Netflix shakes up European OTT market

Warc, 16 September 2014

PARIS: Netflix, the US-based OTT video streaming service, is expanding across Europe, with yesterday's launch in France the first of several across the continent.

The move marks a development that is expected to boost the OTT video market to around $4.6bn this year.

Competitors are scrambling to address the challenge – pay-TV operator Canal Plus has already established its own streaming video services, for example, while cable operator Numericable is offering subscribers free access to hundreds of TV series.

Telcoms operators, meanwhile, have proved reluctant to let Netflix offer its service via their set-top boxes, the most common way in France for people to watch TV, although Bouygues Telecom has said it will start doing so from November.

Rodolphe Belmer, managing director of Canal Plus, thought that if Netflix could not deliver content to televisions via set-top box then it would face an uphill battle to persuade consumers to watch online via computer, a habit most French viewers have yet to acquire.

He also expected that as US content was already so widely available on TV – around 50% of content aired on French TV is estimated to come from the US, despite France's claims to "cultural exception" – there would be little demand for yet more.

But he acknowledged to the Financial Times that "we know that there is always appetite for the new kid on the block and Netflix will be a tough competitor".

A recent study from Boston-based Strategy Analytics suggested that revenue in the European OTT video market was set to grow 44% in 2014. SVOD (subscription video on demand) was predicted to double in Western Europe, led by Netflix. Ad-supported video was also growing, but at a much slower rate of 32%.

"The success or failure of OTT video services is heavily dependent on the quality of their content library," observed Leika Kawasaki, a digital media analyst at Strategy Analytics. Netflix is addressing this area by filming an original series – a political thriller set in Marseilles – aimed at attracting a French audience.

Reed Hastings, Netflix CEO, has set a target of a minimum of 10% of households subscribing within two to five years. "The first year, we will focus on our brand," he said. "Whether we recruit many or few subscribers, the bottom line is that we have a good reputation among consumers."

Data sourced from Reuters, Financial Times, Wall Street Journal, Strategy Analytics, Journal du Net; additional content by Warc staff