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Power Plays

Jay Stuart finds out how Europe’s most prominent broadcasting groups are taking on the threat from well-funded global streamers.

The impact of the FAANGs is so enormous, you only need A for Amazon and N for Netflix to spell trouble for leading European broadcasting companies, no matter what language they speak.

In France this summer, Canal+ Group laid off about 500 employees (18 percent of the local staff) in the face of the OTT challenge. Maxime Saada, chairman of Canal+ Group, in informing employees of the job cuts, noted, “Despite the commercial repositioning with an offer at €20, we have not succeeded in stemming the fall in results.”

Just a few months later, in September, Canal+ announced a partnership with the streamer. Subscribers to the Cine/Series package will have access to the Canal+ premium channel as well as the Netflix service, all under one subscription. “This offer complements our all-round offer of first-run movies, major live sports events, world-class series, including our Créations Originales,” Saada said at the time. “It also helps us further consolidate our position as a key aggregator of content and services.”

In the U.K., Netflix is on its way to passing the combined number of Sky direct-to-home and OTT subscribers in 2019, according to Kagan’s S&P Global Market Intelligence.

Meanwhile, Sky’s new owner, Comcast Corporation, has indicated that it plans to launch another global OTT competitor, a worldwide version of Sky’s NOW TV, in 2020.

Netflix and Amazon have brought two massive new realities into the market: a tier of OTT with the scale to produce a large volume of original content that can compete directly with established broadcasters, and a geographical spread way beyond national boundaries.

Now, broadcasters in France, the U.K. and Germany are forming alliances to create their own domestic OTT platforms.

“The broadcast and pay-TV industry is way behind and needs to play frantic catch-up,” says Ed Barton, chief analyst for the entertainment practice at Ovum. “They tried skinny SVOD bundles as their first counterattack with limited results. Their new hybrid platforms are the second effort. They need them to work.”

The new hybrid model has evolved from SVOD. Broadcasters have seen that they can add AVOD with lots of opportunity for cross-marketing and upselling.

“We’re getting close to the last-chance saloon in OTT,” Barton notes. “If the hybrid approach doesn’t work, distributors with content might just say, Put it all on Netflix and forget it.”

The rationale behind the hybrid model is to offer a national alternative to the global giants and expand the range of the OTT content offer while extending powerful domestic broadcaster brands, and their advertising reach, into the digital space.

Perhaps the most eagerly awaited new OTT project is Salto in France, a joint venture of public broadcaster France Télévisions and commercial networks TF1 and M6. An SVOD offering, Salto will sit alongside the partners’ own digital services, offering exclusive premieres of content as well as original shows.

As Delphine Ernotte Cunci, the CEO of France Télévisions, has described it, “Salto will be able to respond to the challenge of global platforms by offering a high-quality service to all our audiences and showcasing the best of the French and European creative industries.”

Salto has been slow to get off the ground. Announced a year ago, the project has been bogged down by intense regulatory scrutiny. In March, after a six-month delay, the European Commission sent it back to French regulators for a decision. In August, Salto finally received the green light, with the launch slated for 2020.

Significantly, the Salto project has not prevented TF1 from partnering with Netflix to pre-finance a big eight-part drama, Le Bazar de la Charité.

“Broadcasting is highly regulated, OTT is not,” observes Peter MacAvock, the head of distribution, platforms and services for the European Broadcasting Union and chairman of the steering board of the DVB Project. “People might think any regulatory advantage for broadcasters in OTT might be about putting limits on the likes of Netflix, but it’s just the opposite. It’s about freeing the broadcasters up. We need to update the regulatory regime for OTT. Ironically it has been easier for European broadcasters to go into a venture for the global market rather than in their own countries.”

BritBox, a partnership of ITV and BBC, is scheduled to launch in the U.K. before the end of 2019 (a decade after regulators blocked a project for BBC, ITV and Channel 4 to create a joint streaming service). An SVOD platform, BritBox will provide British content in three ways: the partners will put their archives on BritBox, they will put their new shows on once they have been broadcast and available on their respective catch-up platforms, and they will create original BritBox content.

