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UK, Spain to lead online video revenue growth amid EU push for new OTT rules

The United Kingdom is projected to lead Western Europe's online video market, with record growth set for Spain, as players such as Netflix Inc., Amazon.com Inc. and HBO race to earn the loyalty of international subscribers amid a push by the EU to implement new rules and regulations for OTT players.

With online video estimated to account for 80% of all consumer internet traffic by 2019, up from 64% in 2014, European regulators are preparing key changes to media laws in order to extend their scope to cover subscription video-on-demand services such as Netflix, as well as user-generated video platforms including Facebook Inc. and Alphabet Inc.-owned YouTube.

Part of Europe's Digital Single Market strategy, the new Audiovisual Media Services Directive, or AVMSD, will usher in content quotas, among other requirements, requiring online on-demand catalogs to have at least 30% of their content originating in the European Union. Final negotiations over the AVMSD between the European Parliament, EU Council and European Commission are expected to conclude this month.

Amid the regulatory upheaval, Netflix reportedly plans to double its European content budget to $1 billion and escalate its creative push into foreign language dramas in countries such as Germany and Italy. Meanwhile, Time Warner Inc.'s continued regional expansion of HBO saw it launch its stand-alone OTT subscription service, HBO GO, in Poland, completing its European OTT rollout.

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Looking ahead, Italy and Portugal are tipped to deliver the highest levels of growth in SVOD revenue this year, estimated at 90.6% and 128.6% growth respectively, with Spain projected to report the biggest gains in revenue over the next four years, according to estimates by Kagan, a media research group within S&P Global Market Intelligence.

Spain's high profile online video platform launches by Sky PLC and HBO España have fueled SVOD competition with Netflix, Amazon and local player Movistar+, establishing the country as a key growth market for international players.

SVOD earnings in Spain are expected to grow 130% in 2018 and by as much 55.7% in 2019 and 38.2% in 2020, making it the region's fastest-growing market.

But with more online video subscribers than any other Western European market, the U.K. market is expected to deliver the highest total online video subscription revenues over the next four years.

The U.K. leads the European market with an estimated 14.81 million online video subscribers, followed by Germany with 7.22 million, the Netherlands with 3.36 million and France with 3.02 million.

Beyond the wide reach of SVOD services such as Netflix and Amazon, the U.K.'s high engagement with online video has resulted in an influx of slimmed-down, OTT-delivered cable offerings such as NBCUniversal Media LLC's reality-themed online video service hayu and Walt Disney Co.'s DisneyLife in recent years.

U.K. broadcasters such as Sky plc, ITV PLC and the BBC have also responded to shifting consumption patterns with their own on-demand offerings known as NOW TV, ITV Player and BBC iPlayer.

With more options for content, the U.K.'s number of subscribers are set to grow from roughly 12.44 million subscribers to 22.27 million by 2022.

Total SVOD revenues in the country are tipped to grow 30.2% this year to $1.27 billion before reaching $2.4 billion in 2022. In that time, growth in revenue is expected to slow from 21.6% growth in 2019 down to 10.2% in 2022.

Meanwhile, SVOD platforms rake in the most monthly revenue per subscription from users in France, where stricter media requirements and stiff guidelines for competing at the Cannes Film Festival recently saw Netflix pull five films it had planned to debut at the event.

The average monthly revenue per subscription in France is projected to be $10.44 this year, growing to $10.73 over four years. By comparison, average monthly earnings per subscription are set to grow to $8.48 in Germany and $8.97 in the U.K. by 2022.