Blog

It's not just politics that makes for strange bedfellows. Disruption from over-the-top (OTT) services has forced pay-TV providers that are nominal competitors to partner up and launch combined platforms.

The tactic has produced one of the most well-known streaming videos on demand (SVOD) brands in America: Hulu. The service — which announced in May that it had surpassed 20 million US subscribers — is co-owned by Fox, Disney, Comcast, and AT&T. It has become a destination for exclusive network content and popular television, as well as acclaimed original series.

European media companies are the latest to adopt this model, and with a common enemy in mind: Netflix. Struggling to adapt, providers in Europe are getting creative with how they respond to an encroaching giant.

Netflix eyes European foothold

Already available in countries across the world, Netflix has recently ramped up its international expansion, seeing an oncoming plateau in American subscriber growth. While India is a key focus, Europe seems to be the next SVOD market Netflix attempts to dominate. The service is massively popular in Western Europe as it stands. According to 2018 eMarketer data, nearly 70 percent of OTT subscribers in the region use Netflix, including:

• 87 percent in Norway
• 80 percent in Sweden
• 75 percent in the Netherlands
• 74 percent in the U.K
• 70 percent in Germany
• 63 percent in Italy
• 60 percent in France
• 55 percent in Spain

OTT disruption has hit traditional European companies hard. Canal+, a premier French pay-TV provider, announced in 2018 that it would close the book on CanalPlay, its SVOD service. Amid the factors blamed was Netflix's increasing European market share.

The company has established a presence across Europe, enjoying strong customer support in Nordic countries. Netflix further entrenched itself by opening a production hub in Madrid and announcing plans for another in London. European integration was further assured by a partnership that brings Netflix to Sky Q, the set-top box for media powerhouse Sky, which went live in November.

Region tries to fight back

There's a growing fear among providers, broadcasters, and creators that they'll be squeezed out of their home markets — which are increasingly valuable. A forecast from Research and Markets projected revenues from OTT television and movie content in Western Europe to reach $23 billion by 2023, up from $9.8 billion in 2017.

The increasing stakes led the European Parliament to enact a quota on SVOD services operating in the EU that stipulates 30 percent of their content must be sourced from within the bloc. Aimed primarily at Netflix, there's little to suggest it would impede the planned European growth. The company already has an international hit in German-language "Dark," while it recently debuted plans to release new high-profile series in Norwegian and Spanish, with programming in Italian, Portuguese and more languages soon to follow. In announcing the Madrid office, Netflix noted it was working on 20 original productions in Spain alone.

SVOD partnerships sprout up

Netflix, in many ways, is on a march to dominance. But it's one that local providers intend to deter, even if it means linking up with ostensible enemies.

The Hulu formula has been brought to Spain — a hotbed of SVOD competition and innovation — as state broadcaster RTVE joined forces with pay-TV providers Mediaset España and Atresmedia to create LOVEStv, an 18-channel platform that features programming from all three within a unified streaming interface that gives users DVR-like functionality. The product is more interactive TV-styled, but it's only the initial phase. The trio plan to bring a full OTT service with original content to market in stage two.

The joint venture is a response seen across Europe to address the persistent Netflix question. In France, another triumvirate has risen, this time an alliance among public France Télévisions and private T1 and M6. Their objective is to launch a diversified OTT platform, named Salto, that offers a high-quality experience with intuitive controls. Content to be featured will range from entertainment, news magazines, special events, sports, U.S programming, movies, and French fiction. The service will be offered on a monthly subscription basis with different tiers and add-ons.

France Télévisions hasn't stopped there, instead of reaching over borders to link up with Italy-based Rai and Germany-based ZDF to forge a partnership literally called "the Alliance." The pact joins the production houses in a bid to cooperatively finance, create and produce ambitious scripted content designed to gain audiences not only in Europe but also in America and beyond. Additionally, the Alliance has broadcasted a call for unity to other public entities, inviting the aforementioned RTVE, Belgian RTBF, and Swiss RTS to collaborate.

In Germany, a streaming service called 7TV has gained attention and viewership. A partnership between ProSiebenSat.1 Media SE and U.S.-based Discovery, 7TV gives users access to live sports and a vast entertainment content catalog. Deutsche Telekom rebranded its TV service entirely and launched it into an OTT product with content contributions from public broadcasters ARD and ZDF. Meanwhile, the time may be nigh for British players to hammer out a strategy. While the BBC, Channel 4, and free-to-air ITV have had ongoing talks, Carolyn McCall, chief executive of ITV, told The Guardian she thinks the "window is closing" for them to create an SVOD alternative.

European businesses may have a pathway forward to compete, but stemming the rising tide of Netflix will be difficult. The company added nearly 7 million subscribers in quarter three, with some 6 million coming from international markets.