Video on Demand (VOD) in Europe 2021-2024: The New Normal

Table of Contents

Preface 

Executive Summary 

The post-COVID-19 Era: from Resilience to Growth 

• 2021: a transition time to the new normal? 
• Pandemic impact on selected sectors 
  • E-commerce 
  • Telecom (traffic) and video streaming 
  • Gaming 
  
  

Pandemic Impact on the VOD Industry 

• SVOD and TVOD: the definitive shift from broadcast to broadband 
• Production 

Sports VOD the Game Changer 

• Market Overview 
• The Sports’ VOD market in Europe 
• VOD football rights market evolution in Europe 
  • The UK 
  • Germany 
  • Spain 
  • France 
  • Italy 
  
  
• Main OTT Sports Players 
  • Amazon 
  • DAZN 
  
  

The Video-On-Demand Sector in Europe 

• Overview 
• Best cases, main players, and country analysis 
  • The UK 
  • Germany 
  • France 
  
  

Market Forecast

• On demand pay services revenues
• Revenues from single transaction: TVOD 
• Subscription Revenues: SVOD 
• VOD revenues in the main countries: Big 3 (France, Germany, UK) 
• VOD revenues in the Other countries 

Executive Summary

While 2020 was a year like no other before for everyone, the publisher expects 2021 will be the year of transition towards the next new normal. Thus, this year is likely to strengthen all the social and working habits we have been experiencing for more than one year now. As the shockwaves subside, people everywhere are debating what the new “normal” will look like. The big repercussions for globalization, urbanization, and foreign trade will take years to unfold. One of the exceptional digital stories in 2020 was the tremendous increase in eCommerce usage, with the COVID-19 pandemic driving consumers all over the world to embrace online shopping. At a global level, nearly 77% of internet users aged 16 to 64 now say that they buy something online each month. 2020 was a year like no other for communications service providers. With COVID-19 driving radical shifts in customer behavior, almost every service provider saw huge increases in traffic across their networks. With the world turned upside down by the pandemic, telco companies have been facing one of the greatest challenges in their history, continuing to deliver infrastructure and services critical to everyone: network traffic in some countries has surged 70% or more during the outbreak. However, after a sharp increase in its early weeks, a subsequent stabilization followed and, through the latter part of 2020 and now into 2021, a decrease from the peak (experienced early in the crisis). Looking at the applications behind this traffic boost, gaming, entertainment and smart working services are at the top.

Even before COVID-19, online gaming had become a significant contributor to total internet traffic. In particular, more and more games are now played online in real time, facilitated by cloud-based platforms.

