Propelled by the pandemic, the number of subscribers to internet video services in western Europe last year overtook pay-TV customers for the first time.
Yet European media companies are not celebrating this milestone. In virtually every corner of the continent, the dominant streaming providers are American.
Of the 141m video-on-demand subscriptions in western Europe, some 86 per cent are with US services such as Netflix, Amazon Prime and Disney Plus, according to Ampere Analysis estimates.
While Hollywood used to sell films and TV series to European broadcasters, US streaming services now hoard their best content, building relationships directly with European consumers and muscling incumbents out of their way.
Netflix is ramping up local productions such as Dark in Germany and Lupin in France, using an estimated global content budget of $17bn this year — almost eight times the BBC’s TV spending, and 12 times that of ITV.
Disney Plus, which launched less than a year ago, has at least 13m subscribers in western Europe, according to Ampere estimates, bombarding the continent with blockbuster Marvel and Star Wars shows.
Discovery, meanwhile, last month began the rollout of its Discovery Plus service to eight countries and will integrate the Eurosport network, which has the exclusive rights to broadcast Olympics coverage in mainland Europe.
JB Perrette, chief executive of Discovery International, said the service was having “subscriber growth that is better than we expected — and we had very high expectations”.
A Nordic challenger to American dominance
In Scandinavia, one European company is holding its own. Stockholm-headquartered Nordic Entertainment Group (Nent) is a relative minnow, with estimated revenues of SKr12.4bn ($1.5bn) compared with Netflix’s $25bn turnover. Yet, it is doing a better job than any other operator on the continent of defending its turf.
With about 3m subscribers, Nent’s Viaplay streaming service, which offers a mix of premium sport and original entertainment, stands second to Netflix in Sweden, Denmark, Finland and Norway, where Ampere estimates that the US service has about 4.2m customers.
When it comes to revenue from those markets, Nent says Viaplay — whose packages with sports are higher priced than Netflix — actually generates more than its US rival.
No other domestic subscription service in western Europe can match Nent’s second spot to Netflix in its local market — not the big pay-TV groups such as Sky or Vivendi’s Canal+, nor commercial broadcasters such as RTL, France’s TF1, Mediaset of Italy, or ITV.
Anders Jensen, chief executive of Nent, described most European rivals as “very conservative”.
“On a scale of 1 to 10 — where 10 is full readiness to go head-to-head with the US giants — I think most are at, maybe, a strong two,” said. “That’s the unfortunate reality of it.”
Nent was quicker than some in Europe to make the streaming switch, in large part because of its relative weakness. While its founder Jan Stenbeck pioneered Scandinavian commercial television in the late 1980s, by the time Mr Jensen took over what was then called Modern Times Group in 2014 its television arm was lacklustre, the second or third player in most markets.
The group, in other words, had less to lose. “The decision was more obvious to us,” said Mr Jensen. “If you have 99.9 per cent of your revenues coming from advertising, it takes a lot of guts to move to a low-priced subscription video-on-demand service. You will have to go through a lot of pain. It is not for everybody.”
Through its Viasat pay-TV business, Nent also had a pan-regional footprint and a reason to invest in a streaming platform that could easily stretch into new markets and languages.
Nent aggressively cut costs in its legacy businesses to fund investment in streaming technology — roughly SKr4bn in total. Like US media groups, it began to ramp up production of original drama shows such as Alex and I came, I saw, I conquered, and held back some content from international sales.
Venturing out of its home market — sometimes as a specialist Nordic drama service, as it plans to launch in the US next year — Nent knows that only subscriber scale will allow it to reap the benefits of a streaming model and sustainably defend its home turf. “We have to go international to be relevant in five, six, 10 years’ time,” Mr Jensen said.
Mr Jensen is now preparing to push the Viaplay service into 10 new territories, aiming for 10.5m subscribers in total by 2025, with 4.5m outside the Nordic region.
Nent plans to raise SKr3.5bn of equity to fund the rollout, which will start with the Baltics and Poland. It is also considering a secondary listing in the US. Investors are optimistic: the group’s shares have risen 50 per cent in the past 12 months, bucking the downward trend for most listed broadcasters.
Aside from its offering of expensive live sport — Viaplay is the home of England’s Premier League in Scandinavia — the similarities with the Netflix corporate model are unmistakable. “If you don’t copy some [of Netflix] with pride, then you’re making a mistake,” said Mr Jensen.
Marie Nilsson, a media analyst at Stockholm-based Mediavision, agreed. “Nent see the road to success — and they copy,” she said. “The big question is: why don’t the others?”
Legacy players straining to make streaming coexist
Reluctant to abandon their high-priced, high-margin legacy businesses, most incumbents have preferred to dabble in streaming, launching subscription services such as Sky’s NowTV, catch-up players or hybrid platforms like RTL’s TV Now, trying to show that old and new can coexist.
The challenge of amassing enough customers to make the economics of streaming work is daunting. Lossmaking Disney Plus is not expected to be profitable until 2023, even with a global footprint.
“The streaming business is a scale business . . . Even on a multimarket basis, it’s very tough,” said Mr Perrette of Discovery.
Domestic operators in Europe have a valuable asset: a flow of new local content, a crucial hook to attract viewers to platforms. But with Hollywood fare becoming more scarce, that programming is becoming ever more important to fill schedules, while production costs have been driven up by the streaming boom and the pandemic.
Some European operators will see partnerships, or further consolidation, as ever more attractive. Examples of joint streaming initiatives include Salto in France; Britbox in the UK; and Joyn, a venture between ProSiebenSat.1 and Discovery, in Germany.
Nent is also open to exploring this route so it is not entirely reliant on chasing expensive sport rights and making its own programmes. “We have a platform and some content. Some local players may have a lot of great content but not a platform,” Mr Jensen said. “If we combine those two . . . there is a conversation to be had.”
While its ambitions could still fall flat, Nent offers traditional broadcasters a rare cause for hope. It is proof that what was an unexceptional, middling European media conglomerate — spanning radio, pay-TV and free-to-air channels — can reinvent itself as a streaming-first company with aspirations to take on Netflix.
“Nent shows that you don’t need a telecom operator behind you, you don’t need a US owner,” said François Godard of Enders Analysis. “If you are single-minded on the transition, you can do something, even if you are in a small market, even if you don’t have the money to create drama series at $10m an episode.”