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European subscription OTT video 5-year outlook

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European subscription OTT video 5-year outlook

Highlights

Revenues from subscription over-the-top services in Europe could reach $18.24 billion in 2025.

Coupled with distribution deals with pay TV providers, OTT aggregation should raise the number of OTT subscriptions as a percent of the total video subscriptions from 45% in 2020 to 53% in 2025.

Revenues from subscription over-the-top services in Europe could reach $18.24 billion in 2025, according to Kagan projections. The wide availability of direct-to-consumer services from U.S.-based media groups and European broadcasters should drive further shifts in consumption from free-to-air linear and multichannel TV to paid OTT.

In its 2020 annual results, Netflix Inc. reported 66.7 million subscribers in the EMEA region, with 80% of those coming from Western Europe, according to Kagan estimates. About 46.6% of its total 14.9 million net additions took place during the first quarter, when the majority of Europe went into strict lockdowns due to the COVID-19 pandemic. In all the markets of our coverage other than Germany and Russia, Netflix is the leader when counting paid subscriptions, by far outspending its main competitors on a global scale.

Lockdown restrictions changed media content consumption habits and accelerated swings that had already started to take shape in the past couple of years. Premium live sports have always been a strong selling point in pay TV operators' arsenals. The emergence of pure sports services such as Perform Group Limited's DAZN and Amazon's and Disney's acquisitions of key rights are putting further pressure on incumbents looking to keep churn levels in control. Pandemic-related cancellations of major events and economic turmoil will hasten any previous trends. Large U.S.-based media and tech groups like Disney, Apple Inc., Discovery Inc. and AT&T Inc.'s Warner Media LLC have now launched their own direct-to-consumer services and have been expanding on multiple continents. These studios are making content almost exclusively for their own streaming platforms and with a few exceptions not renewing distribution deals with linear and internet providers, essentially cutting out the middleman.

The competition between generalist and niche services and the increase in the overall number of available options have given rise to OTT aggregator platforms, such as Amazon Channels, Roku Inc. and Apple TV, where users can access a range of SVOD, AVOD and TVOD content in a single environment. Services benefit from savings on marketing and technology in return for a share of their revenues. Coupled with distribution deals with pay TV providers, OTT aggregation should raise the number of OTT subscriptions as a percent of the total video subscriptions from 45% in 2020 to 53% in 2025.

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