“Our instinct and research among consumers show there is an appetite for a distinctly British OTT,” says Paul Moore, group corporate affairs and communications director at ITV. “We’re talking about something complementary and in addition to the existing OTT offer. We recognize that streaming has opened up a new way to access content for a relatively low amount and that consumers want to watch what they want, when they want. What does not exist is something distinctively British. We love American content. But we like our own, too.”

Curation will play a big part in the BritBox offer. “It’s not just about algorithms,” Moore says. “We will have those, of course. We have a late-mover advantage in this respect. We will be comparable to Netflix in functionality. But we can offer recommendations that are more authentic and human.”

There are questions about BritBox’s viability in an already crowded landscape. “There is certainly room in the market for new players,” says Courtney Williams, the head of partnerships at Parrot Analytics. “But if you are simply thinking that, Hey, I’ve been making content that has been successful in my market for a long time, so I can compete successfully, that’s not enough. Demand for programming on digital is not the same as viewing preferences for programs on linear, where viewers are already watching TV and have a limited range of choices. It’s not a matter of, Do you prefer white or black? You need to have a color that people actually want. You are competing with a whole world of options, including doing something else.”

And the “color” OTT customers want is usually original and exclusive.

A new hybrid competitor, Joyn, is already up and running in Germany with original content being produced.

Available since June, Joyn is a 50-50 joint venture between ProSiebenSat.1 Media and Discovery, Inc., with more than 50 free TV channels available as live streams and a media library. Joyn is showing the third season of the hit local series jerks., with exclusive and free access to two episodes well ahead of the TV broadcast.

“What we’ve learned from our users so far is that they are keen on watching local originals,” says Alexandar Vassilev, Joyn CEO and managing director. “The success of jerks., which is one of the most authentic local productions in Germany, convinced us they crave relevant content. So local production will be a strong investment focus for Joyn.”

The dramedy Lice Mother (Die Läusemutter) and originals such as Singles’ Diaries and Technically Single were available at launch. Joyn has a well-filled production pipeline that also includes 23 Morde, Check Check and Frau Jordan stellt gleich.

A Joyn Premium tier is slated for a winter debut.

In the cutting-edge digital market of Scandinavia, Nordic Entertainment Group’s (NENT Group) Viaplay is set to premiere 20 new originals every year and is offering 50,000 hours of live sport annually. “We’re finding that originals are a particularly effective way to establish Viaplay as the preferred local complement to global platforms,” says Jakob Mejlhede Andersen, the CEO of NENT Studios U.K. “In 2018, seven of the ten best performing new series on Viaplay were our own productions, and we’ve sold around half of our originals to broadcasting and streaming partners around the world, which confirms how attractive these stories are. They’re a big reason why Viaplay is already one of Europe’s top five streaming services—and we’re just getting started.”

Mejlhede adds, “We’re very happy to make significant investments in original content when it makes sense. Our original series Wisting with Carrie-Anne Moss is one of Norway’s biggest-ever drama productions and has been a huge hit on Viaplay since premiering in April.

“In the main, we use partnerships to tell the very biggest stories. We work with Atrium TV, a global commissioning club with the potential to become a new model for creating premium drama.”

Atrium TV’s other Western European partners include Deutsche Telekom, BT in the U.K., Orange in France and Movistar+ in Spain.

“We see working together as a way to stay unique,” Mejlhede says. “In Q2 of this year, the number of Viaplay customers increased by 65,000 to represent 60 percent of NENT Group’s total subscriber base. I think the most interesting thing is how much growth is still available. There are around 12 million households in the Nordic region, but only 50 percent subscribe to a streaming service today.”

