European market still a mosaic of national realities while weight of US-based companies increases

The European Audiovisual Observatory (EAO) has published in April 2019 its Key Trends from the Observatory’s Yearbook 2018/2019. This report - publicly available on the EAO website - provides an overview of the major developments in the film and audiovisual sectors in Europe (40 countries) and Morocco for the past year, as a result of all the studies released during this period by the Observatory.

The report documents the shift in the audiovisual ecosystem and the disruption caused by the growth of new players. It highlights trends such as US-led consolidation, early signs of cord-cutting and pressure on traditional media services regarding advertising revenues and competitive quality content. It also points at the challenges and uncertainties faced by the European market regarding the transposition of the new AVMSD and as a result of the potential exit of the UK from the EU.

Some highlights of the report:

• New AVMSD: the Key Trends summarize the new provisions introduced by the Directive especially regarding platforms; a complete evaluation of the Directive is scheduled for December 2026.

• Circulation of European works: European TV fiction represents 50% of TV fiction broadcast, most of it coming from the UK, which appears to also dominate the high-end drama segment on VOD. However, less than 30% of films on VOD are European (29% on TVOD and 21% on SVOD). Co-productions are still very rare and the huge diversity among catalogue's providers must be emphasised. Regarding TVOD, European films enjoy 27% of promotion while US productions enjoy 66% - this appears to be in line with the composition of catalogues.

• Audiovisual market trends, localised channels and decrease of linear TV: one third of the audiovisual media services in Europe are provided in a localised version while two out of three of them are controlled by US parent companies. Despite a great diversity in users' habits in Europe, a decrease in linear TV viewing has been recorded, offset by a rise in time-shifted viewing.

• News TV channels: 43% of the TV news channels focus their contents on their core audience (mainly national channels), and are highly supported by the public sector. 70% of news channels belong to groups owning only one news channel, as the business model to support TV news requires synergies between media assets. As a result, the ownership landscape is fairly pluralistic and varied.

• Audiovisual revenues: the market witnessed an explosive growth of SVOD subscriptions. As a result, traditional media services face a decrease in advertising revenues caused by their limited possibilities to target audiences. In Scandinavia, early signs of cord-cutting have already been noted (the fact for users to drop pay-TV offers in favour of media available over the Internet).

• Public service broadcasters: a general decrease of public broadcasters' revenues can be noted, both regarding public funding (29% of EU countries suffered budget cuts from 2016 to 2017) and advertising revenues. To face these challenges, public broadcasters tend to expand their channel portfolio or to collaborate with content producers and new players. Moreover, the growth of streaming platforms, especially successful among young users, may increase the difficulties faced by public broadcasters. 

• Competition and alliances: the tremendous growth of new players in the audiovisual market is partly explained by high financial resources and high-level expertise in customer experience. To face this competition and offset their lack of resources, traditional media tend to create alliances to improve their offer. However, they will have soon to decide between strategies: competition, collaboration or "coopetition". 

• Brexit: the UK being one of the main hubs for linear and on-demand media services established in the EU and targeting foreign countries, the potential advent of Brexit generates several uncertainties regarding notably  freedom of movement of workers, EU funding,  freedom of reception ("Country of origin principle") and portability of the services.

• Video Sharing Platforms: it seems that the strategy of "Uberisation" is still going strong, encouraging low-cost productions shared between users. To some extent, this could lead to a polarization between low-cost content on online platforms and high-end programmes reserved for TV and VOD services.

• Gender equality in the industry: women remain under- and misrepresented on- and off-screen, they are still often portrayed in stereotyped roles. However, several actions have been undertaken by the European institutions (Council of Europe Recommendation; European Parliament Resolution) and the industry. 

In general, the European audiovisual market grew by only 1.5% in 2017. Subscriptions represent the most dynamic segment of revenues and pay video on demand has registered a much higher growth annual rate (34% in 2017), at the expense of rental and sale in the physical world. Some countries experienced a low growth caused notably by a saturation of the on-demand market and the impact of digitisation on TV advertising (BE, GB, FR, IT and SE).

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•  Yearbook 2018/2019 - Key Trends (also available in French and German)

Source: European Audiovisual Observatory