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March 2015

a european perspectiveover-the-top television services:

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This report addresses the landscape of over-the-top (OTT) television services, with an em-phasis on the most digitally advanced Euro-pean markets. The evolution of OTT subscribers and revenues is also placed into a wider global context. egta’s objective is to allow readers to better understand the strategies of different stakeholders in the delivery of OTT, including the response of broadcasters to evolving viewing patterns.

Intended as an overview of existing services, the business and revenue models behind them and their actual and anticipated impact on the linear television industry, this report focuses primarily on the French, Dutch, German, Belgian, United Kingdom and Nordic markets. In that respect, it is not an exhaustive examination of the rich and varied OTT offer currently available throughout Europe.

The report draws on multiple data sources, in-cluding published reports, forecasts and esti-mates, surveys of egta television members and interviews with experts in the field.

/ / Defining OTT servicesIn 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 a presence in set-top boxes and other devices, offering some original, professionally produced, content and live streaming of sports and music events.

/ / Overview of linear and non-linear services in EuropeOTT services exist in a variety of forms throughout Europe, with different funding and business models in place. Broadly speaking they can be classified as seen on the opposite page, with examples of each type listed in figure 01.

OTT services may be linear or on-demand (video-on-demand, VOD), and many offer a combination of both. The former allow live access to existing or online-only channels offered by broadcasters and in some cases telecoms providers or inde-pendent companies. On-demand OTT services allow viewers to choose from a library of movies and TV shows.

/ / Business models in placeThe business models behind OTT VOD services can be broadly classified as direct and indirect; direct funding, in which the user pays for access, may be by subscription (as a standalone service

executive summary

Page 3© Copyright egta 2015. All rights reserved.

figure 01:Overview of linear & non-linear services in europe

services developed by newer entrants

to the market

services developed by broadcasters

services developed by telecoms

providers

NetflixZattoo

Amazon Prime Instant VideoVoddler

Apple TV appsGoogle Play

BBC iPlayerSky Go

4oDHBO GoMYTF1

CanalPlay Viaplay

MaxdomeStievie

RTL à l’infiniNLziet

Telenet VODNuméricable VOD

Vodafone VideothekZiggo On Demand

EntertainProximus TV

figure 02:business models

Revenue Model

direct indirect

S-VODSubscription

T-VODPay-per-view

A-VODAdvertising

subsidies

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• The volume and quality of the content on offer (size of library, how recently the content was produced)

• The availability or otherwise of HD and Ultra HD

• The number of screens on which content can be viewed simultaneously

Customer response to OTT service pricing can be very sensitive, as evidenced by the experience of Netflix in the US in 2011. Following a period of very strong expansion and growth in revenues, Netflix altered its business model in the territory, splitting its physical DVD rentals and streaming services and introducing a sharp price increase. In the third quarter of the year, the company shed 800,000 subscribers amid widespread discontent, and the New York Times reported that its share price slumped to $53 from just under $3001.

The company has since turned its fortunes around, notably by investing in original content and ex-panding into new territories, including Europe. More recent price increases of $1 (US), £1 (UK) and €1 (NL) in 2014 have not resulted in noticeable de-creases in subscription levels.

In a further indication that direct-funding from the consumer’s pocket remains a difficult market to ex-ploit, the consultancy firm Kurt Salmon2 found that the price of VOD and pay-TV packages in France has brought viewers back to the country’s free-to-air DTT channels. As a result, French households cut their average annual video budget from €95.8 in 2011 to €60.20 in 2013. The strength of terres-trial television in France, comparatively high costs for paid video content and the long period of time that must pass before new cinema releases can be made available on S-VOD – 36 months as opposed to just 6 months in the US or UK – mean that the French market is seeing something of an opposite trend to other countries.

This difficulty in developing scale in paid services is further supported by data from Russia, where ad-

or as part of a telecoms bundle) or pay-per-view. Indirect funding takes the form of advertising or subsidies, such as taxation or licence fees. In some cases, the business model may involve a combination of direct and indirect funding, and in the case of services provided by some public service broadcasters, their OTT platforms may be free to access and free of any advertising (figure 02).

The funding of OTT VOD may take the following forms:

• Transactional VOD (T-VOD) – pay-per-view, or “rental” of an episode/movie for a limited time

• Subscription VOD (S-VOD) – monthly (or other) payment for unlimited access to a library of TV series, movies, etc.

• Advertising-supported VOD (A-VOD) – access to VOD content is free at the point of consump-tion, funded only by advertising

• Subsidised VOD – access to VOD content is free at the point of consumption, funded only by subsidies such as television licence fees or other taxation

In some cases, content is made available in catch-up free of charge for a set period, such as seven days, after which it can only be accessed by pay-per-view or rental as part of the channel’s VOD offer.

The pricing and subsequent positioning of European subscription OTT services varies considerably, for example from €49 per year for Amazon Prime (including Instant Video) in Germany to roughly €15 per month for HBO GO in the Netherlands. Some operators, such as Netflix, offer a range of prices, with its French pricing of €7.99/€8.99/€11.99 per month being a typical example of the company’s European offer. Broadly speaking, the pricing of OTT services is dependent on:


NLziet (Netherlands)Niels Baas, Managing Director of NLziet, talked to egta about a new service in the Netherlands, which was launched in July 2014.

egta: What is the strategy behind the subscription-based business model of NLziet? Why did you select this route instead of an ad-funded model, for exam-ple?

Niels: NLziet is a Dutch service that resembles Hulu in the US. As the platform involves all of the main broadcasters in the Netherlands, bundling this power together on the advertising market could have led to competition issues. Therefore, the parties involved chose a subscription-based – and therefore advertising free – service.

The service is priced at €7.95 per month, with a free month’s trial, and the subscription can be can-celled without a notice period.

egta: How does NLziet fit in into the context of the Dutch television market?

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.

