Western European Pay-TV Market Resilient Despite OTT Gains

LONDON: Western Europe’s pay-TV markets are going from strength to strength, while growth is slowing for Netflix and other OTT services in the region, according to new research from Ovum.

Ovum’s Western Europe: Pay-TV & Free-To-Air Forecasts to 2021 report finds that there were 98 million pay-TV subscribers in Western Europe at mid-2016 and is forecasting that 7 million more will be added by the end of 2021, taking the total to 105 million. The 100-million-subscriber mark will be reached next year.

During the 2015-to-2021 period, pay-TV revenues will grow by almost 12 percent, according to the report, rising from $33.9 billion to $37.9 billion. During the same period, digital TV household numbers will increase from 159 million to 180 million, meaning digital TV penetration will rise from 91 percent of TV households to 99 percent.

Adam Steel, Ovum’s TV analyst specializing in Western European markets, said: “Western European pay-TV operators have invested in new technologies to create an impressively sophisticated operating environment. Value added services like bundled VOD catalogs, DVRs and HD are keeping existing clients happy enough to retain the service but also, crucially, they are still attracting new subscribers too. Great content remains critical to success, but that must be supplemented by customer experiences which offer significant differentiation from those offered by lower cost, in particular OTT, alternatives.”

Tony Gunnarsson, senior TV analyst at Ovum, added: “No-one should underestimate the challenge posed by Netflix and other OTT services. But our research shows that Netflix’s growth is slowing in mature SVOD markets such as the U.K. and Scandinavia, indicating that after an initial growth spurt in each market its rate of progress begins to decelerate. Crucially, Ovum also finds that SVOD subscribers are overwhelmingly pay-TV subscribers in many markets: SVOD and pay TV are not ‘either’ ‘or’ propositions. Audiences are increasingly using both.”

Adam Thomas, Ovum’s lead analyst for global TV markets, noted: “The completion of switchover from analog terrestrial to digital is now complete and this has further intensified the pressure on pay-TV. With digital terrestrial TV offering around 50 channels, usually for free, pay-TV platforms have had to up their game to convince subscribers that their service is demonstrably better than the free offerings. Our new research indicates that those conversations with their clients are generally proving successful.”

Thomas continued: “Ovum’s belief is that pay-TV is increasingly reacting credibly to not just the OTT threat but also in realizing the opportunities offered by online distribution. Pay-TV content is widely available on a range of connectable devices. Consumer demand for more flexible viewing options is being addressed by streaming services with linear TV, so enhancing the extensive on-demand offerings already available. All of this indicates a positive outlook for European pay-TV as we head toward 2017.”