In the entertainment arena, 2020 has seen SVOD grow at one of the fastest rates on record. In absolute terms this year has seen more subscribers added to the VOD industry than at any other point in history. The acceleration of cord-cutting and online video adoption during COVID-19, coupled with aggressive expansion of next-gen direct-to-consumer (D2C) services, has resulted in a faster than expected migration toward online video on a global stage. Moreover, according to relevant observers in 2021, for the first time ever, more people will pay for online video services globally than for pay-TV, and the associated increase in spending across video streaming now means that online video has become the largest source of TV and video revenue globally. In 2021, online video will be firmly replacing pay-TV, whether by new releases being ring-fenced for streaming, or next-gen operator bundles being redesigned for online services. In 2021, online video will finally truly dominate the greater TV & video industry. For instance, Disney+ growth since its launch is really astonishing. In January 2021, the Mouse House beat four-year target in just 14 months with 95 million subscribers, a figure up from the 86 million subscribers declared at Disney’s December investors day. Furthermore, in March 2021, subscribers surpassed 100 million leading top management increase investment in the development of high-quality content. In a similar way, also for Netflix, the Pandemics lifted up the business beating 200 million subscribers. Of these, 73.94 million Netflix subscribers were based in the US & Canada. Growth in this region has slowed, however, compared to other regions. EMEA has seen rapid growth in recent years, climbing from 37.82 million in Q4 2020, to 66.7 million two years later. Asian Netflix users have also more than doubled in this period, to reach 25.49 million in total. At the consumer level, one of the key trends in TV & online video continues to be that of households self-bundling SVOD services. While homes can select freely from a pool of global, local, and regional services, most households tend to pick a combination of the big three US services, Netflix, Amazon Prime Video, and Disney+, particularly in mature markets. Anyway, market competition is strongly increasing. Q1 2021 Netflix gained roughly 4 million coming in well below its own forecast (6 million), consensus estimates (6.3 million) and, understandably, the monstrous amount added in Q1 ’20 (15.8 million). Netflix’s Q1 subscriber gain encapsulates a time when Discovery+ launched, Paramount+ launched and Warner Bros.’ 2021 slate started going day-and-date à la HBO Max. Looking at the film industry, the pandemic has been pushing hard on the sector. With movie theater chains closed around the country and the globe, major studios have delayed their film releases to 2021 or pushed them to streaming services instead. It has also led to the delays of major productions as returns to set were disrupted by the coronavirus. All of this combined has led to huge losses to a usually profitable industry. According to the European Audiovisual Observatory, the audiovisual sector lost over 10% of its revenues in 2020 compared to 2019, and close to 15% excluding on-demand services. To cope with the huge impact on the sector, at the national, European and international level, various measures have been taken by public institutions (governments, national film agencies, media regulators...) and industry stakeholders to support and guide the audiovisual sector through the crisis. The measures range, more concretely, from the setting up of new emergency funds, the relaxation of requirements and deadlines, the offering of loans and guarantees, the advancement of support payment and the adaptation of taxes and social security payments, to the offering of new services and hotlines, the issuing of operational guidelines, and the promotion of standards and best practices. As the number of films and movie attendance plunged during the pandemic, financially imperiling movie theaters, studios were seeking new ways to get video entertainment into homes and grow revenue. This included the emergence of Premium VOD (PVOD) which shortened the theater window for films to 17 days before becoming available for home video viewing at a premium cost. In a more controversial approach, some movie studios opted to make a film available at home viewing and in theaters simultaneously. Other films intended for theatrical release became available for at-home entertainment. Anyway, up to now, PVOD has not been able to recover the industry’s losses.

Sports appear to be at a pivotal moment. A new era of changes is looming, with new sports fans asking for a different way to consume and interact, trying to take advantage of the opportunities of the online streaming potential also in terms of quality and innovation: premium sports offer the potential to create side products around the main offer. At the same time, financial issues have arisen due to the continuing pandemic and the difficulties to keep the value of the media rights at the level reached in the past, with the lack of sports for some of the year also contributing to the increase in the degree of loss. However, even during a year with suspended seasons and lower ratings, sports made up in the US almost three-quarters (72%) of the 50 most-watched shows on TV among the key 18-49 demo. Sports also account for one-fifth of the most-watched shows among 18-49s.

The increasing availability of high-quality broadband and the growth in multi-platform and device viewing, has therefore led to a proliferation of new sports SVOD/OTT services, including a new generation of sports OTT aggregators, and direct-to-consumer services from leagues, clubs and broadcasters. Several emerging specialist OTT sports aggregators, including DAZN, Eleven Sports and FloSports, are creating value-for-money global offerings, starting aggregating tier two and three rights not acquired by pay-TV providers and now (DAZN in particular) entering the tier-one premium rights and becoming a real alternative to the pay-TVs. In this scenario, sports TV rights revenues are expected to reach more than €71 Bln by 2024 across Europe. Of this huge amount, the most lucrative is going to be again football rights, which are expected to pass from € 11 to €27 Bln during this time span. This will be caused mainly due to the viewership of the Top 5 five leagues in Asia and North America. What emerges is that the old and almost monopolistic system of the few pay-TV that own the rights of the great majority of the main European championships seems to be questioned, in favor of the coming of the OTT, such as Amazon, DAZN, and so on. Furthermore, the impact that COVID-19 had and is having on the football ecosystem is double: it affected the club finances as well as the media rights market, both domestic and international. The last forecast made by Deloitte shows that the top European clubs are going to be impacted by the pandemic for around €2 Bln in 2020/21, while in 2019/2020 the same club's losses were more than €1 Bln because of the lack of fans and broadcast revenues. In this everchanging scenario, broadband is going to play a fundamental role in the next years, continuing to increase their presence and value, started the last decade.