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-grammes in preview, and this service is part of the subscription fee.

egta: Which devices and viewing platforms can be used to watch NLziet?

Niels: Currently, NLziet is available through PC browsers, mobile apps and Chromecast, allowing viewing on two concurrent streams, in and out of home. The objective is to make the service avail-able across as many devices as possible over time, and discussions are underway with set-top box providers, Smart TV manufacturers and others. Integration with Samsung SmartTV is planned by the second quarter of 2015, with other television manufacturers to follow. Apple AirPlay support is expected in Q3.

egta: Can you explain how the broadcast partners are remunerated?

Niels: The duration of all streams is measured, and NLziet divides the revenue to the broadcaster partners based on market share in viewing time.

NLziet is an open cooperation, meaning that other linear broadcasters active on the Dutch market are welcome to join the service.

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for OTT services delivered to a television screen – are present in a smaller percentage of European homes. The EU28 average broadband penetration was 78% in 2014, with the Netherlands topping the list at 95%, the United Kingdom at 88%, Germany at 87%, France at 77% and Italy at 71%6. Central and Eastern European countries currently lag well be-hind the more mature markets in the West. As the rate of increase in broadband penetration is show-ing a slowing trend, this will naturally limit the ease with which OTT services can attract new users.

Digital TV Research recently published a report that forecast Pay TV subscriptions to reach 171.6 mil-lion in Europe by the end of 2014 (including Russia and Belarus), having grown from 154.5 million in 20107 (see figure 03 for top ten pay TV countries in Europe). This indicates a large and growing ad-dressable market of households that are accus-tomed to paying for television content directly and in which Pay OTT services may offer an attractive alternative (or complement) to traditional Pay TV.

vertising-funded VOD outstrips paid VOD by 73% to 23% in revenue terms3, and Poland, where 99% of VOD is supported by advertising4.

/ / Devices on which OTT services are availableOTT services are available via set-top boxes (DVR/PVR), PCs, smart/connected TVs, smartphones/tablets and game consoles. On mobile devices, content delivery may be through the device brows-er or a dedicated mobile application, and some ser-vices also feature mobile app control. It should be noted that not every service is available across all these screens and devices.

/ / Penetration statisticsTelevision, whether delivered by terrestrial broad-cast, cable, satellite or IPTV is virtually ubiquitous throughout Europe, with household penetration rates typically at 95% or higher5. By contrast, fixed broadband connections – a pre-requisite

figure 03:top 10 european pay tv countries in 2014

Country Penetration (%)

Netherlands 99.0%

Belgium 96.3%

Norway 95.6%

Malta 94.5%

Sweden 94.0%

Denmark 92.0%

Estonia 90.0%

Hungary 89.6%

Finland 86.2%

Switzerland 86.2%

Source: Digital TV Research, 2014

Country Revenues ($ mil.)

UK 7,845

Germany 4,609

France 4,525

Italy 4,010

Netherlands 2,366

Poland 1,823

Spain 1,757

Russia 1,699

Belgium 1,572

Sweden 1,551


ed its European operations by launching in the UK, Ireland and the Nordic countries, followed by the Netherlands. In 2014, the service was made avail-able in Austria, Belgium, France, Germany, Luxem-bourg and Switzerland. As of early 2015, Netflix is present in about 50 countries, and the company stated that it had exceeded 50 million subscrib-ers in July 20149. Although per-country subscriber numbers are not available, Digital TV Research has made a number of estimates, including a forecast for TV household penetration in 202010. The accu-racy of this longer-term vision is of course difficult to predict with any certainty.

Worldwide, subscription OTT VOD (OTT S-VOD) currently stands at over 124 million households, and this is projected to increase to 249 million in 20188. North America makes up the largest share of this base, with 59.8% of worldwide subscrib-ers, followed by Western Europe and Asia-Pacific. Eastern Europe’s share is much smaller at 1.3%, al-though it is expected to show dynamic growth over the next five years.

Netflix has made the greatest gains in Europe in recent times. Having expanded from the US into first Canada and then South America, Netflix start-

figure 04:ESTIMATED Netflix paying subscribers by country (000)

Country Launch date DEC 2011 DEC 2012 DEC 2013 DEC 2014

USA / 20,153 25,471 31,712 36,265

International / 1,447 4,892 9,722 14,389

Canada Sept 2010 1,138 2,050 3,180 3,475

Latin America Oct 2011 309 857 2,942 4,854

Ireland Jan 2012 0 80 150 190

UK Jan 2012 0 1,400 2,250 2,850

Denmark Oct 2012 0 120 245 420

Finland Oct 2012 0 85 205 400

Norway Oct 2012 0 95 210 380

Sweden Oct 2012 0 205 440 800

Netherlands Sept 2013 0 0 100 700

Austria Sept 2014 0 0 0 30

Belgium Sept 2014 0 0 0 30

France Sept 2014 0 0 0 100

Germany Sept 2014 0 0 0 125

Luxembourg Sept 2014 0 0 0 10

Switzerland Sept 2014 0 0 0 25

Source: Digital TV Research estimates from Netflix totals, 2014

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figures for the use of subscription, transactional and indirectly funded OTT services is very difficult to come by, as providers release limited data to the market.

/ / Revenues generated by OTT platformsIncreasing investments in OTT services – either through subscriptions, transactions or advertis-ing – come at a time of slowing advertising growth across the wider television industry in 2014, with GroupM forecasting that traditional television would lose market share in the US for the first time in 201512.

Other S-VOD platforms available in several mar-kets include HBO Go and Amazon Prime Instant Video. The former launched in the Nordic countries in 2012 and is now available in several Central and Eastern European markets. Whilst it currently lacks the scale of Netflix in the markets where both are present, the application of ActiveVideo’s cloud virtualisation technology will allow HBO Go to be integrated into legacy set top-boxes, offering the potential to increase adoption by users. Amazon acquired LOVEFiLM in the UK in 2011 and folded the service into its Instant Video platform in Febru-ary 2014 and is estimated to reach 7% of UK online households11.

