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IHS: Consumer Spending on SVOD in Western Europe to Reach €3 Billion in 2016

20 Sep, 2016 By: Erik Gruenwedel

Total consumer spending on subscription video-on-demand in Western Europe — led by Netflix and Sky’s Now TV — is projected to reach €3 billion ($3.3 billion) by the end of the year after topping €2 billion ($2.2 billion) in 2015, according to a new data from IHS Markit.

“The multi-territory international players [i.e. Netflix, Amazon Prime Video] changed the game dramatically for SVOD in Western Europe in a very short period of time,” Tania Loeffler, analyst at IHS, said in a statement. “When Netflix launched in the U.K., total consumer spending on SVOD more than doubled to €307.6 million in 2012. By the end of 2014, that figure had more than trebled to €1.1 billion ($1.2 billion) due to Netflix’s European expansion and the launch of Amazon Prime in the U.K., Germany and Austria.”

While annual growth in spending on online SVOD in Western Europe will slow through 2020, the platform remains the largest in terms of total home video spending. By 2018, IHS forecasts subscription streaming will account for 49% (€4.2 billion) of home video spending in the region, and is set to increase to 58% or €5.2 billion ($5.8 billion) by 2020.

Notably, smaller markets, including Sweden, Norway, Denmark and Finland, Belgium, Holland, and Switzerland, have higher SVOD per-capita spending than larger countries such as Germany and France.

“These smaller individual markets are relatively affluent, but they do generate disproportionately significant consumer spending from the much smaller populations from which they can draw SVOD subscribers,” Loeffler said.

In 2015, Sweden had 3.2 million broadband households and Norway had 2.1 million, compared with Germany’s 26.9 million. However, broadband households in Sweden spent an average of €23.16 on SVOD, while the average spend in Norway was €89.46. German broadband households, by comparison, spent only an average of €6.06 on SVOD.

Norwegians are forecast to spend a total of €239.6 million on SVOD by the end of the year, reaching €318.3 million by 2020, which will put the country on par with Spain and Italy (markets with approximately four times as many broadband households). By 2016, Belgium and the Netherlands combined will account for 10% of total SVOD spending in Western Europe.

Sweden, Norway, Denmark/Finland, in addition to Belgium, Holland and Luxembourg all benefited from early Netflix launches. Nordic consumers have shown strong demand for online consumption of video content going back to 2006, while those in Benelux already had a strong tradition of both transactional and subscription TV-based VOD. In both regions, digital subscription is a continuation of a long-established digital video consumer habit, which was supported early on by strong broadband infrastructure, according to IHS.

The research company said 2016 will be the first full-year of operations for Netflix in Spain and Italy, and as a result, both regions will see stronger total market growth for SVOD compared to 2015.

Spending in Spain is forecast to increase by 124% to reach €59.9 million and Italy is forecast to reach €94.7 million, or 112% growth in 2015. By 2020, Spain and Italy will account for a combined 11% of total SVOD spending in Western Europe.

Finally, the U.K. will remain the No. 1 market in terms of consumer spending on SVOD in Western Europe. The country is forecast to generate over €1 billion ($1.1 billion) by the end of 2017, and will retain a 35% share of total spending through to 2020.

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