Between the end of 2019 and 2021, three major US studios launched their own platforms in Western Europe: Disney+ (The Walt Disney Company) kicked off its service in 2019, followed by Discovery+, HBO Max (Warner Bros Discovery) and Paramount+ (Paramount Global) in 2021. While Netflix and Amazon still dominate the market in volume of subscribers, the aggregation of these four new platforms forms a block that now accounts for 17% of Western European SVOD subscriptions.
While overall SVOD subscriber growth tends to slow down since the end of 2020, new entrants have experienced rapid subscriber growth, which has mainly come at the expense of Netflix's market share in this region. The latter’s overall number of SVOD subscribers stabilized around 58 million in the last quarters. Similarly, Amazon Prime Video's subscriber base is starting to slow down as can be seen in the chart below.
In Q3 2022, the total number of subscriptions to an SVOD platform (excluding OTT Pay TV) stood at 168.5 million out of a total of 201.5 million households. The market already shows signs of saturation, on account of a deteriorating macroeconomic situation and European households’ decreasing purchase power.
While in the Nordics and the UK, the number of SVOD subscriptions is on average 1.4 times bigger than the total number of households; in Spain, Austria, Italy, Belgium, Portugal and Switzerland the number of SVOD subscriptions in comparison to the number of households is still low. The situation in Germany and France lies in between. Paid streaming services are well established: the number of SVOD subscriptions represents respectively 82% and 87% of the total number of households, but there is still room for growth.
The low penetration of SVOD in the aforementioned countries can be explained by certain market specificities. For example, Portugal and Belgium are countries where consumers have historically been very focused on and loyal to traditional pay TV offers: around 94% of TV households had a pay TV subscription at the end of 2022 in each country.
Conversely, Spain, Italy and Austria are countries where FTA TV is very present and a majority of households watch TV through free-to-air access: FTA TV household penetration lies at 62%, 77% and 52% at the end of 2022 for each country respectively. Consumers are less used to paying for content. Furthermore, for countries such as Italy, Spain and Portugal, household incomes are lower than elsewhere in Western Europe: the GDP per capita lies on average at 25,000 euros for those 3 countries in 2021; around 2.2 times lower than the average in the Nordics. These specific national dynamics can explain the lower penetration of paying video services and the preference for free options.
Overall, the European SVOD market remains appealing to new actors, as shown with the recent launch of Universal+ in France at the end of 2022. But the current economic context on the old continent limits growth prospects. This is putting pressure on platforms, some of which have decided to close down part or all of their business: Lionsgate announced in early November 2022 that it would withdraw its Lionsgate+ platform from France, Germany, Italy, Spain, Benelux and the Nordics in early 2023; and Salto, thought to be the domestic SVOD juggernaut in France, is expected to close down soon.
HBO Max and Discovery+ are also expected to merge in 2023 or 2024, following the creation of the Warner Bros. Discovery conglomerate. The two platforms combined totaled 8.2 million subscribers at Q3 2022 in Western Europe, Dataxis estimates. An aggregation strategy that is similar to the alliance between Comcast and Paramount for the new SkyShowtime platform, launched in the Nordics in Q3 2022.
Other actors are adapting their strategy and trying to find new growth drivers. Netflix launched in October 2022 a cheaper subscription offer with advertising. The idea is to expand the potential subscriber base of those hybrid services to audiences with tighter budgets, improve the retention rate and be able to coexist with competing platforms on an already crowded ecosystem.
Disney has already announced it will also roll out an ad-tier subscription in 2023 in Europe, after having already launched one at the end of 2022 in the US. HBO Max has also launched an ad-supported offer in the US, and Europe will most likely follow. It remains to be seen whether these offers will really convince households and advertisers in the long run.
Victor Galland | Analyst at Dataxis
This research highlight is based on our data coverage of OTT and SVOD markets in Europe. Please contact us to get a demo and see the depth of our service.