Subscription-based video-on-demand services are sweeping Europe. Digital TV Research analysts forecast that this year more than 8 million European households will subscribe to a SVOD service for the first time. The total number of subscriptions is predicted to climb to almost 54 million by 2021 (it currently stands at just over 30 million). Those 54 million subscriptions will represent almost a third (30.7 percent) of the continent’s TV households.
Did I mention that there is a lot of money being generated by all those subscriptions? Our analyst friends predict that OTT (“Over The Top,” or IP-based) TV and video revenues in Western Europe will reach a staggering $14.64 billion in 2021 — that’s up from just over $7 billion this year.
“OTT adoption is already high in Scandinavia, the Netherlands and the UK, but it has been much more muted in other countries — such as France, Spain and Portugal,” said Simon Murray, a principal analyst at Digital TV Research.
A recent report conducted by my company Zuora and YouGov confirms that the UK consumer’s appetite for VoD shows no signs of slowing down any time soon. With over a quarter of the British public having already signed up to the likes of Netflix, Sky Go and Amazon Prime, and a quarter planning on using more subscription services in the future, the popularity of VoD in the UK has real potential to surpass traditional media outlets.
So why, then, is Netflix struggling on the Continent?
To be clear — most companies would be happy to have Netflix’s struggles. By the end of this year strong markets in the UK (6 million subscribers) and Netherlands and Nordic (5.4 million subscribers combined) will be the leading regions for Netflix outside their US subscriber base. They have over 80 million subscribers around the world.
But their most recent growth figures, especially in France and Germany, haven’t impressed the market. So how can Netflix do better, and what can other OTT providers learn in the process?
There’s no doubt about it — Europeans can be difficult. They have wide variations in download speeds and Internet infrastructures. They have their own national media services who are keenly interested in not missing out on the future of their industry. And last but certainly not least, they have the temerity to speak in different languages.
Netflix can’t just go into a new European market with the flip of a switch. It has to invest significant resources into content localization — subtitles, dubbing, user interfaces. It’s currently spending lots of money in Poland and Turkey doing just that. Netflix of course is also famous for investing in original content (it’s spending $6 billion this year on the stuff!), so it needs to develop local entertainment, which can sometimes work and sometimes not (it’s French police drama, “Marseilles,” was a flop).
But I believe that Netflix has three core competencies that many other OTT providers looking to break into European markets could learn from:
The killer IP of streaming video services is their huge amounts of usage data. Netflix can combine service data (gathered from customers’ multiple screens) with other seemingly unrelated data such as social to understand their viewers more deeply. This helps them provide a more accurate, targeted and intuitive experience for their audience, which in turn will make them want to stay longer with them. If I was an OTT provider looking to go after a European market, I’d start by taking a close, hard look at the data sitting in my own servers.
Due the very individualized nature of the medium as well as success with niche content, OTT video has a much better chance at building a real community of viewers. The benefits range from higher viewer loyalty to more insight into customer needs and preferences. And as social discovery grows, OTT video has an excellent opportunity to tap into this community to get people to help each other in the discovery process as well. For a new OTT provider, this may be an argument for picking a genre and sticking with it. There are dedicated services for horror, comedy, independent films, anime, Korean drama, Bollywood, you name it. Are there markets for Polish horror films, or Turkish soap operas? Of course.
Personalization must permeate your entire OTT video service and go beyond just the content. Along with Amazon, Netflix famously has as many home screens as they have subscribers. With viewers constantly switching between multiple devices, you will need to use data from these multiple sources to inform your upsell and renewal offers. It’s also important that they see a consistent message across all devices. And if you can allow them to handcraft the offer directly, they should have little reason to complain.
Right now, hundreds of European OTT operators are benefitting from watching Netflix’s successes and failures in Europe. But they won’t have the luxury of watching from the sidelines for long. It’s time to jump in.