ever viewing figures19. In 2013, Norway tors by offering the largest content library on the

Page 14 © Copyright egta 2015. All rights reserved. Page 15 minutes 30 seconds, and the drop was greatest for decline and revenues will be hit by ad-skipping on heavy TV viewers and young people20. This drop set-top boxes. This in turn will have a negative ef- Figure 09: is compensated somewhat when the figures in- fect on the quality of content available on demand. TOP 10 VOD providers in germany clude 8-28 day time-shifted, rather than the live A number of respondents also expect OTT provid- Question: “Which VOD service do you use most frequently, regardless of the business model?” plus seven days data used for the trading currency. ers such as Netflix to develop more of their own Viewing on screens such as tablets and laptops original content in the future. grew year-on-year by 17%, and BARB’s Project This belief is backed up by the recent announce- Dovetail is currently being developed to incorpo- 3.1% ment by Netflix that it has committed to 320 new rate viewing on these devices into the currency. Videoload hours of original programming in 2015, roughly 2.3% In Germany, a 2014 survey by Bitkom Research three times the amount it released in 2014. With 4.4% Watchever and Aris found that 73% of Internet users over the original content seen as a key driver of subscriber Unitymedia age of 14 – representing more than 40 million Ger- growth, this strategy appears likely to strengthen 33.2% mans – stream videos21. Furthermore, the study Netflix in the markets where it has already estab- 5.7% Amazon Prime found that 33% of video streaming users replace lished a foothold. Instant Video Amazon Instant conventional television completely or partially, and Video One strategy for ensuring viewers remain loyal 18% of streaming video users would be prepared to to incumbent Pay TV and Pay VOD providers lies abandon TV completely in the future. in retaining the exclusive, high quality and locally 8.0% Netflix However, whilst these findings may appear to be produced content that differentiates them from alarming, audience data from the measurement international competitors. These newcomers body AGF/GfK Fernsehforschung actually show naturally take the position of complementary ser- listening across the population as a whole to have vices rather than viable alternatives in the eyes of 2015 risen consistently year-on-year between 2009 potential subscribers if they do not carry the best and 2013, and viewing in younger target groups locally produced content. has also remained very stable22. 10.8% Several of the egta members surveyed do not see Google Play A report by Goldmedia found Amazon Prime In- the entry of OTT providers as a direct threat, and stant Video to be the market leader in VOD in Ger- in fact believe it could encourage the use of their many, with roughly three times the frequency of own OTT services, which dominate market share in use as its nearest challengers, iTunes, Maxdome some countries. These companies view indepen- (ProSiebenSat.1), Google Play and Netflix23. dent OTT services as complementary to TV view- 11.3% 12.1% ing, and the most pressing challenge is to ensure Maxdome Others / / Should broadcasters fear the that all TV content, whenever and however it is viewed, is properly measured. 11.3% entry of OTT services on their iTunes markets? UK broadcasters have had some time to gauge the Source: Goldmedia 2015. Online survey in Feb. 2015, N=1. 120, 18-69y German Internet users impact of new OTT services, Netflix and Amazon In 2014, egta carried out an extensive survey of its Prime in particular, on their market. On the one members to better understand how broadcasters hand, Danny Cohen, the BBC’s Director of TV noted and their commercial arms see the possible effects to The Financial Times in December 2014 that Net- of OTT services on their markets. A small majority flix has deeper pockets than the BBC for acquiring of respondents to the survey do indeed consider content, which alongside greater investment in that international OTT services represent a threat drama from Sky and ITV is causing the corporation to their businesses, believing that linear/live TV will to adjust to a “hybrid world” of both live and online