The total value of Broadband rights, which was €946 million in the 2013/2014 season, has reached almost €3 Bln (+ 211%) and is expected to make another huge leap next year, reaching over €4 Bln in 2022, a +37% YoY. The same trend is clear in the domestic championships. The revenues coming from broadband providers have passed from €846 million in 2013 to €1.8 Bln in 2021 and will reach €2.7 Bln in 2022. This means a CAGR of over 13% in nine years. Also, the value of VOD has started to have a huge influence in this matter. Starting in 2017, when the first slice of the Bundesliga in Germany was acquired by Eurosport and broadcasted by Eurosport Player, and in 2018, when DAZN entered the market in Italy, acquiring rights in Serie A and in Champions League in Germany and Amazon in the UK in the same period, by then, the total rights spend from VOD providers in Europe increase dramatically in the following season, reaching now €1.7 Bln, at a CAGR of 91% in a 5 seasons period.

This growth will be mainly generated by domestic rights (Italy in particular), which will be three-quarters of the total. In the current season, VOD domestic rights account for €367 million, 79% of total VOD, and will increase in 2021/2022 to a huge €1.29 Bln. In terms of market share, starting from the 2016/17 season, where only Spain had an OTT providing a small amount of La Liga content over its platform, in the current season (2020/21) the amount was €467 million.

The number is expected to take a huge leap since DAZN has been awarded the majority of the Serie A rights for the 2021-2024 period, for €840 million per season. This means that in the European football rights, OTT providers already provide 6% of the total rights spend, with this number already expected to grow starting from next season. SVOD services profited from rapid consumer adoption. the launch of Netflix and several other services started the uptake in subscriptions of EU consumers and their shift in content consumption. Launches of direct-to-consumer streaming services by pay-TV, commercial TV, telecom and tech players the past 8 years furthermore increased this trend with 140 million subscriptions to SVOD services at the end of 2020. As SVOD is becoming mainstream and other players are preparing launches of services, the market will continue to grow over the next years. Amazon’s arrival on the global sports rights stage could not have come in a more controversial period, but, at the same time, possibly the most favorable as it has been aggressively expanding its portfolio of live sports streaming rights in recent years. The biggest news came in the final days of March, when Amazon officialized the enormous investment of over $1.3 Bln to broadcast the Thursday Night NFL game, starting from 2023 for ten years, until 2033.

This event may be a game-changer in the global Amazon strategy. Until now the investment made by Bezos’ company has been limited, as for the €105 million for a package of 20 Premier League games per season or the same amount for Germany for a bunch of Champions League games. In December 2020, DAZN finally started its global expansion, allowing them to reach more than 200 countries. The debut was decided to focus on two live boxing events. The initial monthly price point for new markets will be £1.99 or less. The content offered will be mainly fight-related, with boxing as its core product, while additional sports will be added not before the half of 2021. Yet as for its “sister” Amazon, DAZN’s strategy has found its peak with a single decision. While Amazon decided to go big in the US with the acquisition of the NFL rights, DAZN acquired the biggest slice of Italian Serie A rights, for €840 per year for three years. This decision can result in a change in paradigm in the European sports ecosystem since, until today, the investment made was limited to small packages in the main European championships, not as the main provider.

