Netflix effect will help German video spend to grow

Consumer spending on video entertainment in Germany will grow by 2% this year to reach €6.9 billion, following 5% growth in 2013, with an expectation that it will reach €7.4 billion by 2018, according to research by Futuresource Consulting.

According to Futuresource, growth will be driven primarily by pay TV services, combined with growth in digital video, including Netflix. Pay TV grew by over 50% between 2010 and 2013 and is expected to grow by 10% a year over the next three years.

Futuresource believes that digital spend will grow by almost 50% this year, driven by new services and increased investment in the sector.
Currently, packaged media accounts for 21% of total video spend, the highest level of any country at €1.5 billion. Futuresorce believes packaged video will decline by 11% this year but will remain relatively more important than in other markets.

Senior market analyst Peter Sidebottom said that SVoD service revenue is expected to double this year, helped by the launch of Netflix and Amazon Prime Instant Video.

“The arrival of Netflix in Germany marks the beginning of an exciting new era for the German video market, and for German consumers. However, it won’t be without its challenges, given the German consumers affinity for packaged media and many being traditionally resistant to premium subscription services. Also, the strength of free-to-air television has also been an obstacle to both digital video and Pay-TV services historically,” said Sidebottom.

“The much anticipated arrival of Netflix this week in additional European countries, including Germany and France, will provide a significant stimulus to the consumer transition to digital video in these countries. However, it may encounter some cultural resistance, compared to its successful launches in other European countries.”