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SVOD likely to avoid UK sport, and broadcasters will win battle for localised content, says Enders Analysis

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There was good news and bad news for local broadcasters when  Gill Hind, COO at Enders Analysis, revealed her company’s predictions for how the premium video marketplace will evolve over the next few years. Speaking at Future TV Advertising Forum this week, Hind highlighted what she believes is a dramatic decline in under-24s watching TV, said online SVOD giants like Netflix and Amazon are creating audiences for global content, and that they will dominate commissioning for super-premium content with international appeal. To complete the list of bad news, only 60% of all video viewing by under-24s will be captured by existing broadcasters by 2026, she said.

The good news is that 80% of all video viewing in 2026, across the population as a whole, will be with today’s broadcasters. Most people will continue to get their localised content – which accounts for the vast majority of viewing – from these broadcasters. Hind concluded that the online giants are not going to compete with public service broadcasters in the UK, at least, and that their content will prove to be complementary and not substitutional. “The death of TV is clearly exaggerated,” she told the London audience.

On the fundamental point of whether incumbent TV companies face an existential threat, she pointed out: “If you are going to argue that SVOD will eradicate traditional TV then you have to argue that people will want less choice of content in future, with fewer content genres.”

Sport, news, current affairs and soap operas are among the popular genres that are missing from the SVOD giants and Hind is convinced sport will largely stay in control of traditional players for the foreseeable future. She said it was unlikely that any of the GAFAN grouping (Google Amazon, Facebook, Apple, Netflix) will be bidding for Premier League rights in the UK.

Enders Analysis is convinced that GAFAN will fail to crack localised content markets, even if they try. First, there is some content that is only made because of PSB (public service broadcasting) requirements and SVOD will never invest in that. And she explained that these companies, when they do invest in local content, are looking for an international return on it. She is highly sceptical that content produced in Germany with an international market in mind will appeal in the UK, for example.

“In the UK, foreign produced programmes perform badly on linear TV, although this is skewed by the fact that the top channels do not show much, which is partly due to their PSB obligations but also because of past poor performance.” Only three – yes, three – overseas produced shows made it into the top 2,000 UK programmes on broadcast TV last year, and none have achieved this feat during 2017, she reported.

“SVOD companies are investing in the UK. It is small but growing. But they will not compete with the UK public service broadcasters,” she predicted. “While GAFAN might, in time, create programming for a UK audience that resonates in the same way as today’s local content – like ‘EastEnders’  and ‘I’m a Celebrity’, you also have to ask whether making such territory-specific content here is the best use of their budget.”

Focusing on Amazon, Hind pointed to how she believes the company is using content to drive its larger business, and explained: “Amazon is winning the e-commerce war in the UK market. It makes more sense for them to make content in India that could help them win in that potentially very lucrative [e-commerce] market.”

Without being able to damage broadcasters with local content, SVOD providers must rely largely on scripted U.S. programming. This is very popular, as Hind acknowledged, and has helped drive SVOD into one-third of UK homes. “The question is how much of that you really want,” she asked.

Hind believes Netflix has an important challenge ahead – how it can sustain its current spend levels. Cash spent on content is growing largely in line with revenue, she noted. “Q3 2017 worldwide revenues were $26 per subscriber and cash spent on content was $22 per subscriber. They keep going back to the bond market to raise cash, saying it is due to upfront payments for in-house content.

“There is an inference that at some point they will be able to slow down the rate at which they are making content and the pressure [for new money] will subside, but the problem is that it cannot slow down. Netflix has trained and encouraged consumers to binge view and they need new content all the time, or subscribers will start to notice.”

Enders Analysis reckons Netflix gets nothing like the shelf-life from a major content investment that a traditional broadcaster does. At Future TV Advertising Forum, she noted how new Originals are given prominence, then pushed back into the catalogue if they do not ‘bite’. And not surprisingly, consumers watch the new content sooner rather than later.

Some of the shows achieved good audiences but drawing on Nielsen viewing data for Netflix, she said: “It is surprising how quickly Originals lose their value [in terms of audiences]. ‘Marvel’s The Defenders’ was given as an example. Netflix is getting days or weeks’ worth of audience value from its huge investments, she suggested.

The content that Netflix acquires (rather than makes) has a longer shelf-life and a more ‘expansive’ impact on viewing, Hind said. She also noted how the BBC’s ‘Poldark’ saw sharp audience drop-offs after each episode but continued to deliver sizeable value throughout its nine-week run. “That show had greater longevity than a Netflix Original,” she observed.

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