European Broadcasters Must “Self-Cannibalise” to Survive

Dan Meier 10 July, 2024 

While the likes of Netflix, Disney and Amazon have invested heavily in US content over the years, European broadcasters have differentiated themselves through their foothold in local content. But now the SVOD giants are on home turf, shelling out a combined €10 billion in Europe’s big five markets this year. Ampere Analysis forecasts content spending by streaming companies in Europe to surpass that of commercial broadcasters in 2024.

However, spending sprees have a tendency to run out of steam, and global media conglomerates (particularly Disney and Warner Bros. Discovery) have been vocal about the need to cut costs in order to make their streaming businesses profitable. In 2022, WBD CEO David Zaslav declared: “The grand experiment of creating something at any cost is over.” As a result, content spending by streaming companies is expected to plateau over the next few years.

This leaves the door open for European broadcasters to capitalise, and Ampere suggests increasing content investment is “crucial” for commercial broadcasters to compete with the global players. But how viable is upping content budgets in a TV market still reeling from what Alex Mahon, Chief Executive of Channel 4, called the deepest advertising slump since the 2008 recession?

Behind the numbers

Although they are unlikely to match the major streaming companies in terms of pure spending power, European broadcasters have an opportunity if the SVOD companies look to other markets in pursuit of growth. More than half of Netflix’s content spend is expected to fund non-US content this year, according to Ampere – and though Europe is expected to capture around 35 percent of that investment, South Korea, Japan and China are gaining ground as content hubs for the SVOD giant.

The other factor to consider when looking at the streaming companies’ spending figures is the Hollywood strikes, which reduced commissioning levels last year, particularly among the studio-backed players. This year sees the major SVOD companies return their budgets to pre-strike levels, growing their global content spend by 12 percent YoY. But this is expected to fall to 7 percent YoY in 2025, paving the way for commercial broadcasters to deliver more locally relevant content.

And despite the continued decline in linear TV consumption, Ampere found that broadcast TV viewing rose slightly during Q1 2024 in all major European markets (except Spain). This suggests there is still room for the commercial broadcasters, providing they adapt their strategies to serve streaming audiences.

The research firm noted that broadcasters with diversified revenue streams have been better positioned to weather a storm that has wiped €1 billion in ad revenue from the linear TV market over the last decade. ITV for example has managed to grow its annual revenues since 2016 by increasingly leaning on its production arm ITV Studios, which now accounts for 50 percent of the group’s revenue. MediaForEurope (MFE) meanwhile has consistently outperformed ITV in terms of ad revenues, but due its reliance on TV advertising, has seen its revenue fall overall.

Do not feed the giants

But beyond merely upping investment in content, commercial broadcasters should consider content strategies that appeal to streaming audiences. While their BVOD services have traditionally served as extentions of their linear channels, the SVOD companies have leveraged scripted original content to steal away younger viewers. But this is changing; ITV has shifted to a digital-first release strategy on ITVX, a move that Ampere found to have enhanced the popularity of the BVOD service. Dropping the full series of Mr. Bates Vs The Post Office on ITVX reportedly propelled the drama to an average 13.1 million viewers.

The other benefit of exclusive content is that it keeps viewers on their service, rather than sending them to watch it on another streaming platform. Though licensing content to SVOD companies has been a valuable revenue stream for commercial broadcasters (and continues to play a role for ITV Studios), there is a risk that this strategy serves to feed the SVOD giants.

“With the rise of streaming platforms, broadcasters could evolve into creators of national or specialised content without stakes in distribution or customer relationships, essentially becoming suppliers for major digital companies,” Neil Anderson, Senior Analyst at Ampere Analysis, tells VideoWeek.

Where the broadcasters have perhaps been slower to adapt is in the type of content they commission, still looking to their older audience bases while neglecting the younger viewers who tend to prefer SVOD services. According to Ampere, BVOD catalogues generally replicate the genre mix found on their linear channels, trailing the SVOD libraries in terms of horror, sci-fi, action and romance titles.

“To thrive in a streaming dominated landscape, broadcasters should concentrate on engaging specific sub-audiences, especially younger viewers,” comments Anderson. “Youth-skewing scripted dramas, sci-fi and fantasy, coming-of-age romance and licensed US comedy series could be key in doing so.”

Cannibalise to survive

The prevailing content strategies point to a broader overreliance on shrinking linear TV businesses. Although broadcasters are pivoting to streaming-first operations and seeking to grow their share of digital ad revenues, Ampere recommends they are bolder still. As long as linear TV represents their major revenue stream, broadcasters fear their streaming channels could siphon ad revenues away from their core linear business. But according to Anderson, self-cannibalisation is now a necessity for broadcasters, transitioning consumers to their streaming apps even if it means losing linear ad revenues in the short-term.

And commercial broadcasters are well-placed to capture cost-conscious consumers looking to avoid the rising costs of SVOD services. With Netflix, Amazon and Disney+ collectively accounting for around 70 percent of the European SVOD market, European broadcasters have seen little success in the subscription space, including Britbox UK and the now-defunct Salto. And while some offer paid, ad-free tiers within their BVOD services, Anderson argues that the “greatest opportunity” for European broadcasters lies in “capturing online advertising revenue rather than directly competing with subscription-based streamers.”

The other differentiator for commercial broadcasters is their investment in live sports, as global SVOD companies are less interested in the local nature of sports rights deals. “Investing in sports could significantly strengthen broadcasters’ competitive edge over global streamers, which have typically ignored local sports rights so far,” notes Anderson. “While this strategy involves higher costs, it’s generally seen as a safer investment with potential for substantial returns.”

Meanwhile broadcasters have looked to consolidate their businesses in order to better compete with the streaming giants. The last few years have seen European M&A activity frustrated by regulatory intervention, such as the blocked tie-up between M6 and TF1, and RTL Nederland’s abandoned acquisition of Talpa. But the shift to streaming could unlock new opportunities for European collaboration, following moves in the US by broadcasters to co-own streaming services (such as the Venu Sports joint venture) or offer their products through bundles.

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