It should be noted that reliable and comparative

figure 05:ESTIMATED Netflix international subscribers by country in 2020

Country Launch date Subscribers(000)

TV households(000)

Subs/TVHH(%)

Austria Sept 2014 1,103 3,678 30%

Belgium Sept 2014 1,422 4,739 30%

Denmark Oct 2012 870 2,559 34%

Finland Oct 2012 856 2,518 34%

France Sept 2014 8,298 27,659 30%

Germany Sept 2014 11,325 37,750 30%

Ireland Jan 2012 572 1,635 35%

Luxembourg Sept 2014 71 237 30%

Netherlands Sept 2013 2,507 7,596 33%

Norway Oct 2012 776 2,282 34%

Sweden Oct 2012 1,620 4,766 34%

Switzerland Sept 2014 1,308 4,360 30%

UK Jan 2012 9,495 27,128 35%

International / 103,939 308,525 34%

Source: Digital TV Research, 2014


growing. Research consultancy MTM predicts the premium OTT market in the UK to grow from €150 million in 2013 to about €490 million in 201714. Growth in the Dutch market is expected to be even greater, from €15-20 million in 2013 to €190 mil-lion in 2017, whilst the German market is expected to grow more modestly, from €30-35 million to around €115 million over the same period.

The report by MTM found Germany to be the weakest of these three markets due to its relative-ly low “digital sophistication” and lower broadband penetration. The report also states that Germans

Worldwide OTT S-VOD revenues reached $8.4 bil-lion in 2014, and SNL Kagan predicts that this will rise to $18.7 billion in 201813. Western Europe fol-lows North America as the second largest region in terms of online video subscribers and revenues, with a much smaller share of the global S-VOD market going to Eastern Europe (1.1% of worldwide volume).

The arrival of Netflix in Europe has stimulated other international OTT providers to increase their investment in marketing their products to wider audiences, and the range of premium services is

figure 06:VOD subscription forecasts in 2018 for UK, Germany, France & the Netherlands (millions)

0.0

2.0

4.0

6.0

8.0

10.0

UK germany france netherlands

10.253 8.942 3.148 2.060

7.235 3.557 1.472 1.647

2.087 3.161 0 0

0.931 2.224 1.676 0.413

Total

Netflix

Amazon

Others

Source: IDATE, Netflix en Europe, December 2014

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/ / Advertising formats on OTT servicesWith some notable exceptions from the UK and France, advertising forms a secondary funding stream for the majority of commercial OTT servic-es in Western Europe. However, video advertising as a sector is growing quickly, offering digital media buyers a high quality, premium alternative to online display. Engagement with online video advertising is high, and data-driven, programmatic trading of this inventory is fast becoming a European reality.

Advertising may take the form of pre- or mid- rolls, with or without interactivity, as well as a range of innovative social, sponsorship and banner formats. The advertising that had been inserted into the terrestrial broadcast of a given programme is usu-ally removed when accessed via Paid-VOD, as the user is in a premium environment.

are traditionally more reliant on the high quality free-to-air TV content that is widely available and less inclined to pay for content. This is highlighted by the discrepancy in the size of the German and UK Pay TV markets, which are worth €3.7 billion and €6.3 billion per year respectively.

A forecast by the European research and consul-tancy organisation IDATE projects that by 2018 Netflix will hold a quasi-monopoly of S-VOD rev-enues in the Netherlands and the UK (80% and 70% market share respectively), and it will be the market leader in France and Germany (46.8% and 39.8% market share respectively)15. IDATE expects Amazon to be the main challenger in the UK and Germany, whilst locally developed offers will put up strong resistance in France.

figure 07:Market size forecasts for premium OTT in 2017

0

100

200

300

400

500

UK NETHERLANDS germany

Source: MTM, 2014. Prospects for Premium OTT in Western Europe

2013€ 150 mil.

2017 € 490 mil.

2013€ 18 mil.

2017 € 190 mil.

2013€ 33 mil.

2017€ 115 mil.

34%

80% 37%


RTL à l’infini (Belgium)

RTL Belgium has two main monetisation models within its OTT VOD offer: Transactional and Sub-scription VOD. Long-form content is only avail-able through set-top boxes, whilst some extracts of shows as well as news, weather and political programming can also be accessed free of charge through OTT platforms. RTL offers access to TV series and RTL programming, but it does not cur-rently offer movies.

T-VOD includes both programmes (immediately after broadcast) and series (catch-up and previews three weeks before they are due to be broadcast).

S-VOD is split into two packages under the RTL à l’infini brand, comprising Sélection and Series Pass. Priced at €5.95 per month, Sélection offers RTL’s programmes, such as magazine, entertain-ment shows, comedy, sports programmes, etc., whilst the monthly subscription of €4.95 for Se-ries Pass allows viewers to watch US series just after they have been broadcasted in the States as well as current and catch-up viewing. All paid VOD content is free of advertising.

The RTL à l’infini package has proved very popu-lar with consumers, with usage increasing month by month and reaching more than 3 million VOD views in 2014. From this, about 60% were for Se-ries Pass, and the majority of these views come from S-VOD rather than T-VOD. When Netflix

launched in Belgium, there was a very small drop in the number of customers, but these were re-placed very quickly, suggesting the services are essentially complementary. On the one hand, Net-flix offers a greater volume of older content, whilst on the other RTL à l’infini has a smaller library of more recent content.