Page 16 © Copyright egta 2015. All rights reserved. Page 17 viewing. On the other hand, Paul Kanareck, Direc- / / TV broadcasters’ initiatives Belgium in 2014, has a different content offer, tor of Online and Brands for ITV, told the Digital TV to counter international OTT in that it presents series and movies rather than World Summit 2014 that he does not see Netflix bundled linear TV content. as a major competitor for free-to-air broadcasters, services or indeed to ITV’s own on demand service, as they Feedback given by egta members suggests that serve different needs of viewers. there has, to some extent, been a reaction to the The phenomenon of binge viewing may, as OTT arrival of international OTT services, such as Netf- usage increases, present a threat to linear broad- lix, usually taking the form of adaptation of locally casters if it translates into a widespread and fun- developed services. However, broadcasters have damental change to the way television content – for the most part been developing their own OTT stievie (Belgium) and especially series – are watched. Netflix carried services primarily as a response to growing de- out a survey in the US in late 2013, finding that 61% mand from viewers looking to access non-linear of its sample of almost 1,500 TV streamers binge content on a greater variety of screens. watch regularly, which translates as watching 2-3 Stievie is an innovative second screen service that Although there have been a few notable initiatives Canal+ (FRANCE) episodes back-to-back at least every few weeks24. brings the content of the Flemish private and pub- jointly developed by consortia of broadcasters on lic TV broadcasters together on a single platform. Naturally, OTT services have far less traction in a single market, regulatory obstacles have pre- Stievie stands out on the European marketplace, the less digitally developed markets and are not vented this from taking place in countries such as as it offers programming from several publishers expected to have an impact on the television busi- Germany and the UK. The German private broad- Leading French Pay-TV operator Canal+ has taken in the same app-based environment. The service, ness for the foreseeable future. casters RTL and ProSiebenSat.1 attempted to de- a number of steps to support its OTT destinations. launched in December 2013, is priced at €9.99 per velop a common VOD platform under the working Some of these initiatives are outlined below: month. / / The impact of international title Amazonas, but this was rejected on competi- • Developing co-production of original series to tion grounds by the country’s cartel office in 2012. In an interview with egta, Calogero Macaluso, OTT services on incumbent be used as traffic builders A similar effort by the public broadcasters, provi- Marketing Lead at Medialaan, explained that the platforms • An advertising campaign for CanalPlay Infinity sionally titled Germany’s Gold was also blocked by objective behind the Stievie launch was to intro- to attract new subscribers Only a small proportion of egta members surveyed legislation. In the UK, an attempt was made to duce new and richer models of viewing for tele- • Recommendation tools in set-top boxes and expect to see subscription withdrawals or revenue bring content from BBC Worldwide (the commer- vision audiences. Time-shifted and place-shifted second-screen apps linked to viewers’ prefer- losses as a result of international providers com- cial arm of the BBC), ITV.com and Channel 4’s 4oD viewing on different screens became available for ences ing into their markets, with a number believing that onto a joint VOD platform under the working title the first time, and the service is therefore impor- • Allowing the binge viewing of complete sea- locally-based services may actually benefit from Kangaroo. This was blocked by the UK’s Competi- tant as a driver of innovation. Following the launch sons of series market stimulation. tion Commission in 2009, and the technology was of Stievie, the Flemish television operators also • Broadcasting of American series in Day+1 bought by the telecommunications infrastructure introduced catch-up functionalities into their set- Similarly, there is no widespread expectation that • The creation of a YouTube channel, which is company Arquiva, which launched a new service top boxes. used to drive viewing of Canal+ content the price of domestic OTT services will be driven called SeeSaw. Offering both A-VOD and T-VOD • A simplified second-screen offer that integrates down by international entrants. online and, later, through a set-top box, the project The television content on Stievie retains the ad- all Canal+ and CanalSat apps into myCanal ultimately failed in October 2011 on commercial vertising originally included in the linear broadcast. One advantage that incumbent broadcasters enjoy • Extension of access to devices such as grounds. In the current premium version of the app, users is the possibility to drive usage of their own OTT can fast-forward this if they so choose. Impres- Chromecast and games consoles, in order to platforms using the powerful reach of their linear It is worth noting that following the regulatory fail- sions generated through viewing in Stievie are not reach younger audiences that may have moved channels. This offers an excellent opportunity to ure of Kangaroo, the UK free-to-air broadcasters measured within the television currency. away from viewing linear TV on the television invite viewers to transition from the linear environ- developed a successful IPTV service called You- set. ment to the VOD platform View alongside three telecommunications compa- Calogero noted that Stievie is positioned as a com- nies. This platform offers VOD services via a set- panion service to both linear free-to-air television top box under a range of funding models including and to Netflix: The US service, which launched in

