Mergers, acquisitions and alliances: what is holding back European TV projects?

As traditional TV networks revenues continue their decline in favour of digital, global groups from the US reach records in attention captured across OTT platforms in Europe: Netflix, Amazon, Disney, Warner Bros. Discovery and Comcast together gathered 73% of European SVOD subscriptions and Alphabet and Meta alone concentrated around half of Europe’s total AVOD monthly users in 2021. Although still relatively small compared to US giants on the European scale, European players have initiated their transition to digital and are trying to gain momentum in the digital space, whether they are broadcasters or telecommunication operators. The largest can count on their established position in their home market, and in some cases benefit from substantial revenues from traditional activities. RTL (including M6) generated almost €3.5 billion of net advertising revenue in 2021 through its TV networks and Canal+ generated €2.1 billion through Pay TV distribution only for instance.

European players launched several initiatives in recent years to strengthen their position and take the digital turn. These initiatives took several forms, first of all formalised co-production agreements between broadcasters to reduce the gap with American players in the production budgets allocated to their projects. For instance, the Alliance between public broadcasters France Télévision, ZDF and Rai announced in 2018, or the pooling of resources between Arte France and Arte Germany. The partnerships were designed to compete with the premium content offered by major SVOD platforms, and to capture audiences’ interest with high-budget content.

Joint ventures resulting in the launch of new digital platforms also appeared: LovesTV between RTVE, Mediaset Espana and Atresmedia, Salto between France Télévision, M6 and TF1, or Britbox between the BBC and ITV among others. Although aimed at domestic markets, these initiatives did not reach expectations - Salto and Britbox have both only attracted less than 2% of SVOD subscribers in their respective markets at Q2 2022. The different advertising agencies did not agree on a common advertising sales strategy for LovesTV - preventing economies of scale. The strategic interests between public and commercial broadcasters were unable to align for Salto - weakened only six months after its launch by the announcement of the attempted TF1-M6 merger and recently jeopardised by the launch of paid BVOD platforms by both TF1 and M6. Although results are limited in the domestic market, Britbox shows some success internationally: 2.7 million international subscribers at Q2 2022, including 200,000 in the Nordics, only two months after its launch. ITV recently bought out BBC's share of the domestic platform and will integrate it into its own digital platform ITV Hub+ in the UK, which will be renamed IVTX.

Until now, alliances between national television networks struggled to attract customers on their paying digital platforms. It seems especially difficult for FTA broadcasters, whose content is available for free on linear television channels, with the exception of Nordic markets (as shown in the TV2 Denmark example), where FTA TV has almost entirely disappeared. For instance, while ITV Hub+ convinced around 520.000 domestic subscribers at Q2 2022, the ad-supported tenant ITV Hub had 22 million monthly users at the same period. The sole transition to a nonlinear OTT distribution doesn’t represent a sufficient value proposition for consumers. Moreover, when evolving at a national scale it can be difficult to compete with international VOD platforms. While Netflix spent over $17 billion on content in 2021, ITV, which generated the largest amount of digital revenues in Europe among European actors, spent $1.4 billion (£1.15 billion) on content production and acquisition for its global operations, which represents only 8% of Netflix’s investments.

The transition from traditional TV to paying D2C offers seems less complicated for groups evolving at European scale or for traditional Pay TV actors, whose customers are already used to paying for content: RTL captured 9.00% of the market in Germany at Q2 2022 and 11.90% in the Netherlands with Videoland, Timvision 19.20% in Italy, Canal+ around 6.00% in France and in Poland, Viaplay 15.00% in Sweden. Even if those groups have satisfying results in their home markets, their success must be put into perspective on the European scale: in the top 10 OTTs in Europe in terms of revenue, only 4 are European groups - the bottom 4.

The question for those players is whether to adopt a national or European strategy, the latter putting them in competition with the American platforms. Three European groups illustrate effective pan-European strategies that can be deployed: Viaplay, Canal+ and RTL. The first entered the market early and is now expanding rapidly: it gathered 3.8 million subscriptions at Q2 2022 across 10 European countries and just launched its platform in the UK. The other two have developed through acquisitions on a European scale. The acquisitions carried out enabled them to acquire large catalogues, such as for instance the recent integration of SPI International’s assets by Canal+, thereby acquiring the rights to 10,000 films and series. This size can also allow groups to make substantial investments in content: RTL invested almost $2.5 billion in 2021, 80% more than ITV’s investment capacity over the same period. RTL Group reported a +40.6% year on year subscriber growth at the end of Q3 2022 for its streaming services RTL+ and Videoland. Both groups remain under high competitive pressure within national markets in addition to the global competition coming from US platforms.

It is to be noted that while Canal+ and RTL's digital revenues remain low compared to US giants’, their OTT deployment is still limited to a few countries and to a small part of their overall footprint in Europe. RTL's streaming services are mainly present in Germany and the Netherlands while the group has activities in 6 countries. For Canal+, present in 8 European countries with more than 10 million pay TV subscribers, OTT subscriptions represent only 15% of total clients. Their expansion continues after good results in the countries mentioned above: Canal+ just launched a streaming service in Austria in partnership with A1 Telekom while RTL announced the upcoming launch of RTL+ in Hungary.

If expansion through acquisitions can pay off, regulatory issues might also hinder the emergence of European media giants. A position that seems paradoxical. While the TF1-M6 merger was rejected for fear of creating a monopoly on French TV advertising, Alphabet and Meta alone captured 91% of net digital advertising revenues in Europe in 2021, and even 53.5% of net advertising revenues in all sectors combined in Europe in 2021.

Yet, the exponential growth of AVOD represents a new land of opportunities for European actors, especially for FTA broadcasters and their BVOD services which could implement new national or pan-European alliances. To support actors in this direction and enforce fair competition, regulation could work as a facilitator and this is what the recent Digital Services Act and Digital Markets Acts enacted by the European Union will have to demonstrate.

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