Marc Lellouche, Head of Digital Sales & VOD at IP Belgium, the sales house for RTL, explained to egta that the platform is currently operated by the telecoms distributers (Proximus TV, Telenet, VOO, Numericable, etc.) under a revenue share model, and that RTL’s strategy is to some extent dependent on the telcos in terms of strategy and technical development. However, the broadcaster is considering opening the service on the Internet in order to allow it to manage the service end-to-end. Content – particularly recent American series – is expensive to acquire, and he does not believe this part of the business would be sustainable under an advertising-funded model. “Viewers will pay for quality content, and the €4.95 we propose for Series Pass is a reasonable price, the lowest on the Belgian market. Today, advertising is not my preferred model of VOD funding, certainly for series, although it could be a model for other types of programming.”

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subscription from Pay TV are likely to face higher charges for online access, and the compounding cost of multiple standalone subscriptions may yet protect the cable and satellite distributors against further erosion of traditional viewing.

Currently, European operators of advertising-sup-ported VOD offers can only take their own data to the market, rather than the independent metrics on which the television industry has been built. The pressure to introduce fit-for-purpose measure-ment regimes for television content beyond linear has therefore become acute.

/ / Audience figures and usage dataIndependent OTT providers are extremely reluctant to provide viewership data. Ted Sarandos, Netflix’s Chief Content Officer, stated in January 2015 that there was “no real business reason to report those numbers.” The company plans to keep these data unreported as long as it can, and even withholds it from the creators of its most popular shows and its product placement partners, such as AB Inbev.

Even if the true extent of streaming cannot be known, the US has seen a 3% decline in television viewing in the final season of 2014, as reported by David Poltrack, Chief Research Officer at CBS. Re-search by CBS has found that a significant share of Netflix viewing is of popular current television series, including from NBC, whilst less than 10% of adult viewing was for Netflix’s own original se-ries17.

The data and research available from European markets suggest that streaming in its various forms is seeing significant increases whilst there is evidence of declining viewing of linear television in some markets.

A November 2014 report from the Institute for In-formation and Media Science at the University of Bergen identified that 25% of Norwegians watch

/ / Measurement of OTT platformsWhilst it may be a key concern for the industry, the measurement of television across all platforms – including broadcast and online – is in its infancy, both in the US and Europe. The establishment of robust hybrid measurement methodologies that will allow broadcasters to effectively monetise their content across all screens and devices will be the subject of a future egta report, and the is-sue has been the main focus of egta’s AV Currency Working Group since 2011.

Measuring television content beyond the first screen has been brought sharply into the spotlight in the US in recent times. In response to viewership declines of 18% for Viacom, 17% for Nickelodeon and 14% for MTV in the fourth quarter of 2014, coming just after a weak upfront for television, the American television industry is now putting pres-sure on ratings provider Nielsen to capture digital and non-linear viewing more effectively16. Whilst Nielsen is launching new tools to address this is-sue, the announcement of several new OTT plat-forms – including offers from Verizon, Dish/Sling TV (including ESPN), CBS, HBO, Sony and Nickel-odeon – suggest that content providers will seek a direct route to the consumer’s pocket when weak-nesses in audience measurement start to trans-late into lost advertising revenues.

The announcement of standalone OTT services by Dish, HBO and Sony are particularly significant, as they reflect a marked change in the way people can access television channels in the US. Access to HBO and ESPN has long been considered a key reason behind Americans keeping their Pay TV bundles, so uncoupling these channels from traditional cable and satellite subscriptions clearly opens the door for an increase in cord-cutting, and a younger generation of cord-nevers that have never, or will never, subscribe to traditional TV may emerge. However, consumers who unshackle their Internet


MYTF1 (france)

MYTF1 is a multi-platform OTT service that offers live streaming and VOD across a range of screens and devices, including IPTV set-top boxes, with ac-cess free to viewers at the point of consumption. IPTV is highly developed in France, with about half of homes using an IP box to deliver triple play sub-scription services.

Fabrice Mollier, Deputy General Manager, Strategic Marketing Innovation at TF1 Publicité explained to egta that MYTF1 has two revenue streams:

• On IPTV: B2B revenue from Internet service providers (ISPs)

• Advertising: pre-rolls and mid-rolls delivered via an ad server

Catch-up has proved to be highly successful in France. MYTF1 has 15 million monthly unique visitors across all screens, and in February 2015 the platform registered 7.5 million unique viewers on IPTV – its fastest growing platform – with an average daily viewing time of 1h07.

IPTV (via a set-top box) represents 45% of MYTF1 viewing, PC 41% and tablets and mobile 14%. Rev-enues are growing strongly, with a 30% increase for 2014 over the previous year. Driven by an im-proved marketing offer and roadshows in agencies to show ratings, this performance has increased in the first two months of 2015, with a 60% increase over the same period in 2014.

Metrics from IPTV are now delivered by measure-ment body Médiamétrie on a daily basis, offering better profiling of the inventory. 54% of MYTF1 viewers on IPTV are between 25-49 years old, and 65% are women, making the MYTF1 audience highly attractive for advertisers.

There are historic reasons for this advertising-supported VOD model in France, as the strategies of Internet service providers (ISPs) in France has been to include free catch-up within their bundled telecoms and television offers, and this type of ac-cess is now a basic expectation of French viewers.

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became the first country in the world to integrate web TV viewing into its TAM, with reporting start-ing from 1 November of that year. The result-ing positive impact on viewing figures highlights the importance of measurement evolution to the health of advertising-supported broadcasters (see figure 08).

Denmark’s DR Media Research estimated that Danes actually watched as much television and television-like content in 2014 as they did in 2013, but that traditional viewing decreased at the ex-pense of streamed viewing, which rose to a 17% share of television viewing from 12% the year be-fore.

This picture is matched in the UK by BARB’s fig-ures for 2014. Daily TV viewing declined by 4.5% in 2014 over the previous year, a fall of some 10

Netflix at least once a week, which is equal to the usage of NRK’s popular online platform18. Be-tween 2009 and 2013, the channels of the main broadcasters – with the exception of SBS Discov-ery’s Norwegian channels – have all seen declines in viewing time per household in the age groups 12-19 and 20-34, as measured by TNS Gallup. A number of other services, such as HBO, Viaplay, TV3 Sumo and TV2 Play also attract significant au-diences, but this report puts them some distance behind Netflix and NRK Nett-TV.