In the Netherlands, NPO, RTL Nederland and Talpa TV teamed up to launch the OTT platform NLziet five years ago. “The business model is straightforward,” says Niels Baas, managing director of the venture. “We collect all the revenues and we distribute money to the partners based on the viewing share of their channel. If public TV has a 30-percent share, they get 30 percent of total revenues. The whole model depends on scale. For it to make sense for a channel, they have to be sure of getting some viewing share. If you are small, you won’t get enough share, so you won’t put your content on.”

Plus, Baas notes, “There’s the brand issue. The Dutch market is so fragmented and competitive, our broadcasters already have a branding challenge. NLziet actually dilutes their brands more.”

Original content is paramount in the OTT battle, Baas says. “Having everything from the broadcast channels a year later on an SVOD basis without any advertising is nice, but it’s not strong enough. It’s too much like catch-up. For pure SVOD, you need originals.”

In the grand scheme of things, OTT is not a natural space for broadcasters, whose business for decades has been all about building channels and acquiring high-profile rights.

“The big strategic question is, What do broadcasters do in a world where you don’t need channels?” says Wim Sweldens, chief architect and co-founder of mobile applications company Kiswe, whose activities include localizing OTT content around the world for major rights owners.

“Broadcasters can struggle with OTT because they have done things in the same way for so many years and it has worked,” notes Taylor Riese, managing director for EMEA at Verizon Digital Media Services. “Pivoting is not easy. You have to decide how OTT fits with what you already do. Is it part of the broadcast operation? Is it a technology thing? It’s an adjustment.”

He sees a world where traditional television won’t have any sports, which have long been a scheduling linchpin (especially on weekends) for so many broadcasters.

“It’s easier to monetize other content that you create in the studio or license rather than one-off live programming with expensive rights attached and value that evaporates,” Riese says. “Ultimately, a lot of what will be decided in the future comes down to what the big rights owners decide about where their programming goes.”

To complicate the picture, many prominent sports rights owners have their own OTT ambitions. For example, in Spain, where RTVE, Mediaset España and Atresmedia are partners in the OTT venture LOVEStv, the national soccer league, La Liga, has already created its own subscription platform, LaLigaSportsTV.

“We want people to be as close to our competition as they are to their favorite HBO show,” says Javier Tebas, president of La Liga. “In our world, the players are the stars, and we can bring their story to life through camerawork, sound and visual spectacle. It doesn’t matter what genre you are producing, the user expects the same level of quality.”

He adds, “It’s clear that younger viewers expect more than the traditional TV broadcast. The new battleground for our industry will be across multiple screens.”

With fragmentation intensifying, companies need to think about how all this looks to the consumer. Research shows that the number of different subscriptions a household will absorb is about four. So how many different apps will people accept? Bear in mind that they aren’t getting any volume discounts like with a channel bundle. And they have to launch a separate app every time they want to watch each OTT offer. It can be pretty consumer-unfriendly.

“Broadcasters need to start thinking like retailers,” says Bhavesh Vaghela, the CEO of subscription management company Paywizard, whose clients include Digital UK, ITV Box Office and BT Sport. “There is sometimes a perception that the industry is going to a more content-centric model when, in reality, it is becoming customer-centric.”

Joyn is already heading that way. “While Joyn has its own brand identity, we understand ourselves as an aggregation platform housing the most entertaining content,” Vassilev says. “Our brand is never the leading element in our communication. Instead, we strive to give center stage to the content from our various partners and extend its reach to a larger audience. You could say our ambition is to create a unique entertainment destination that unites all local content providers, local originals and a massive VOD library under one roof and one delightful experience. We ultimately define our success based on user feedback, whether from active users, paid subscriptions, or positive comments we receive on social channels.”

The new collaborative hybrids will probably need long investment horizons, as well as strong management that can get partners who are used to competing with each other to pull together. The process of getting to scale will not be easy.

And remember, Netflix and Amazon (and those other FAANGs) will come out swinging. They’re not just sitting there watching new OTT competitors crank up.

About Jay Stuart

Jay Stuart, based in London, is a regular contributor to World Screen.


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