Beautiful Streamer: against Netflix in Europe
When Netflix and other American streaming companies arrived in Europe, governments feared the destruction of their local film industries. They shouldn’t have worried.
This summer, I looked forward to Tuesdays. A new episode of Netflix’s “Better call Saul” airs every week and I’m a fan.
Video streaming services have taken off over the past 15 years, made possible by telecommunications networks that have become strong enough to deliver video to large numbers of viewers. American multinationals Netflix, Disney, Apple, Amazon and HBO led the charge in Europe.
As CEO of Finland’s national broadcaster, Yle, I faced off against these global giants. Although the video content industry rarely plays a major role in the economy, it is important for a country’s national identity and image. Most European governments use two tools to preserve their national film industries: quotas for local content in online services and tax incentives for production. My experience shows that this protectionism has proven unnecessary and perhaps even counterproductive.
The 2018 EU Audiovisual Visual Media Services Directive requires that 30% of content on streaming services originate from Europe. Additionally, most governments have implemented tax incentives to encourage film production. For example, UK Film Tax Relief is available for all eligible UK films at all budget levels; the film production company can claim a cash rebate of up to 25% of qualifying UK expenditure. This is intended to increase international interest in making films in European countries. Although distorting competition, this practice has imposed itself, because everyone practices it.
Quotas and tax incentives overlook a crucial fact: in almost all European markets, streaming still accounts for only around 10-15% of total minutes watched. Although this may seem surprisingly low, it reflects how European audiences spend most of their time watching live sports, news broadcasting, reality TV, quizzes and soap operas. dailies. Age plays an important role. Streaming attracts viewers under the age of 45, while older viewers often watch four to five hours of television each day. This totals several minutes.
The American television market is quite different. Nielsen, a market research firm, recently released viewership figures for the United States, indicating that streaming services reached one-third of the US television viewing market in June. Cord cutting remains an American phenomenon.
Europe is struggling with a fragmented market and low production budgets. A television series travels more easily from the United States to Europe than on the Rhine from France to Germany. At Yle, we were able to fight successfully with our local streaming service. Finland has for years been the only European country where Netflix is second to the local public streaming service in terms of market share. This is thanks to the very smooth user interface of the Finnish broadcasting company’s streaming service combined with full rights for live content and the catalog.
Streaming will continue to spread in Europe. National sports federations, religious groups or orchestras offer their content on YouTube or directly to their audience. Companies upload user manuals, cooking recipes or skincare tips in video format.
But global streamers face serious challenges in Europe.
First, the fight for market share will become fierce. The newcomers will attract consumers with rich content portfolios and attractive subscription offers. Streamers must be skillful in their investments; there’s a plethora of not-so-great content available and the best series know their price.
Second, streamers will face both churn and a stack problem.. The churn rate is the share of customers who, during a given period, decide to no longer use the service. Stack refers to the stack of various subscriptions from the perspective of consumers. Families are increasingly hesitant to subscribe to additional streaming services.
Third, streaming comes at a cost. Broadcasting over terrestrial, satellite or cable networks is far more efficient and economical than streaming individually to every home and device. This will no longer become a problem with rising energy prices and increased attention to environmental issues. From a power consumption perspective, mobile video streaming is more expensive than any other delivery medium.
As the streaming wars escalate, consumers should be happy. Never has so much content been available in such a competitive market at such affordable prices. Let’s take advantage of it.
I look forward to the next episode of ‘Better call Saul’. Next Tuesday.
Lauri Kivinen is a non-resident principal investigator of the CEPA Digital Innovation Initiative. He is the former CEO of the Finnish national television channel Yle.