Friday, February 14, 2025

Netflix meets its match in the Nordic Minnow Nent

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Driven by the pandemic, the number of subscribers to internet video services in Western Europe last year exceeded pay-TV customers for the first time.

Yet European media companies are not celebrating this milestone. In virtually every corner of the continent, the major streaming providers are American.

Of the 141 million video-on-demand subscriptions in Western Europe, around 86% are for US services such as Netflix, Amazon Prime and Disney plus, as estimated by Ampere analysis.

While Hollywood sold films and TV series to European broadcasters, US streaming services are now stocking their best content, building relationships directly with European consumers and pushing out incumbents.

Netflix is the rise of local productions such as Dark in Germany and Lupine in France, using an estimate overall content budget of $ 17 billion this year – nearly eight times the BBC’s TV spending and 12 times that of ITV.

Disney Plus, which launched less than a year ago, has at least 13 million subscribers in Western Europe, according to Ampere estimates, bombarding the continent with blockbuster Marvel and Star Wars shows.

Discovery, meanwhile, last month started deployment of its Discovery Plus service in eight countries and will integrate the Eurosport network, which holds the exclusive rights to broadcast Olympic coverage in continental Europe.

JB Perrette, Managing Director of Discovery International, said the service had “better subscriber growth than we expected – and we had very high expectations.”

Line graph of percentage of subscriptions by nationality of service provider showing streaming adoption in Western Europe

A Nordic challenger to American domination

In Scandinavia, a European company owns its own. Nordic Entertainment Group (Nent), headquartered in Stockholm, is a relative minnow, with an estimated turnover of SKr12.4 billion ($ 1.5 billion) against $ 25 billion in turnover. Netflix business. Still, it does a better job than any other operator on the continent in defending its territory.

With around 3 million subscribers, Nent’s streaming service Viaplay, which offers a blend of high-end sports and original entertainment, is second behind Netflix in Sweden, Denmark, Finland and Norway, where Ampere believes. that the US service has approximately 4.2 million customers.

When it comes to revenue from those markets, Nent says Viaplay – whose sports packages are more expensive than Netflix – actually generates more than its US rival.

Anders Jensen, Managing Director of Nent: “ If you don’t copy some [of Netflix] with pride, then you make a mistake ‘

No other domestic subscription service in Western Europe can match Nent’s second place to Netflix in its local market – neither large pay-TV groups such as Vivendi’s Sky or Canal +, nor commercial broadcasters such as RTL, TF1. in France, Mediaset of Italy or ITV. .

Anders Jensen, managing director of Nent, called most of Europe’s rivals “very conservative”.

“On a scale of 1 to 10 – where 10 is full readiness to take on the US giants – I think most maybe two,” said. “It’s the sad truth.”

Nent was faster than some in Europe to make the streaming switch, in large part because of his relative weakness. While its founder Jan Stenbeck was the pioneer of Scandinavian commercial television in the late 1980s, by the time Mr. Jensen took over what was then called Modern Times Group in 2014, his television branch was lackluster, the second or third largest player in most markets.

The group, in other words, had less to lose. “The decision was more obvious to us,” Jensen said. “If 99.9% of your revenue comes from advertising, it takes a lot of courage to switch to a low-cost subscription video-on-demand service. You will have to go through a lot of pain. It’s not for everyone. “

Through its Viasat pay-TV business, Nent also had a pan-regional footprint and a reason to invest in a streaming platform that could easily expand into new markets and languages.

Nent has significantly reduced the costs of its traditional operations to fund investments in streaming technology – around SKr 4 billion in total. Like American media groups, it began to ramp up the production of original drama shows such as Alex and I came, I saw, I conqueredand retained some content from international sales.

Venturing out of its home market – sometimes as a service specializing in Nordic dramas, as it plans to launch in the United States next year – Nent knows that only the size of the subscribers will allow it to reap the benefits of ‘a streaming model and sustainably defend its territory. “We have to go international to be relevant in five, six, ten years,” Jensen said.

Mr Jensen is now preparing to push the Viaplay service into 10 new territories, targeting 10.5 million total subscribers by 2025, including 4.5 million outside the Nordic region.

Streaming services in Europe are predominantly American

Nent plans to raise SKr 3.5 billion of equity to finance the deployment, which will start with the Baltic States and Poland. He is also considering secondary listing in the United States. Investors are optimistic: The group’s shares have risen 50% in the past 12 months, beating the downtrend of most listed broadcasters.

Aside from its expensive live sports offering – Viaplay is the seat of the English Premier League in Scandinavia – the similarities to Netflix’s business model are undeniable. “If you don’t copy [of Netflix] with pride, then you are making a mistake, ”Jensen said.

Marie Nilsson, media analyst at Stockholm-based Mediavision, agrees. “Nent sees the path to success – and they copy,” she says. “The big question is: why not the others?”

Former players strive to make streaming coexist

Reluctant to ditch their traditional high-priced, high-margin businesses, most incumbents preferred to branch out into streaming, launching subscription services like Sky’s NowTV, catch-up players, or hybrid platforms like RTL’s TV Now, trying to show that the old and the new can coexist.

The challenge of building up enough customers to make the streaming economy work is daunting. Disney Plus is not expected to be profitable until 2023, even with a global footprint.

“The streaming industry is a large-scale business. . . Even on a multi-market basis, it’s very difficult, ”said Mr. Perrette of Discovery.

National operators in Europe have a valuable asset: a flow of new local content, a crucial hook to attract viewers to the platforms. But with the scarcity of Hollywood tariffs, this programming is becoming increasingly important to fill schedules, while production costs have been increased by the streaming boom and the pandemic.

Some European operators will see partnerships, or the pursuit of consolidation, becoming more attractive. Examples of joint streaming initiatives include Salto in France; Britbox in the UK; and Joyn, a company between ProSiebenSat.1 and Discovery, in Germany.

Line chart of Rebase through January 2020 showing that Nent's shares have outperformed traditional TV channels

Nent is also open to exploring this path, so he is not entirely dependent on finding expensive sports rights and building his own programs. “We have a platform and content. Some local players may have a lot of great content, but not a platform, ”Jensen said. “If we combine these two. . . there is a conversation to be had.

If its ambitions could still fall flat, Nent offers traditional broadcasters a rare cause of hope. It’s proof that what was an average, not exceptional European media conglomerate – spanning radio, pay-TV and free-to-air channels – can reinvent itself as a streaming company with aspirations to take on Netflix.

“Nent shows that you don’t need a telecom operator behind you, you don’t need an American owner,” said Francois Godard of Enders Analysis. “If you are committed to making the transition, there is something you can do, even if you are in a small market, even if you can’t afford to make drama series at $ 10 million per episode.”

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