Dutch data confirms positive European impact of OTT on total pay TV revenues

European video revenues are rising strongly on the back of sustained growth in SVoD and OTT, while traditional services remain flat or are even in slight decline.

This larger regional picture has been confirmed by recent Dutch figures from the news and research site Telecompaper, which is based in the Netherlands. Dutch pay TV revenues in the second quarter of 2018 totaled €556 million, up 7.2 per cent on a year earlier, with new OTT providers expanding their presence in the market accounting for most of that rise. In fact, subscriptions to traditional pay TV services have been virtually flat although revenues there are slightly up largely because the two big operators, telco KPN and MSO Ziggo, both raised prices of their triple play packages.

Telecompaper pointed out that broadband service providers have been growing their share of consumer TV budgets ever since Netflix arrived in the Netherlands in 2013. This is common to several leading European markets including France, Germany and Spain as well as the UK. In Spain for example pay TV as a whole is gaining both subscribers and advertising revenues on the back largely of OTT and SVoD, according to recent research from Zenith forecasts.

This indicated a 6.2 per cent growth in ad revenues from pay TV and 3.4 per cent for ads in FTA (Free To Air) TV in 2018 against the previous year. Total TV ad revenue in the country is likely to reach €12.54 billion, up 2.1 per cent on the previous year, but ad revenues generated by online video streaming services will be up 11 per cent. The research found that 61 per cent of all online ad spend in Spain is now dedicated to streaming, either pre, middle or post roll, and 39 per cent to in-screen banners.

The global picture is rather similar to Europe’s with total pay TV and SVoD subscriptions set to rise 37% between 2017 and 2023 to reach 1.877 billion, according to Digital TV Research. SVoD will account for about 80% of this growth from a lower base with numbers set to more than double from 366 million in 2017 to 777 million in 2023 according to this research, an increase of 411 million.

Traditional pay TV will also continue growing but at a slower rate, especially in percentage terms, from 1.006 billion to 1.100 billion subscribers, a rise of 94 million. The gap therefore will be narrowed significantly and when linear OTT is thrown into the mix will close even more as consumption of live sports and kids’ content online continues to escalate. It is hard to count linear OTT subscriptions accurately but by many estimates there are around 60 million globally now coming from behind SVoD but growing even faster at a CAGR (Compound Annual Growth Rate) of over 50%. At this rate it will be heading for around 400 million by 2023, which means that when combined with SVoD it could have caught up legacy pay TV, although there will be an overlap since many consumers will be subscribing to two or even all three of these categories.

The US has led the migration from legacy pay TV to SVoD which has already taken the lead there at 132 million subscriptions, set to rise to 208 million by 2023 following further cord-cutting. Traditional pay TV subscriptions are forecast to fall another 10 million to 80 million over that period, again according to Digital TV Research.

Asia Pacific will be the region propping up legacy pay TV the strongest, including China where it will still be ahead of SVoD in 2023, with 375 million subs against 235 million. Currently pay TV in China is on 343 million subs against 138 million for SVoD, so there as globally the gap will narrow a lot.

Total global traditional pay TV revenues are expected to fall by $18.5 billion to $183 billion over the forecast period as SVoD revenues climb by $43.7 billion to $69 billion. Aggregate global video revenues will therefore be up $25.2 billion at $252 billion.

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