Netflix and Amazon are in a cut-throat competition to acquire bigger shares of the European market, and they are betting big on local content to do it. In this attempt, they are pit against powerful incumbents such as France’s Canal Plus with 15 million subscribers and against Sky, which has 21 million subscribers, says a report from Bloomberg.
Germany holds the key for Netflix
Ninety percent of American homes have pay-TV subscriptions, but the percentage is lower in Germany and the U.K. where only about 30% and two-thirds of households have subscriptions, respectively. There are ample options available for households to choose from Netflix-like streaming services, including Sky’s Now TV and Maxdome in Germany.
For Netflix and Amazon, their relatively modest price is an advantage. Netflix’s services start at €7.99 ($8.87) a month in Germany, while Amazon Prime is available for €49 per year, including music streaming and free shipping for purchases from its Web store. In contrast, monthly charges for cable TV run from €20 to €100.
Up-and-Coming Small- and Mid-cap Portfolio Managers #MICUS (Morningstar Conference)
The fight will take place throughout Europe, but Germany is the important of all as it is the largest and the wealthiest economy in the region. According to IHS, Netflix has 1 million subscribers in Germany or 7% of its total subscribers in Europe. On the other hand, Amazon Prime has 3 million subscribers in Germany or 7.7% of the total homes with TVs in the country. This is slightly more than half the penetration it has in the U.S.
“For such a developed market, Germany was slow on the uptake. TV wasn’t something you pay for, it’s something you get. That’s changing, and people are more willing to pay for TV,” said IHS analyst Daniel Sutton.
Local content: a hit formula
To expand internationally, local content is seen as very important by the companies. In May, Netflix will release Marseille, a French political drama, and the U.S. firm is also working on an Italian crime series called Suburra, which is expected to come out next year. Even Sky has several Italian shows in the works, including Gomorrah.
HBO has channels in 15 countries, and in February, it said that it was looking for Scandinavian productions. Well-funded public broadcasters produce high-quality content, which is a major challenge for streaming services.
Local-language programming goes well with European audiences, and at the same time, it is more popular among advertisers than foreign shows are.
“But there’s also a higher degree of risk, since you have to believe local content will translate into global appeal,” Neil Campling, a media analyst with Aviate Global London, told Bloomberg.