Europe’s Pay-TV market is fragmented, but it continues to be the most common way of receiving TV, according to an IABM snapshot of the market.
The broadcast market in Europe is much more fragmented than in North America; the region is characterised by multiple languages, a wide range of large state-funded broadcasters, a variety of commercial broadcasters and several pay-TV operators. In addition to the content they produce themselves, broadcasters in Europe deliver plenty of regional and international content.
Because rights holders typically sell content to a single broadcaster per country, programs must be delivered to each country and/or territory with the appropriate audio tracks, subtitling, aspect ratio, and technical metadata to meet local regulatory requirements.
Given the complexity of preparing content for distribution to dozens of countries, many program producers find it more efficient to deliver internationally syndicated content to European broadcasters via a central playout center, which has the staff and expertise to take care of all the technical and regulatory compliance issues at the point of content origination. As a result, the European market has a significantly larger number of service providers than in other regions.
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Despite strong competition from other delivery methods, cable continued to be the most popular distribution platform in Europe in 2018, followed by DTH, IPTV and linear OTT. Transmission in Europe is often done through a centralised service provider. The switch from analogue to digital transmission in Europe gave rise to a number of digital multiplex operators, who own or lease broadcast spectrum and deliver content on behalf of multiple broadcasters. In many countries, there are one or two primary multiple operators.
Pay-TV is still by far the most common way of receiving TV services in Europe. Compared to the US, Europe’s pay-TV market remains highly fragmented with the top five players – including Sky/Comcast (with an estimated market share of 15%) and Liberty Global (14%) – accounting for less than half of all subscribers in the region. Nevertheless, consolidation has accelerated in Europe’s pay-TV industry following the global trend.
The recessionary environment of Europe since 2008 has made business challenging for broadcast technology vendors with large exposure to the region. Since 2011, the combination of the “Euro crisis” and various national austerity measures, particularly in the south, has dampened demand for products of all types. Prior to the market disruption in 2011, a considerable amount of European technology spending was driven by the continent-wide switch-off of analogue transmission, which was completed in 2012.
While the transition to digital and HDTV has been completed in most of the region, during 2017 some cable operators in Northern Europe transitioned their operations to digital and launched new HD channels. UHD is yet to be a significant spending driver in the region although established pay-TV operators started rolling out their first initiatives during 2016 and 2017.
The broadband market across Europe is going through far-reaching technological changes, with fiber and high-speed internet access (DOCSIS 3.x) rapidly replacing ADSL and standard cable. Next Generation Access (NGA) broadband is also increasingly deployed and in some countries such as Switzerland, Germany and Hungary; NGA penetration as a share of the population is already higher than the European average. NGA has acted as a catalyst for OTT streaming services, which as of second quarter of 2018 were received in 20 million households in Europe. Even though Netflix – accounting for over half of the total – and Amazon are expanding their subscriber bases in Europe, local OTT services are also becoming increasingly popular in the region. For example, in Russia, ivi.ru, Megogo and Amedia have recently emerged as the three largest OTT platforms in the country.
Multi-screen initiatives by broadcasters have proliferated in recent years although the European continent lags behind on this compared to North America. Various factors have contributed to this trend, including the average lower cost of pay-TV services in the old continent and insufficient content localisation by major new media players. In spite of this trend, traditional media companies in Europe continued to roll out new media initiatives during 2017 and 2018.
Another new technology trend in Europe – and globally – is the emergence of 5G and telecom operators in the video distribution space. In Europe, the development of 5G infrastructure dates back to 2013, when the European Commission (EC) established a Public Private Partnership on 5G, the EU flagship initiative to accelerate research and innovation in 5G technology. 5G standards are also one of the five priority areas under the recently launched Digitising European Industry initiative. In terms of 5G trials, the EU is gradually catching up with the leading countries and it is not lagging that much behind technically compared to the US, China and other Asian countries thanks to development and investment work done by equipment manufacturers Nokia and Ericsson.
The deployment of 4K/UHD television in Europe is currently ongoing; more dedicated channels have been launched since 2017. By the end of 2018, Eutelsat had identified at least 142 UHD channels or services worldwide, of which more than one third (55 channels) were in Europe, including independent channels, pay-TV services and national television channels. These channels mainly serve Western Europe, where the share of households with a UHD TV set was estimated to be around 17% by the end of 2018.
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According to IABM’s Buying Trends survey conducted mainly among European broadcasters in October 2018, nearly a quarter of respondents had already launched UHD initiatives, while end-users remained more interested in combining enhancements such as HDR and HFR with 4K/UHD rather than 4K offerings only. This indicates that better pixels are likely more important than more pixels for them.
Most UHD initiatives have been launched by pay-TV operators. In fact, UHD so far remains a pay-TV niche market. Commercial and public broadcasters have not gone beyond broadcast trials in the higher-resolution format - and/or occasional broadcasts for special live events. This is due to the low revenue potential of 4K/UHD in commercial broadcasting as opposed to pay-TV. 88% of UHD deployments in Europe have been launched by cable, IPTV or satellite operators with IPTV being the most popular platform. This is different from North America where most of the initiatives have been launched through OTT services. This difference translates into different types of services in the two continents: live prevails in Europe while VOD is prevalent in North America.
When looking at specific countries, most UHD initiatives have been launched in the UK and France with Germany following closely:
- The UK: BT and Sky launched 4K initiatives in the summer of 2016. BT launched its 4K/UHD service on IPTV, which covers live sports including the UEFA Champions League and the Premier League, in August 2016. Sky started broadcasting sports, films and TV shows in 4K/UHD via satellite from August 2016 as well through its Sky Q technology. In 2018, BBC UK showed the 2018 FIFA World Cup in 4K/UHD via the BBC iPlayer app. Virgin Media also launched a UHD live service via cable in 2018.
- France: IPTV operators such as Orange France and Free launched 4K offerings between 2015 and 2016. Orange launched a 4K offering featuring sports and Netflix programming in 2016 while Free started carrying a 4K channel - Festival 4K - focused on music festivals, concerts and entertainment events at the end of 2015. Other 4K offerings in France were launched by Fransat and SFR on satellite and IPTV respectively. In 2018, canal+ launched a 4K UHD live channel via satellite and OTT. In addition, beIN Sports launched a 4K UHD channel thanks to a partnership with Canal and Orange.
- Germany: In 2016, Sky Deutschland launched a UHD channel covering live sports - both Bundesliga and UEFA Champions League football matches. Mediengruppe RTL Deutschland launched a UHD channel in April 2018 that broadcasts Formula 1 races and a selection of football games. ProSiebenSat.1 broadcast its first program in UHD in July 2018; unlike many players that start with sports events, ProsiebenSat.1 inaugurated its service with an edition of Galileo Spezial, a regular non-fiction program addressing cultural and social topics.
- Italy: Mediaset launched the first UHD sports channel at the end of May 2016 to broadcast the UEFA Champions League Final. This was distributed over a terrestrial network. Sky Italia also launched UHD services by making available it’s Sky Q in Italy from the end of 2017.
- The Netherlands: Insight TV announced the signing of an agreement with the Dutch telco KNP in 2018 to make its programs available in UHD via IPTV services.
With regard to VR, European broadcasters have yet to launch consistent offerings featuring the emerging technology. In general, VR technology is still in its earliest stages and mainly used in live sports and concerts. In 2018, some broadcasters were still in an experimental phase to explore implementation requirements and the customer demand for this new way of watching TV. However, it seems that VR is not yet a top priority for most media technology end-users due to the lack of a consistent business model to monetise it.
Riikka Koponen is principal analyst at IABM