It should be noted that whilst all of the Nordic countries registered declines in TV viewing times over the whole of their populations from 2012 to 2013, the story from 2014 is mixed: Denmark and Sweden saw further falls, but Norway saw its viewing time bounce back, and Finland enjoyed its highest ever viewing figures19. In 2013, Norway

figure 08:TV viewing times (from official TAM organisations) from 2004 to 2014 (minutes)

2004

100

200

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

150

Norway (Age 12+)

Finland (Age 10+)

Sweden (Age 3+)

Denmark (Age 3+)

Norway:Nov 2013: integration of online TV viewing into TAM

Note: TV-meter-data, yearly averages.Sources: TNS Gallup Danmark, Finnpanel, TNS Gallup Norge, MMS Sweden.


maxdome (Germany)

maxdome – a premium OTT service from the Ger-man ProSiebenSat.1 Group – was the first S-VOD to launch in the world. The broadcaster’s portfolio includes free-to-air and pay-TV stations alongside a wide range of digital platforms. maxdome has a very strong position in Germany, holding the high-est market share of subscription VOD in the coun-try at 40% (full year 2014) and the highest aware-ness among consumers.

The service has four funding models, comprising T-VOD to buy or rent films and series, electronic sell-through (EST) purchases, S-VOD for unlim-ited library access priced at €7.99 per month (with a month’s free trial) and Live pay-per-view. maxdome does not use advertising as a funding stream, as all access is paid.

For Thomas Höfer, Director Business Develop-ment at maxdome, the reason for a paid model over advertising is straightforward. “Within the ProSiebenSat.1 Group we have three very strong A-VOD assets, which are MyVideo, 7TV and the multi-channel network Studio71, so we have the free segment covered. An A-VOD model would be insufficient for very premium studio content with leading blockbusters and leading series we pro-vide on maxdome.”

maxdome differentiates itself from its competi-tors by offering the largest content library on the

market, with over 60,000 titles to choose from, an offline mode to allow viewers to watch pro-grammes when on the move, previews of new US series before they go on air (unique to maxdome) and integration across a wide range of devices and screens. This includes integration with all the main smart TV manufactures, meaning that maxdome is available on virtually every OTT device in Ger-man households. The ProSiebenSat.1 Group has a significant advantage over its international com-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 terrestrial channels also reinforce this position.

The Live pay-per-view offer in partnership with WWE (Worldwide Wrestling Entertainment) is an interesting example of a specific product for a par-ticular target group that is both very loyal and has a high affinity for paid online events.

In 2014, maxdome almost doubled its subscriber numbers over the previous year, and the platform is delivering increases in video usage of over 150% year-over-year. Linear TV viewing in Germany has remained stable in recent years, whilst overall video usage is continuously growing.

Höfer sees that in the long term the German mar-ket will consolidate, and the broadcaster expects maxdome to be a top-three player through to 2020 and beyond.

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decline and revenues will be hit by ad-skipping on set-top boxes. This in turn will have a negative ef-fect on the quality of content available on demand. A number of respondents also expect OTT provid-ers such as Netflix to develop more of their own original content in the future.

This belief is backed up by the recent announce-ment by Netflix that it has committed to 320 new hours of original programming in 2015, roughly three times the amount it released in 2014. With original content seen as a key driver of subscriber growth, this strategy appears likely to strengthen Netflix in the markets where it has already estab-lished a foothold.

One strategy for ensuring viewers remain loyal to incumbent Pay TV and Pay VOD providers lies in retaining the exclusive, high quality and locally produced content that differentiates them from international competitors. These newcomers naturally take the position of complementary ser-vices rather than viable alternatives in the eyes of potential subscribers if they do not carry the best locally produced content.

Several of the egta members surveyed do not see the entry of OTT providers as a direct threat, and in fact believe it could encourage the use of their own OTT services, which dominate market share in some countries. These companies view indepen-dent OTT services as complementary to TV view-ing, and the most pressing challenge is to ensure that all TV content, whenever and however it is viewed, is properly measured.

UK broadcasters have had some time to gauge the impact of new OTT services, Netflix and Amazon Prime in particular, on their market. On the one hand, Danny Cohen, the BBC’s Director of TV noted to The Financial Times in December 2014 that Net-flix has deeper pockets than the BBC for acquiring content, which alongside greater investment in drama from Sky and ITV is causing the corporation to adjust to a “hybrid world” of both live and online

minutes 30 seconds, and the drop was greatest for heavy TV viewers and young people20. This drop is compensated somewhat when the figures in-clude 8-28 day time-shifted, rather than the live plus seven days data used for the trading currency. Viewing on screens such as tablets and laptops grew year-on-year by 17%, and BARB’s Project Dovetail is currently being developed to incorpo-rate viewing on these devices into the currency.

In Germany, a 2014 survey by Bitkom Research and Aris found that 73% of Internet users over the age of 14 – representing more than 40 million Ger-mans – stream videos21. Furthermore, the study found that 33% of video streaming users replace conventional television completely or partially, and 18% of streaming video users would be prepared to abandon TV completely in the future.

However, whilst these findings may appear to be alarming, audience data from the measurement body AGF/GfK Fernsehforschung actually show listening across the population as a whole to have risen consistently year-on-year between 2009 and 2013, and viewing in younger target groups has also remained very stable22.

A report by Goldmedia found Amazon Prime In-stant Video to be the market leader in VOD in Ger-many, with roughly three times the frequency of use as its nearest challengers, iTunes, Maxdome (ProSiebenSat.1), Google Play and Netflix23.

