Netflix having significant impact in CEE, says IHS Markit

Netflix is having a significant impact on subscription TV in Central and Eastern Europe, even if its penetration lags far behind markets in Western Europe, according to Andrey Popov, home entertainment analyst at IHS Markit.

Despite a widespread perception that Netflix is having a negligible impact in CEE because it has not localised its service and because the price point is too high for the market, Popov, speaking at the Digital TV CEE conference in Budapest, said that the streaming giant is in fact responsible for much of recent growth in paid services in the region.

While CEE has not been affected much by cord cutting, in more developed markets online subscription services are widely available and the market is undergoing changes in terms of subscription growth, said Popov. Online subscriptions are set to grow by 65% this year and will grow by 38% in CAGR terms over the next five years, excluding free trials, he said, claiming that Netflix is responsible for two thirds of the growth.

By the end of this year, online services will account for 11% of the total number of subscription services in the region, growing to 11 million subscriptions and accounting for a fifth of total pay subscriptions overall by 2021, Popov said.

There are market by market differences. In Poland almost all growth in pay services is for online service, with Netflix accounting for most of that. Only in Ukraine is pay TV growth faster than growth for online services.

Popov said that Netflix will be the fifth biggest pay service provider in the region in terms of subscribers at the end of this year, after two years of operation, rising to number three next year. “It is difficult to believe but these figures are very realistic.”

In Poland Netflix has 11.9% penetration among broadband subscribers. Numbers vary in other countries, ranging from strong penetration in Slovenia and the Czech Republic to negligible uptake in Russia, a country Netflix is expected to exit soon, according to multiple reports.

Despite its growth, even Netflix’s best performing territories in CEE are behind the Western European average for the service. While Netflix has attained significant reach among broadband homes, in terms of TV households its reach is much lower than in western Europe.

Netflix’s growth in CEE is taking place against the background of a mature pay TV market. Pay TV penetration in CEE is actually higher than in Western Europe but broadband penetration is lower. Satellite is 32% and cable is 51%. Satellite is greater than Western Europe, as is cable. IPTV is lower but has been winning market share.