2020 was a year like no other for all industries. Whilst the impacts on the television industry are ongoing, the conditions facing broadcasters, streamers, pay-TV operators and content owners have worked together to create a Perfect Storm. COVID-19 has accelerated change, fast-tracking the rollout of D2C services and increasing the pace of transition to Digital. The pandemic has definitely accelerated broadcasters’ plans for Digital migration. The available SVOD catalogues content offer range from general entertainment services to niche services, with a large majority offering film and TV fiction in their catalogues. Now, only global pan-European players compete for subscribers in each national European market, and it is no surprise that global services dominate the European SVOD market in subscriber numbers and revenues. However, more developed European markets, such as the Nordics, the UK, the Netherlands have also strong national/local players, often launched by local pay-TV groups or broadcasters. New entrants Disney and Apple, whose SVOD service is still free of charge for Apple device holders, quickly added subscribers and in the case of Disney, SVOD revenues, and are planning increased investments into content the coming years. SVOD is not a market with a “winner-takes-all” outcome, several players will coexist and compete but only a few will dominate. The question of how to achieve a road to profitability for most players will be a key determinant on further market consolidation. Local broadcasters are so facing increased pressure. The coronavirus pandemic has plunged the television advertising market into decline, exacerbating and accelerating the difficulties of traditional and established brands. In the UK, as the lockdown progressed, the easing of social restrictions and good weather across most of British, coupled with reduced viewing of news programming, saw broadcast TV viewing decline from its peak, but it remained higher than 2019 levels. Unmatched viewing, meanwhile, has not declined in a comparable way, retaining much of the uplift it achieved as a result of lockdown, in large part due to a sustained increase in the viewing of SVOD services such as Netflix and Amazon Prime Video. In 2020, 70% of UK people had access to at least one SVOD service. This has increased by 50% points in five years. Unsurprisingly, younger viewers are more likely than average to have access to SVOD, but 2020 saw an accelerated increase in access amongst the 65+ audience with lockdown restrictions increasing the desire for high-quality content. The proportion of UK homes with access to an SVOD service grew, passing 17.5 million for the first time. This was an increase of over 2.5 million homes since data were last available in 2019. Individual services also continued to increase, with Netflix growing to 15.2 million homes, up 23.4% YoY. Amazon Prime Video increased to over 10 million households, a 42.6% increase on 2019. Both leading providers have added over 3m homes since 2019. NOW TV also grew YoY, by just over 30%. These annual growth figures are enhanced by the addition of those homes with non-subscription access. 

The new frontier of entertainment, video streaming, is growing in popularity in Germany, with more than 32 million people declaring to regularly consuming the content offered by the OTT players, such as Netflix, Amazon Prime, Disney+ and others. The number is impressive since it has almost reached half of the German 14 years or older population. This huge growth has obviously been boosted by the restrictions imposed by the pandemic, which have seen a large number of new customers during the various lockdowns. The increase in the German SVOD market is not exclusively due to the arrival of new subscribers, but mainly to the addition of new subscribers by existing subscribers. According to Goldmedia, there are therefore more than 25 million active SVOD subscribers in Germany, for about 13 million subscribers, due to the multi-subscription game. In the end, the research company estimates that there are 40 million SVOD users in Germany, with Netflix returning to 2.8 users per account. In France, the arrival of SVOD on the market has generated ambivalent behavior on the part of French players: on the one hand, the profession complains about the importance assumed by SVOD and by American platforms and on the other hand this same profession awaits the implementation of the SMA decree (Audiovisual Media Services) in order to make these platforms contribute to the financing of creation. Today, VOD and SVOD have entered French consumption habits and it is not about to stop. The first confinement caused an increase in the number of French daily SVOD users of the order of 2 million, which therefore increased from 4 to 6 million in a few weeks. Since then, the market has stabilized around 5 million daily users, with a new upward trend following the second lockdown. This is pushing other market players to structure themselves to be able to respond to the challenges of SVOD, such as Mediawan, which continues its shopping (Lagardère Studios) and its European expansion focusing on streamers to accelerate its growth and about local contents which American platforms badly need (either by legal obligation or because they need to sell to French parents or children’s local series which speak to them). 

To summarize, the pandemic has therefore accelerated the past year's trends, leading to increased streaming video consumption. In particular: the time spent has grown consistently, encouraging people staying at home during long periods passed in lockdown to enjoy more and more in-home entertainment; on specific categories, less incline to the use of the digital technology, the free trial proposition during the pandemic has represented a major incentive to familiarize and get used for the first time with the VOD services; as more people have stayed at home, watching screen through the day, the primetime peak has shifted with viewing spread more evenly across hours of the day.