/ / Should broadcasters fear the entry of OTT services on their markets?In 2014, egta carried out an extensive survey of its members to better understand how broadcasters and their commercial arms see the possible effects of OTT services on their markets. A small majority of respondents to the survey do indeed consider that international OTT services represent a threat to their businesses, believing that linear/live TV will


Figure 09:TOP 10 VOD providers in germanyQuestion: “Which VOD service do you use most frequently, regardless of the business model?”

Amazon Prime Instant Video

33.2%

Others12.1%

iTunes11.3%

Maxdome11.3%

Google Play10.8%

Netflix8.0%

Amazon InstantVideo

5.7%

Source: Goldmedia 2015. Online survey in Feb. 2015, N=1. 120, 18-69y German Internet users

Unitymedia4.4%

Videoload3.1%

Watchever2.3%

2015

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/ / TV broadcasters’ initiatives to counter international OTT servicesFeedback given by egta members suggests that there has, to some extent, been a reaction to the arrival of international OTT services, such as Netf-lix, usually taking the form of adaptation of locally developed services. However, broadcasters have for the most part been developing their own OTT services primarily as a response to growing de-mand from viewers looking to access non-linear content on a greater variety of screens.

Although there have been a few notable initiatives jointly developed by consortia of broadcasters on a single market, regulatory obstacles have pre-vented this from taking place in countries such as Germany and the UK. The German private broad-casters RTL and ProSiebenSat.1 attempted to de-velop a common VOD platform under the working title Amazonas, but this was rejected on competi-tion grounds by the country’s cartel office in 2012. A similar effort by the public broadcasters, provi-sionally titled Germany’s Gold was also blocked by legislation. In the UK, an attempt was made to bring content from BBC Worldwide (the commer-cial arm of the BBC), ITV.com and Channel 4’s 4oD onto a joint VOD platform under the working title Kangaroo. This was blocked by the UK’s Competi-tion Commission in 2009, and the technology was bought by the telecommunications infrastructure company Arquiva, which launched a new service called SeeSaw. Offering both A-VOD and T-VOD online and, later, through a set-top box, the project ultimately failed in October 2011 on commercial grounds.

It is worth noting that following the regulatory fail-ure of Kangaroo, the UK free-to-air broadcasters developed a successful IPTV service called You-View alongside three telecommunications compa-nies. This platform offers VOD services via a set-top box under a range of funding models including

viewing. On the other hand, Paul Kanareck, Direc-tor of Online and Brands for ITV, told the Digital TV World Summit 2014 that he does not see Netflix as a major competitor for free-to-air broadcasters, or indeed to ITV’s own on demand service, as they serve different needs of viewers.

The phenomenon of binge viewing may, as OTT usage increases, present a threat to linear broad-casters if it translates into a widespread and fun-damental change to the way television content – and especially series – are watched. Netflix carried out a survey in the US in late 2013, finding that 61% of its sample of almost 1,500 TV streamers binge watch regularly, which translates as watching 2-3 episodes back-to-back at least every few weeks24.

Naturally, OTT services have far less traction in the less digitally developed markets and are not expected to have an impact on the television busi-ness for the foreseeable future.

/ / The impact of international OTT services on incumbent platformsOnly a small proportion of egta members surveyed expect to see subscription withdrawals or revenue losses as a result of international providers com-ing into their markets, with a number believing that locally-based services may actually benefit from market stimulation.

Similarly, there is no widespread expectation that the price of domestic OTT services will be driven down by international entrants.

One advantage that incumbent broadcasters enjoy is the possibility to drive usage of their own OTT platforms using the powerful reach of their linear channels. This offers an excellent opportunity to invite viewers to transition from the linear environ-ment to the VOD platform


Canal+ (FRANCE)

Leading French Pay-TV operator Canal+ has taken a number of steps to support its OTT destinations. Some of these initiatives are outlined below:

• Developing co-production of original series to be used as traffic builders

• An advertising campaign for CanalPlay Infinity to attract new subscribers

• Recommendation tools in set-top boxes and second-screen apps linked to viewers’ prefer-ences

• Allowing the binge viewing of complete sea-sons of series

• Broadcasting of American series in Day+1• The creation of a YouTube channel, which is

used to drive viewing of Canal+ content• A simplified second-screen offer that integrates

all Canal+ and CanalSat apps into myCanal• Extension of access to devices such as

Chromecast and games consoles, in order to reach younger audiences that may have moved away from viewing linear TV on the television set.

stievie (Belgium)

Stievie is an innovative second screen service that brings the content of the Flemish private and pub-lic TV broadcasters together on a single platform. Stievie stands out on the European marketplace, as it offers programming from several publishers in the same app-based environment. The service, launched in December 2013, is priced at €9.99 per month.

In an interview with egta, Calogero Macaluso, Marketing Lead at Medialaan, explained that the objective behind the Stievie launch was to intro-duce new and richer models of viewing for tele-vision audiences. Time-shifted and place-shifted viewing on different screens became available for the first time, and the service is therefore impor-tant as a driver of innovation. Following the launch of Stievie, the Flemish television operators also introduced catch-up functionalities into their set-top boxes.

The television content on Stievie retains the ad-vertising originally included in the linear broadcast. In the current premium version of the app, users can fast-forward this if they so choose. Impres-sions generated through viewing in Stievie are not measured within the television currency.

Calogero noted that Stievie is positioned as a com-panion service to both linear free-to-air television and to Netflix: The US service, which launched in

Belgium in 2014, has a different content offer, in that it presents series and movies rather than bundled linear TV content.

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networks (VPNs) allow users to access content on-line that would otherwise be blocked. In a notable example of this, Iceland Review reported in Febru-ary 2014 that one in four people aged 18 to 29 in Iceland, a country in which the service has yet to launch, have a Netflix account26.

It is difficult to estimate the scale of illegal OTT usage, or its direct impact on the viewing of legal linear or non-linear content.