Page 18 © Copyright egta 2015. All rights reserved. Page 19 A-VOD, T-VOD and S-VOD. Catch-up content from networks (VPNs) allow users to access content on- the BBC is both free to view and free of advertis- line that would otherwise be blocked. In a notable figure 10: ing, and the line-up includes Netflix and the Pay TV example of this, Iceland Review reported in Febru- expanding universe of ott devices operator Sky. In February 2015, rival DTV opera- ary 2014 that one in four people aged 18 to 29 in tor Freeview announced Freeview Play, a new OTT Iceland, a country in which the service has yet to service that will offer a similar range of catch-up launch, have a Netflix account26. and on-demand services to YouView, although It is difficult to estimate the scale of illegal OTT without access to Netflix or Amazon services. usage, or its direct impact on the viewing of legal In Belgium, the Flemish public and private broad- linear or non-linear content. casters have jointly developed an app-based S- VOD platform called Stievie, priced at €9.99 per / / Legal issues month. This OTT service, launched in December A range of legal considerations apply to OTT ser- 2013, offers viewers access to the participating vices, both at the national and international levels, broadcasters’ channels on alternative screens and and different rules may apply depending on the devices and offers the opportunity to view content platform’s specific business model and content ott environment on demand. With a monthly subscription fee of offer. Content distribution and rights issues deter- €7.95, the NLziet platform in the Netherlands also mine when content such as movies may be made brings the stations from this market together into available on paid and free linear and non-linear a single subscription OTT service, and it represents STB audiovisual platforms, and these vary considerably a joint project of RTL, SBS and the public broad- between countries. casting organisation NPO. smart Competition and anti-trust rulings have prevented / / The problem of piracy broadcasters from developing joint platforms in countries such as Germany and the UK, as de- Illegal sharing, on a transactional basis or oth- Audiovisual Observatory report noted that the aim scribed above, whilst multi-broadcaster projects / / The current relationship erwise, of video and audio content was a market of the AVMSD is “to ensure that basic principles of have been successfully launched in, for example, between TV broadcasters and reality long before the Internet age. However, the the internal market such as free competition and Belgium and the Netherlands. In Germany, the rapid development of fixed-line and later broad- equal treatment be respected in order to provide external OTT services reasoning of the Bundeskartellamt in blocking RTL band and mobile connectivity have brought piracy transparency and predictability in markets for au- and ProSiebenSat.1 in 2009 from developing their Cooperation with external OTT services ranges into the mainstream. In a 2014 report, the Euro- diovisual media services and to achieve low barri- proposed Amazonas service focussed on the domi- from the basic level of accepting them as advertis- pean Commission found that VOD operators al- ers to entry.”27 nance of these two players in the television adver- ing clients to deeper relationships involving licens- most universally consider piracy to be a significant tising market, whilst the UK Competition Commis- ing deals with broadcasters and potentially offer- barrier to user adoption of legal – and in particular This Directive is most clearly applicable to services sion’s decision in 2009 to prevent the BBC, ITV and ing access to their content inventory. – paid services25. that are partially or wholly funded by advertis- Channel 4 from launching a joint service was based ing; however, on demand services are subject to Broadcasters and their sales houses have taken Illegal access takes various forms. Torrent or on the Commission’s belief that such a platform fewer rules compared to linear services. Even in different approaches to promoting Netflix and peer-to-peer sharing sites such as The Pirate Bay represented too much of a threat to competition in cases where the business model is direct funding other services through paid advertising. When egta and Popcorn Time continue to make very recent the nascent UK video-on-demand market. (S-VOD or T-VOD), the Directive may still apply to members were surveyed, less than half of the re- movies and television content available for ille- any sponsorship and product placement that may OTT services are subject to the Audiovisual Media spondents currently engage in some form of co- gal download despite repeated attempts to close be contained within the content being made avail- Services Directive (AVMSD), which regulates ad- operation with these services, and this is generally them down. Whilst almost all legal OTT services, able to viewers. vertising on linear and non-linear “TV-like” services only to the extent of allowing them to advertise on regardless of their business model, restrict access at the European level, regardless of the device on their channels. This study does, however, indicate to particular geographies, the use of virtual private which the content is consumed. A 2013 European that broadcasters are not closing the door to po-

