Western Europe: are operators regaining control over content distribution?

The Western European market is experiencing a saturation of VOD offerings caused by the launch of a growing number of platforms. The growth of traditional players is slowing down and the launch of new platforms needs to be carefully planned to attract users. OTT services need to intensify their efforts to expand their user base and above all retain them. In that context, platforms turn towards telecommunication operators to benefit from their strong penetration rate and knowledge of national markets. While network agnosticism was at the heart of OTT disruption, paradoxically we see a return of operators at the forefront of content distribution. The recent launches of Paramount+ and Peacock illustrate this trend perfectly: Peacock is taking advantage of Sky's networks in Europe to support its international expansion, as Paramount+, which has implemented 31 partnerships in 2021.

These collaborations mainly take the form of bundles where OTT subscriptions are fully or partially sold by the operator at an agreed price and added to the customer’s mobile or broadband package charges. The OTT service is then integrated into the operator’s branded TV service, usually through a set-top box or pay TV interface.

This approach is becoming more systematic for new entrants, as illustrated by HBO Max, but it was already largely used by other well established platforms like Viaplay, Amazon Prime Video, and of course Netflix which has partnerships with Orange, Canal, Sky, Deutsche Telekom, Virgin to name but a few.

This strategy benefits not only the platforms but also the operators. Platforms generate new subscriptions by increasing their reach: Netflix can reach a potential 224 million subscribers in Western Europe through its partnerships with telecommunication actors in the first quarter of 2022. Operators generally offer their customers aggregated packages, which are more attractive, thereby generating new subscriptions or achieving a better retention rate. It is also an opportunity for telecommunication companies to differentiate themselves from competitors in a context of increasing homogenisation of mobile and broadband services.

NB: Netflix's 116% penetration rate is linked to the fact that some potential subscriptions may be double counted - related to dual partnerships on mobile and broadband offers

More broadly, telecommunications with OTT partnerships offer a one-stop shop for customers, where multiple services are bundled on a single bill: 86% of partnerships signed in Western Europe since 2014 have been accompanied by carrier billing agreements. Partnerships are expected to reverse or mitigate the decline in operators' revenues caused by lower tariffs and cord cutting. However, while many operators see bundled OTT content as a way to differentiate their services, this is becoming increasingly difficult as OTT platforms partner with multiple operators rather than sign exclusive distribution agreements in Western Europe. Exceptions are to be found in highly concentrated pay TV markets. Examples include Belgium, where Proximus implemented most of the partnerships with platforms, and the UK, where Paramount+ is distributed exclusively by Sky. On the platforms' side, the multiplication of partnerships also threatens their added value: as they develop, the question of the visibility of the services in the operators' offer arises. Actors must therefore pay particular attention to maintain the value of these agreements, which allow platforms to consolidate their subscription base: while HBO Max and Viaplay are currently the two platforms that have developed the most partnerships in Western Europe behind Netflix, it is expected that both services will almost double their subscriber base by 2027 compared to 2021.

In the same way, telecommunication operators were partnering with TV channels, SVOD platforms and operators recognize the mutual benefits of partnerships, for themselves and for the users - operators are regaining their role as gateway to content and the circle is complete. As new platforms continue to emerge and competition increases in this already saturated market, we can expect further partnerships to be concluded in the future to help users navigate in these plethoric content offers.

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