As a result, on-demand services have experienced greater popularity, extending their influence on all Western Europe households, reaching the mass market in many countries.

Therefore, the publisher recorded a very consistent increase in take-up and consequently in revenues in 2020, unexpected and unmatched to such an extent, as a result of all the above-mentioned trends, together with the rapid growth of Disney+ and the other VOD services whose launch were scheduled later in that year. As a matter of fact, if 2017 was the year of the breakthrough and 2018, 2019 were the years of the expansion, 2020 represents a watershed in the relatively short history of the VOD in Europe.

For the future, in the next three years (2021-2024), the publisher envisages further key factors that will drive VOD development: technology innovation (5G, Big Data and Artificial Intelligence); supply-side (crisis of pay-TV, new offers, strong recovery and incentives in local production); demand side (consumption, social media, etc..). As a result, paid for video on demand will experience a further reduction of the differences still existing within Western Europe territories as VOD will reach the mass market in any country as early as 2021.

The publisher, therefore, estimates the total revenues of the VOD sector in Western Europe will steadily increase from €10,655 million in 2020, which was astonishing in many ways, to €18.031 million in 2024, keeping with a still double-digit average annual growth of 12%.

The TVOD (including Transactional and Electronic Sell-Through) increase will be significantly lower, bound, mostly, to impulse buying, which still represents an important source of revenues, mainly in markets where VOD is more a substitute of the offline home video sector (Blue-ray, DVD). With the expansion of pay broadcaster and OTT in the subscription business, the TVOD is doomed to reduce its market share, which will decline from 2021 to 2024. This will occur unless a consistent increase in revenues from € 1,978 million in 2020 to € 2,275 million in 2024, with a CAGR of 5%. Therefore, SVOD, after booming in 2020, will be the driving force of all the growth in the next three years, with an increase of 17% on the first year and will continue to represent the fastest-growing component at a double-digit CAGR also in the following years. As a matter of fact, the publisher estimates that SVOD revenues in Western Europe will increase at an average annual growth rate of 14%, starting from € 10,754 million in 2021 to € 15,756 million in 2024. France, Germany and the UK, although with some differences, represent a specific cluster of the European market, which the publisher refers to as Big 3. This definition is particularly consistent in the case of VOD, as they represent almost 60% of the total, while of the rest of Europe, including important countries such as Italy and Spain, only account for just 40%.

The publisher estimates that the total revenues deriving from the VOD offer in the joint Big 3 markets, will be of €7,660 million in 2021, increasing to €10,583 million in 2024, with an average annual growth of 11%, slightly less than the average. In the Other Countries (apart from the Big 3) growth rate is higher than in the aggregate of Western Europe, driven by the less advanced markets in the South of Europe (Italy and Spain in particular, with the former leading this kind of ranking with a really astonishing growth in 2020 and keeping the rate high also in the following years). In conclusion, 2020 was definitely a year like no other for everyone. In the media landscape, it represents a watershed between the traditional broadcasting world and the new world of broadband and video streaming.

On one hand, the impact that COVID-19 had on live streaming and sport, in particular, was negative, affecting the club finances as well as the media rights market, both domestic and international, on the other hand, has sped up the evolution from Pay-TV to VOD/OTT in securing rights and in the distribution of the sports content. Hence, the publisher foresees that 2021 will be the year of transition towards the new normal after the pandemic, still an emergency at the time of writing, and the next three years will see a strong consolidation of this disruptive trend in all the European countries. In this radically changed environment the new normal will no longer be the same as before.

Companies Mentioned

• Amazon
• Apple
• BeIN Sport
• BritBox
• BT Sports
• Canal+
• Comcast
• DAZN
• Disney
• Eleven Sports
• ESPN
• Eurosport
• Facebook
• FloSports,Paramount
• Google Play
• HBO Max
• HULU
• iFollow
• Joyn
• Maxdome
• Mediapro
• Mediaset
• MyCujoo
• Netflix
• Now TV
• Orange
• Peacock
• Rakuten TV
• RMC
• Sky
• Telefonica
• Viaplaay
• YouTube