Page 20 © Copyright egta 2015. All rights reserved. Page 21 tential collaboration in the future. made available in Sweden in the second half of Registration, which has been in place for a few 2015 followed by roll-out in the other Nordic mar- years now, will become mandatory with the launch A number of broadcasters, including RTBF in Bel- kets where Bonnier and C More are present. of ALL 4. Channel 4’s data strategy has enabled it gium, France Télévisions, ZDF in Germany, TV3 in to introduce demographic targeting to online video Latvia and atmedia and Polsat in Poland do not al- Looking further ahead, the public broadcasters advertising, replicating linear TV audiences. This low external OTT services to buy airtime on their under the European Broadcasting Union (EBU) targeted advertising makes up around 30% of the channels. Polsat, for example, only allows adver- umbrella may consider a joint VOD service across inventory in 2015, and should reach 50% in 2016. tising of its own OTT service, ipla.tv. Goldbach Me- many European territories, as stated by ORF Direc- dia in Switzerland imposes very strict restrictions tor General Alexander Wrabetz in the newspaper Beyond simple pre- and mid-rolls, Channel 4 has on what Netflix is allowed to air on channels in the Die Tageszeitung29. Compared to existing, national developed a series of sophisticated interactive ad sales house’s portfolio. services, such an undertaking would represent Channel4 (UK) formats under the iVOD umbrella. 20% of revenues a huge project, with licensing rights in particular are generated from iVODs, the remainder com- During a meeting with a delegation of egta mem- presenting a serious hurdle. However, potential ing from classical spots. The new formats include ber executives, Ted Sarandos noted that Netflix audiences for such a service would be very size- Ad-Elect, which allows the viewer to a choice over had already developed some original shows under able, and shared development would represent an Channel 4 was the first broadcaster in the world ad creative; Ad-Social, integrating social media shared licence deals with European broadcasters, opportunity for considerable cost savings. to offer a VOD platform, launching 4oD in 2006. sharing; Ad-Extend, with longer-form commercial including Derek in the UK and Lillyhammer in Nor- Channel 4 has a history of innovating both in the content; and – soon to be launched – the highly way. Just as market forces and viewer behaviour have development of original TV content and in the de- innovative Ad4U, which offers viewers the oppor- influenced the current OTT landscape, so they will Television distributors are proving more will- livery of advertising. With the exception of its Pay- tunity to receive advertising personalised to the continue to do in the medium to long terms. It may ing to develop a deeper interaction. In France, for VOD service Film4oD, all of the content on 4oD is user level. be unwise to predict at this stage which business example, Boygues Telecom, Orange and SFR are available for free and funded by advertising. Pro- models and platforms will survive and thrive in the Notable personalised advertising examples from integrating Netflix into their platforms, but only gramming from Channel 4, E4 and More4 is avail- coming years, and which will not, until the OTT 2014 include a version of the Share a Coke cam- for some subscribers. Amongst others, Netflix able for 30 days post-transmission, with high- landscape in Europe reaches greater maturity. paign for Coca-Cola, in which the viewer’s own also has distribution partnerships in place with lights from the past also accessible in the archive. name appeared on a bottle in the ad, and a cam- Proximus TV (Belgacom) in Belgium and Entertain Although 4oD originally launched using a trans- paign for the luxury brand Burberry that saw the (Deutsche Telekom) in Germany. actional model, access became free shortly after- viewer’s initials monogrammed onto a bottle of its wards. In a conversation with egta, David Amodio, / / Future perspectives My Burberry fragrance. The spot allowed viewers Digital and Creative Leader at Channel 4, explained to click through and buy their very own mono- There is little doubt that the rich OTT offer available the reasons behind the advertising-funded model. grammed bottle. will continue to expand and that high quality, linear “Being a public service broadcaster and having a and non-linear video by Internet distribution will be completely ad-funded model on the linear plat- consumed by increasing numbers of viewers. This forms means that it is a more natural strategy for is expected to be driven both by subscriber growth us to transfer this model to the VOD service.” for existing market leaders, such as Netflix, HBO David also noted that the VOD offer would be re- Go, Maxdome and others, as well as new services branded as ALL 4 from March 30 2015, bringing being brought to the market. the broadcaster’s linear channels, digital content As reported by news portal C21Media, the Bonnier and services into one place, also offering live media group is preparing to launch a Nordic VOD streaming for the first time. Transformation of the platform to consolidate the S-VOD of its subsid- digital offer is being driven in part by changes to iary TV broadcast groups, including TV4 in Sweden the way people watch TV: a quarter of 4oD’s traffic and MTV Media in Finland, alongside C More and is now on mobile devices, and mobile viewing via Svensk Filmindustri28. The platform is due to be ALL 4 is seen as an increasingly important for the future.

