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EAO: Netflix, Sky Dominate European SVOD, Pay-TV Markets

Subscription streaming video pioneer Netflix, and satellite-based pay-TV operator Sky continue to dominate the European market, according to new data from the European Audiovisual Observatory, part of the Council of Europe in Strasbourg, France.

The report, which aims to shed light on the structure of the streaming video and pay-TV industry in Europe in terms of revenue as well as other performance indicators specific to key market segments, found that Sky (through 2020) generated more revenue ($18.5 billion) than both Netflix Europe ($7 billion) and German public broadcaster ARD ($7.4 billion) combined.

Indeed, the report found that public broadcasters still account for one-third of global viewing consumption in Europe. At the same time, Netflix held a 35% market share among SVOD markets, followed by Amazon Prime Video at 20.4%. SVOD remained the most concentrated audiovisual market in Europe in terms of subscriptions, according to the report.

While the EAO found that the top 100 audiovisual companies showed a resilience to COVID-19, merger and acquisition activity has been accelerated by the streaming rush and the pandemic crisis. U.S. interests in the Europe show an upward trend, driven in part by HBO Max, Paramount+, Discovery+ and Disney+ expansion throughout the region, including Eastern Europe.

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The cumulated operating AV services revenue of the top 100 companies in Europe (+7.7% over 2016 at the end of 2020) grew slightly more than average inflation and the overall market. The growth was driven solely by the private sector (+12% over the same period), with more than 75% of the incremental revenue cumulatively delivered by pure SVOD players alone (Netflix, Amazon and DAZN, etc.).

By contrast, the revenue of the traditional AV players has stagnated, with businesses relying on advertising being more severely affected and publish broadcast market share down by 3% over the five-year period.

Concentration remains similar over the analyzed period, with the top 20 players accounting for around 70% of the top 100 European AV groups by operating revenue. Although this percentage is much higher in the private sector (85%), it still shows less concentration when compared to the U.S. market.

U.S. streaming companies’ internationalization efforts for the five-year period (+4% up to 31% of the top 100 revenues in 2020) with a preference for prioritizing direct as opposed to traditional indirect investments. While the share of U.S. interests was by far the highest in the SVOD market (78%) at the end of 2020, their contribution as (executive) producers of European TV fiction titles remained limited (6% of the total number of TV fiction titles produced in Europe between 2015-2019).

The M&A activity did not really impact the share of the U.S.-backed players or significantly contribute to the overall growth, but it did help bolster the top companies’ revenue in Europe. Company mergers were driven by strategies to obtain more premium content at competitive prices, seeking to pair that content with stronger distribution, aiming to build stronger mobile distribution, eyeing territorial expansion or refocusing on strongholds to strengthen existing market positions.

Although active in several AV market segments at the same time, most of the top companies operating in Europe tend to also hold a strong position in at least one additional activity. Specifically, for broadcasters and pay-TV operators, diversifying into TV production seems a common strategy and answer to the threat of on-demand over-the-top video services.

With the top four OTT platforms controlling over 70% of subscriptions, SVOD stands out as the most concentrated audiovisual market segment in Europe, followed by pay-TV with 72% of subscriptions cumulated by the top 20 pay-TV operators.

Even if under-represented in terms of volume, public broadcasters accounted for one-third of global viewing consumption in Europe and almost all of them were offering at least one on-demand service at the end of 2020.

Netflix reports fourth quarter (ended Dec. 31, 2021) financial results Jan. 2o.

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