Europe’s faltering streaming efforts give Netflix an easy ride

  • TECH
  • Monday, 01 Jul 2019

Netflix logo (Dreamstime/TNS)

In November 2007, a group of British broadcasters announced they were pooling their content in a “rich entertainment site”, allowing viewers to see their favourite shows via the Internet whenever they wanted. 

Netflix Inc had begun its US streaming service that year and was still more than four years away from a UK launch. 

Regulators blocked the plan by the British Broadcasting Corp and its free-to-air rivals, fearing it would prevent new entrants. Netflix and Inc have since swept in to claim around two-thirds of the country’s video streaming market. 

Now the BBC and ITV Plc are trying again. The makers of crime series Line Of Duty and period drama Victoria are planning a new platform for later this year called BritBox, offering popular shows from the two networks topped up with other fresh, exclusive content. But industry observers are already writing off the service and similar efforts across the continent, as the broadcasters struggle to solve thorny issues from audience data sharing to budgets and exclusivity of content. 

“I don’t think any of the ventures being developed are going to be successful,” said Claire Enders, founder of media research firm Enders Analysis. “They haven’t got the scale to survive now that their markets have been colonised by Netflix and Amazon. I think they’ll all be loss-making and they’ll all weaken the core business.” 

Conventional television is in decline, with average daily viewing falling by 10% between 2014 and 2017 to two hours and 54 minutes, according to British communications regulator Ofcom. 

Investors have been dumping shares in European broadcasters, worried about the future outlook. ITV stock has lost almost two-thirds of its value in the past four years, while French commercial broadcaster Television Francaise 1 SA has fallen 43%. Netflix stock has quadrupled over the same period. 

TV executives agree that maintaining a confusing patchwork of competing platforms will make it harder to slow the advance of Netflix and Amazon’s Prime Video. They’re finding it hard to find a path forward. 

BritBox may already have a problem: ITV and the BBC will have to convince consumers to pay for BritBox when some of the content will already have been available for free for a year on the BBC’s iPlayer service.  

“There’s a clear appetite among British consumers for a streaming service which will bring together the biggest range and the best quality British content,” ITV said in a statement. 

The iPlayer issue is one example of the competing incentives that make it so hard for broadcasters to deal with the biggest disruption of their industry since the start of commercial TV in the 1950s. 

In Germany, ProSiebenSat.1 Media SE and RTL Group SA talked about a joint platform, then decided to offer competing products after clashing on strategy and deciding they would lose precious time in further discussions. 

Conflicting priorities 

Cooperation doesn’t seem to come easily for network executives who are more used to fighting each other for ad dollars and are jealously protective of their most popular shows. Investors may also be getting in the way. 

“The shareholders that sit underneath Netflix are willing to fund a business that’s loss-making to grab scale and size,” said John Turner of OC&C Strategy Consultants in London. “If you’re a shareholder of ITV, you want a dividend and you’re worried about the core business and this is like a hobby that’s being kept on the side.” 

In France, where Netflix now has over 5 million subscribers, three TV networks have scraped together €45mil (RM211.88mil) to build a rival platform, Salto. With Netflix pouring billions of dollars into original content every year, Alain Le Diberder, a former head of new programming at the country’s biggest pay-TV broadcaster Canal+, said Salto is going to need between €400mil (RM1.88bil) and €500mil (RM2.35bil). 

With the deepest pockets and a technological edge, the US platforms are moving fast to reshape Europe’s media landscape. Their combined UK revenue last year was more than double the streaming income of the country’s five biggest broadcasters, according to a report commissioned by Ofcom. 

As they recruit millions of new subscribers every year, that’s changing the habits of viewers, making them less tolerant of the fixed viewing times that underpin the old ad-based business model. Their vast budgets are also raising the standard of what’s required to win and retain audiences and creating a race for production resources that is inflating costs. 

Hulu hopes 

European executives often cite US Netflix rival Hulu LLC as a blueprint for streaming success. The service founded by 21st Century Fox and NBC Universal began in 2007 – the year that Netflix began streaming – allowing viewers to see last night’s episodes online. Within three years, Hulu was the second-most popular video site worldwide after YouTube. 

Yet Hulu also offers a lesson in what can go wrong. 

The shareholders spent years arguing over who should lead the business and whether it should be a TV catch-up service or a source of original programming. Netflix focused on pouring money into fresh content and expanding to new markets. Hulu had 26.8 million paid subscribers as of March 31. Netflix had 148.9 million.  

A similar dilemma faces the European broadcasters. 

To make their services distinctive, they need to offer shows that can’t be found elsewhere. That means shifting investment away from their core channels, threatening viewer numbers and advertising revenue. Netflix and Amazon are also turning into important customers for their content, helping them to reach wider audiences in new markets but making decisions on whether to compete or cooperate even more fraught. 

A decade after regulators nixed Britain’s first joint streaming project, European regulators also remain wary of broadcasting tie-ups, despite the new power of Netflix. The Salto project of state-owned France Televisions and its commercial rivals TF1 and Metropole Television SA is still waiting for antitrust clearance a year after it was announced. 

“It drives me crazy,” France Televisions chief executive officer Delphine Ernotte said at an industry event in March. “The European authorities took six months to say that in the end it was up to the French authorities to issue an opinion. Meanwhile Netflix has gained how many users? About a million.” – Bloomberg

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