Page 22 © Copyright egta 2015. All rights reserved. Page 23 / / References 20: Advanced Television (March 2, 2015). “UK multiscreen viewing up 17%”. Advanced Television 1: Steel, E. (July 21, 2014). “Netflix, Growing, Envisions Expan- 21: Krieger, J. (November 20, 2014). “Germany: video stream- sion Abroad”. The New York Times ing pushes down TV consumption”. Broadband TV News 2: Pellet, V.; Druelle, A.; Galzy, C. (2014). De l’intérêt d’investir 22: AGF/GfK Fernsehforschung (2014) de nouveaux espaces stratégiques pour redynamiser le marché de la vidéo en France. Kurt Salmon 23: Goldmedia (February, 2015). Online survey

3: Cee TV News (November 20, 2014). “Nearly 64 million Rus- 24: Netflix Media Center (December 13, 2013). “Netflix de- sians using OTT services”. Cee TV News clares binge watching is the new normal”. Netflix Media Center

4: McDonald, A. (August 5, 2014). “The Netflix effect –OTT in 25: De Vinck, S.; Ranaivoson, H.; Van Rompuy, B. (2014) Frag- Europe”. Digital TV Europe: Informa mentation of the Single Market for on-line video-on-demand services: point of view of content providers. A study prepared 5: egta c/000 (2014) for the European Commission DG Communications Networks, 6: Eurostat (2015) Content & Technology by iMinds

7: Digital TV Research (2014). European Digital TV Databook. 26: Stefánsson, P. (February 20, 2014). “Netflix illegal but Digital TV Research hugely popular in Iceland”. Iceland Review

8: Bogen, N.; Jurkevic, J.; Zhao, W.; Hamza, M.; Rodriguez, M.; 27: Cabrera-Blázquez, F. (2014). What is an on-demand Ser- Gaber, P. (2014). Strong growth projected worldwide for OTT vice? On-demand services: made in the likeness of TV? Euro- subscription video-on-demand services. SNL Kagan pean Audiovisual Observatory

9: O’Toole, J. (July 21, 2014). “Netflix passes 50 million sub- 28: Akyuz, G. (March 02,2015). “Bonnier preps Nordic SVoD scribers”. CNN Money service”. C21Media

10: Tretbar, A. (2014). “Netflix could top 100 million interna- 29: TVbizz (November 14, 2014). “EBU members considering tional subscribers by 2020”. Digital Trends joint VOD platform?”. TVbizz

11: Decipher (2014) mediabug - Wave 5 Report. Decipher

12: Steel, E. (December 8, 2014). “Research Confirms the Crowd: Netflix and Others Are Upending the TV Business”. The New York Times more on this topic

13: Bogen, N.; Jurkevic, J.; Zhao, W.; Hamza, M.; Rodriguez, M.; Editorial committee: Gaber, P. (2014). Strong growth projected worldwide for OTT subscription video-on-demand services. SNL Kagan Caroline Brasseur

14: MTM (2014). Prospects for Premium OTT in Western Eu- Head of TV rope. MTM E: [email protected]

15: Jolin, A.; Le Borgne, F. (2014). Netflix en Europe. IDATE Matthew Carver Research Radio Coordinator

16: Bond, S.; Garrahan, M. (February 22, 2015). “Broadcasters E: [email protected] fear falling revenues as viewers switch to on-demand TV”. The Financial Times more on egta 17: Steel, E. (December 8, 2014). “Research Confirms the Crowd: Netflix and Others Are Upending the TV Business”. The egta New York Times 22, Rue des Comédiens, boîte 4

18: Bjørnstad, N.; Tornes, K. A. (2014). “Medieåret 2013- 1000 Brussels 2014. Medieutvikling i Norge: Fakta og trende”. University of Belgium Bergen T: + 32 2 290 31 31 19: TNS Gallup Danmark, Finnpanel, TNS Gallup Norge, MMS T: + 32 2 290 31 39 Sweden (2004-2014) www.egta.com @egtaconnect Page 24