/ / Legal issuesA range of legal considerations apply to OTT ser-vices, both at the national and international levels, and different rules may apply depending on the platform’s specific business model and content offer. Content distribution and rights issues deter-mine when content such as movies may be made available on paid and free linear and non-linear audiovisual platforms, and these vary considerably between countries.

Competition and anti-trust rulings have prevented broadcasters from developing joint platforms in countries such as Germany and the UK, as de-scribed above, whilst multi-broadcaster projects have been successfully launched in, for example, Belgium and the Netherlands. In Germany, the reasoning of the Bundeskartellamt in blocking RTL and ProSiebenSat.1 in 2009 from developing their proposed Amazonas service focussed on the domi-nance of these two players in the television adver-tising market, whilst the UK Competition Commis-sion’s decision in 2009 to prevent the BBC, ITV and Channel 4 from launching a joint service was based on the Commission’s belief that such a platform represented too much of a threat to competition in the nascent UK video-on-demand market.

OTT services are subject to the Audiovisual Media Services Directive (AVMSD), which regulates ad-vertising on linear and non-linear “TV-like” services at the European level, regardless of the device on which the content is consumed. A 2013 European

A-VOD, T-VOD and S-VOD. Catch-up content from the BBC is both free to view and free of advertis-ing, and the line-up includes Netflix and the Pay TV operator Sky. In February 2015, rival DTV opera-tor Freeview announced Freeview Play, a new OTT service that will offer a similar range of catch-up and on-demand services to YouView, although without access to Netflix or Amazon services.

In Belgium, the Flemish public and private broad-casters have jointly developed an app-based S-VOD platform called Stievie, priced at €9.99 per month. This OTT service, launched in December 2013, offers viewers access to the participating broadcasters’ channels on alternative screens and devices and offers the opportunity to view content on demand. With a monthly subscription fee of €7.95, the NLziet platform in the Netherlands also brings the stations from this market together into a single subscription OTT service, and it represents a joint project of RTL, SBS and the public broad-casting organisation NPO.

/ / The problem of piracyIllegal sharing, on a transactional basis or oth-erwise, of video and audio content was a market reality long before the Internet age. However, the rapid development of fixed-line and later broad-band and mobile connectivity have brought piracy into the mainstream. In a 2014 report, the Euro-pean Commission found that VOD operators al-most universally consider piracy to be a significant barrier to user adoption of legal – and in particular – paid services25.

Illegal access takes various forms. Torrent or peer-to-peer sharing sites such as The Pirate Bay and Popcorn Time continue to make very recent movies and television content available for ille-gal download despite repeated attempts to close them down. Whilst almost all legal OTT services, regardless of their business model, restrict access to particular geographies, the use of virtual private


/ / The current relationship between TV broadcasters and external OTT servicesCooperation with external OTT services ranges from the basic level of accepting them as advertis-ing clients to deeper relationships involving licens-ing deals with broadcasters and potentially offer-ing access to their content inventory.

Broadcasters and their sales houses have taken different approaches to promoting Netflix and other services through paid advertising. When egta members were surveyed, less than half of the re-spondents currently engage in some form of co-operation with these services, and this is generally only to the extent of allowing them to advertise on their channels. This study does, however, indicate that broadcasters are not closing the door to po-

Audiovisual Observatory report noted that the aim of the AVMSD is “to ensure that basic principles of the internal market such as free competition and equal treatment be respected in order to provide transparency and predictability in markets for au-diovisual media services and to achieve low barri-ers to entry.”27

This Directive is most clearly applicable to services that are partially or wholly funded by advertis-ing; however, on demand services are subject to fewer rules compared to linear services. Even in cases where the business model is direct funding (S-VOD or T-VOD), the Directive may still apply to any sponsorship and product placement that may be contained within the content being made avail-able to viewers.

figure 10:expanding universe of ott devices

ott environment

STB

smart

Page 22

tential collaboration in the future.

A number of broadcasters, including RTBF in Bel-gium, France Télévisions, ZDF in Germany, TV3 in Latvia and atmedia and Polsat in Poland do not al-low external OTT services to buy airtime on their channels. Polsat, for example, only allows adver-tising of its own OTT service, ipla.tv. Goldbach Me-dia in Switzerland imposes very strict restrictions on what Netflix is allowed to air on channels in the sales house’s portfolio.

During a meeting with a delegation of egta mem-ber executives, Ted Sarandos noted that Netflix had already developed some original shows under shared licence deals with European broadcasters, including Derek in the UK and Lillyhammer in Nor-way.

Television distributors are proving more will-ing to develop a deeper interaction. In France, for example, Boygues Telecom, Orange and SFR are integrating Netflix into their platforms, but only for some subscribers. Amongst others, Netflix also has distribution partnerships in place with Proximus TV (Belgacom) in Belgium and Entertain (Deutsche Telekom) in Germany.

/ / Future perspectivesThere is little doubt that the rich OTT offer available will continue to expand and that high quality, linear and non-linear video by Internet distribution will be consumed by increasing numbers of viewers. This is expected to be driven both by subscriber growth for existing market leaders, such as Netflix, HBO Go, Maxdome and others, as well as new services being brought to the market.

As reported by news portal C21Media, the Bonnier media group is preparing to launch a Nordic VOD platform to consolidate the S-VOD of its subsid-iary TV broadcast groups, including TV4 in Sweden and MTV Media in Finland, alongside C More and Svensk Filmindustri28. The platform is due to be

made available in Sweden in the second half of 2015 followed by roll-out in the other Nordic mar-kets where Bonnier and C More are present.

Looking further ahead, the public broadcasters under the European Broadcasting Union (EBU) umbrella may consider a joint VOD service across many European territories, as stated by ORF Direc-tor General Alexander Wrabetz in the newspaper Die Tageszeitung29. Compared to existing, national services, such an undertaking would represent a huge project, with licensing rights in particular presenting a serious hurdle. However, potential audiences for such a service would be very size-able, and shared development would represent an opportunity for considerable cost savings.

