The digital revolution is transforming the film (and television) industry, which have to cope with changes in the entire supply chain, from production to distribution, while new ways of viewing films are conquering more space. The downward trend in box office receipts is offset by the growth of home entertainment, that through the services offered by Ott (Over the top) players attracts and in turn stimulates demand for video content, which has exploded in the past five years beyond all prediction. The Scandinavian SVOD market is one of the most mature in the world. SVOD household penetration is very high and is approaching the penetration rates of established pay-TV services. Five years on since launch, Netflix continues to perform very well in the Scandinavian markets. “At the end of last year, according to Ovum, it had a total of 3.75 million subscribers across Sweden, Denmark and Norway. This firmly puts Netflix as the largest SVOD service across the region with a market share of 49%” Tony Gunnarsson (Ovum senior analyst) said.
Netflix faces competition from multiscreen and Ott services developed by existing players. How is the landscape changing?
Yes, it is true that Netflix is faced with more competition today than 5 years ago. In fact, last year Netflix’s market share in Scandinavia dropped from 55% in 2015 to 49%. This is however not an indication that Netflix is in any way detracting in the Scandinavian market – actually, Netflix grew its subscriber base by 14% in 2016 – rather it is a sign that other competitive SVOD services have finally ‘grown up’ and are now able to better compete with Netflix.
Will Netflix market share decline further?
Netflix is likely to continue to grow in Scandinavia, and it will have just under 5 million subscribers across the region in 5 years’ time. By that time, Netflix’s market share will have declined further, to 38% in 2022, but even so, it will remain the by far largest SVOD service in this region.
How do Pay-TV services react?
Pay-TV and SVOD subscribers greatly overlap, with many SVOD subscribers taking multiple SVOD subscriptions at the same time while many pay-TV subscribers are also taking out one or two SVOD services on top of pay-TV offerings. As such, the popularity of SVOD is not directly causing a decline in pay-TV services, rather the two types of entertainment services are complimentary in this mature market.
Apart From Netflix what are the most popular online streaming sites in Scandinavia?
The second largest SVOD service in Scandinavia is ViaPlay, which is owned by the Modern Times Group which operates Viasat pay-TV services across the region. ViaPlay’s SVOD platform is based on Viasat pay-TV offering with a mix of on-demand TV series and films, as well as some linear channels streamed over the internet and live premium sports. ViaPlay currently has 1.58 million SVOD subscribers across the three markets, which reflects an SVOD market share of 21% in 2016. Note, however, that Viasat pay-TV subscribers have free access to Viaplay, and these users of ViaPlay are not counted here. The third largest is HBO Nordic with its ~ 1 million subscribers across the region in 2016, and a market share of 13%. HBO Nordic has struggled to drive rapid subscriber growth in its first 5 years since launch but has now reached a level of maturity when it is likely to grow faster. I don’t think HBO Nordic will ever be able to compete for head-on with Netflix – or ViaPlay’s linear and premium sports offering – but it’s established status as ‘the home of series’ (it’s Nordic marketing slogan) is one that has staying power. Ovum believes HBO Nordic is the most popular secondary SVOD service for many Netflix subscribers in Scandinavia—Netflix subscribers that take out a second SVOD service is most likely to be taking out HBO Nordic.
And what about Amazon?
In December 2016 Amazon Video was launched on a global basis, and it is likely that Amazon will cause further disruption in the Scandinavian market once it gets its service localised with local languages and as it builds on its own original programming. I think it’s not impossible that Amazon Video may end 2017 with a few hundred thousand subscribers across the Scandinavian market, especially considering it launched with a very competitive price (less than half the monthly charge of Netflix).
What do you expect in the next 5-10 years?
In the next 5 years, we expect further developments for SVOD services: Netflix will continue to driving the ‘revolution’ in cutting-edge TV content by way of its celebrated original programming, while other services such as HBO Nordic and ViaPlay are innovating with linear and live services which offer the best competitive edge to Netflix. Further afield than that, looking at the 5-10 years’ scenario, I would anticipate most pay-TV services to have moved to a live streaming SVOD-like environment, with many pay-TV subscribers switching off their traditional pay-TV services for purely online models. Netflix is likely to retain a sizable market share, at perhaps one-third of the market, while all the larger pay-TV operators are reasserting their strengths in the OTT market.