Just as market forces and viewer behaviour have influenced the current OTT landscape, so they will continue to do in the medium to long terms. It may be unwise to predict at this stage which business models and platforms will survive and thrive in the coming years, and which will not, until the OTT landscape in Europe reaches greater maturity.


Channel4 (UK)

Channel 4 was the first broadcaster in the world to offer a VOD platform, launching 4oD in 2006. Channel 4 has a history of innovating both in the development of original TV content and in the de-livery of advertising. With the exception of its Pay-VOD service Film4oD, all of the content on 4oD is available for free and funded by advertising. Pro-gramming from Channel 4, E4 and More4 is avail-able for 30 days post-transmission, with high-lights from the past also accessible in the archive.

Although 4oD originally launched using a trans-actional model, access became free shortly after-wards. In a conversation with egta, David Amodio, Digital and Creative Leader at Channel 4, explained the reasons behind the advertising-funded model. “Being a public service broadcaster and having a completely ad-funded model on the linear plat-forms means that it is a more natural strategy for us to transfer this model to the VOD service.”

David also noted that the VOD offer would be re-branded as ALL 4 from March 30 2015, bringing the broadcaster’s linear channels, digital content and services into one place, also offering live streaming for the first time. Transformation of the digital offer is being driven in part by changes to the way people watch TV: a quarter of 4oD’s traffic is now on mobile devices, and mobile viewing via ALL 4 is seen as an increasingly important for the future.

Registration, which has been in place for a few years now, will become mandatory with the launch of ALL 4. Channel 4’s data strategy has enabled it to introduce demographic targeting to online video advertising, replicating linear TV audiences. This targeted advertising makes up around 30% of the inventory in 2015, and should reach 50% in 2016.

Beyond simple pre- and mid-rolls, Channel 4 has developed a series of sophisticated interactive ad formats under the iVOD umbrella. 20% of revenues are generated from iVODs, the remainder com-ing from classical spots. The new formats include Ad-Elect, which allows the viewer to a choice over ad creative; Ad-Social, integrating social media sharing; Ad-Extend, with longer-form commercial content; and – soon to be launched – the highly innovative Ad4U, which offers viewers the oppor-tunity to receive advertising personalised to the user level.

Notable personalised advertising examples from 2014 include a version of the Share a Coke cam-paign for Coca-Cola, in which the viewer’s own name appeared on a bottle in the ad, and a cam-paign for the luxury brand Burberry that saw the viewer’s initials monogrammed onto a bottle of its My Burberry fragrance. The spot allowed viewers to click through and buy their very own mono-grammed bottle.

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more on this topicEditorial committee:

Caroline BrasseurHead of TVE: [email protected] CarverRadio CoordinatorE: [email protected]

more on egtaegta22, Rue des Comédiens, boîte 41000 BrusselsBelgiumT: + 32 2 290 31 31T: + 32 2 290 31 39www.egta.com@egtaconnect

/ / References1: Steel, E. (July 21, 2014). “Netflix, Growing, Envisions Expan-sion Abroad”. The New York Times

2: Pellet, V.; Druelle, A.; Galzy, C. (2014). De l’intérêt d’investir de nouveaux espaces stratégiques pour redynamiser le marché de la vidéo en France. Kurt Salmon

3: Cee TV News (November 20, 2014). “Nearly 64 million Rus-sians using OTT services”. Cee TV News

4: McDonald, A. (August 5, 2014). “The Netflix effect –OTT in Europe”. Digital TV Europe: Informa

5: egta c/000 (2014)

6: Eurostat (2015)

7: Digital TV Research (2014). European Digital TV Databook. Digital TV Research

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

9: O’Toole, J. (July 21, 2014). “Netflix passes 50 million sub-scribers”. CNN Money

10: Tretbar, A. (2014). “Netflix could top 100 million interna-tional subscribers by 2020”. Digital Trends

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

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

14: MTM (2014). Prospects for Premium OTT in Western Eu-rope. MTM

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

16: Bond, S.; Garrahan, M. (February 22, 2015). “Broadcasters fear falling revenues as viewers switch to on-demand TV”. The Financial Times

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

18: Bjørnstad, N.; Tornes, K. A. (2014). “Medieåret 2013-2014. Medieutvikling i Norge: Fakta og trende”. University of Bergen

19: TNS Gallup Danmark, Finnpanel, TNS Gallup Norge, MMS Sweden (2004-2014)

20: Advanced Television (March 2, 2015). “UK multiscreen viewing up 17%”. Advanced Television

21: Krieger, J. (November 20, 2014). “Germany: video stream-ing pushes down TV consumption”. Broadband TV News

22: AGF/GfK Fernsehforschung (2014)

23: Goldmedia (February, 2015). Online survey

24: Netflix Media Center (December 13, 2013). “Netflix de-clares binge watching is the new normal”. Netflix Media Center

25: De Vinck, S.; Ranaivoson, H.; Van Rompuy, B. (2014) Frag-mentation of the Single Market for on-line video-on-demand services: point of view of content providers. A study prepared for the European Commission DG Communications Networks, Content & Technology by iMinds

26: Stefánsson, P. (February 20, 2014). “Netflix illegal but hugely popular in Iceland”. Iceland Review

27: Cabrera-Blázquez, F. (2014). What is an on-demand Ser-vice? On-demand services: made in the likeness of TV? Euro-pean Audiovisual Observatory

28: Akyuz, G. (March 02,2015). “Bonnier preps Nordic SVoD service”. C21Media

29: TVbizz (November 14, 2014). “EBU members considering joint VOD platform?”. TVbizz

Documents

egta insight - Home | egta...• The volume and quality of the content on offer (size of library, how recently the content was produced) • The availability or otherwise of HD and