SVOD targets growth in Central and Eastern Europe
Central and Eastern Europe has so far not been a focus for US-based streamers, but with the Latin America and Western Europe rollout complete, attention has turned to countries such as Poland, the Czech Republic (Czechia), Bulgaria, Romania, Slovenia and Hungary (with Turkey and Russia). Netflix is dominant with Amazon Prime also well established, but the introduction of Disney+ and SkyShowtime has the potential to destabilize and perhaps even dethrone the market leaders.
In 2020-2021, streaming services around the world got a boost from pandemic-related containment measures and Central and Eastern Europe (CEE) was no exception. The total number of online video subscriptions in the region reached 31 million in 2021, up from 25 million in 2020, according to Omdia.
As more OTT services begin to look to the region as an expansion point, CEE’s SVOD subscriber base is expected to grow by more than 60% from 2020 to 2022, driven primarily by Netflix and the launch of HBO. Max and Disney+, in figures provided by Amps Analysis. This strong growth is expected to continue in the future, supported by the launch of new services, including SkyShowtime, and the continued improvement in broadband availability.
For most countries in the region, the subscription OTT landscape was, until recently, essentially limited to Netflix and Amazon Prime Video. The lack of alternative OTT options has limited churn, but churn is expected to increase. The average SVOD user in CEE subscribes to 1.6 services, but with the launch of more US competitors, rotating churn (subscribing to different services at different times of the year) could occur for budget-conscious viewers, says Callum Sillars, principal analyst at Ampere. “As the market is flooded with a deluge of competing SVOD services, cheaper ad-supported tiers could prove the difference and the key to growth in a relatively price-sensitive market.”
The mbig international streamers in CEE
Although far from reaching saturation, Netflix faces increasing competition as international, local and regional players begin to catch up. In the first quarter of 2022, Netflix ceased operations in Russia, resulting in the loss of 700,000 subscribers, but apart from that, Ampère expects continued growth. The majority of regional Netflix subscribers are in Poland – around 2 million according to Omdia. Its production of local original content has also been limited to Poland.
“Netflix made a big push in Poland,” says Sillars. “In 2016, it was the first CEE market in which Netflix located its services. It has over 40 Polish titles in production and Poland has received over $100 million in original content investment to date. A new office in Warsaw will soon serve as a hub for the region – a sign of investment to come, as Poland is set to be at the heart of Netflix’s CEE plans.
As elsewhere, Apple TV+ remains heavily reliant on owners of Apple devices, with the service seeing limited interest outside of that core user base footprint. “In Central and Eastern Europe, penetration of Apple devices remains much lower than in Western Europe due to expensive devices presenting a barrier to entry, hampering the success of Apple TV+ in the region,” says Sillars. .
Matthew Evenson, research analyst for online TV and video at Omdia, adds that the region seems to be a lower priority for Amazon and Apple at the moment, although Amazon has launched a localized version of its e-commerce store in Poland last year, so it can now offer more Prime benefits, which will increase the number of Prime subscribers and could, in turn, encourage more subscribers to watch Prime Video content.
HBO Max and Disney+ recently launched in the CEE, in Q1 and Q2 2022 respectively. HBO Max benefits from the transition of its existing pay-TV operations and quasi-SVOD service HBO Go to the pure SVOD platform what HBO Max is, “and can therefore expect a strong user base from launch,” Sillars suggests.
“Disney+ offers a new proposition for many markets in Central and Eastern Europe and offers significant potential for market disruption. Disney+ will see its subscriber base at launch, supported by bundles in Poland, making the service accessible to millions of users, and strong growth will be expected outside of these bundles well into the forecast period.
Paramount has yet to launch its renamed Paramount+ streaming service, but Paramount hubs exist within local pay-TV and OTT platforms. These are present in several CEEC markets, including Hungary, Poland, Russia and the Baltic countries.
“Despite this, Paramount+ will not launch its standalone SVOD platform in CEE, but will instead launch it as part of SkyShowtime in the majority of CEE markets in the second half of 2022.”
Local SVOD Players
A number of large markets in Central and Eastern Europe are home to a vibrant and unique SVOD market where local players have been able to thrive.
The largest SVOD addressing only a domestic market is Russia KinoPoisk HDwhich is part of Yandex’s all-in-one subscription—YandexMore. Similar to Amazon Prime, Yandex Plus gives subscribers access to streaming music, ad-free videos on demand, free shipping on online purchases, and more. It is the largest SVOD in the EEC, with over 10 million active subscribers, per amp.
Several pan-national services are also present in the region. Among these, the most important are Voyo and Go3each of which caters to a small number of countries only within CEE (Go3 in the Baltics and Voyo in South East Europe).
“The Baltic States are one of the few regions where Netflix is not the market leader, here Go3 is in pole position, with a market share approaching 45%,” says Sillars. “A local content offering as well as partnerships with local pay-TV providers and international OTT players have enabled this pan-national player to achieve dominant market status with a subscriber base expected to grow to over 400,000 subscribers. by the end of 2022.”
Voyo is available in five Central and Eastern European markets, but was most successful in its two main markets, Czechia and Slovakia, where it overtook HBO Max and Amazon Prime Video to become the second most popular OTT service. most subscribed, behind Netflix.
Supported by broadcaster Central European media companiesAmpere expects Voyo to reach 900,000 subscribers in all markets by the end of 2022, after starting 2020 with just 150,000 subscribers.
Russia is in its own niche with local services providing local content through a variety of monetization models. Russian protectionist policies have prevented international services from competing on a level playing field, allowing SVOD services unique to Russia to fill the void.
HBO had a streaming service in some regions before HBO Max launched, so it basically expanded that service to become HBO Max in a lot of its territories. As such, it has a number of existing and upcoming local series (The Informant from Hungary, The Winner from the Czech Republic).
Less known is by play, but Omdia reports that it already has plenty of original productions for its home Nordic territories. It launched in the Baltics in the first half of 2021, then in Poland in August 2021 and has a number of original Polish series in the works. Viaplay has also acquired major sports rights for these markets to broaden the attractiveness of the service.
“Because there is not this incentive to reduce costs to attract Eastern European consumers to online video services, the quantity and quality of content offered by these services will be more stretched to generate new subscriptions,” says Evenson.
Pay TV and OTT mix holds the key
Average SVOD penetration in the CEE is just under a quarter (22%) of households, mainly limited by broadband penetration, payment methods and limited local content. This leaves the region’s SVOD market relatively underdeveloped and with significant untapped growth potential. The key to whether this potential can be realized is whether consumers view SVOD services as a complement to pay-TV or as a suitable substitute.
“There is still room for growth, but due to the more complementary relationship between pay TV and online video, the online video market ceiling is likely to be lower in the near future,” says Evenson.
Evenson highlights two main differences impacting the growth of online video in Eastern Europe versus Western Europe or the United States. First, the penetration of broadband connections and video-enabled mobile connections (4G and 5G) is much lower in the region, which limits consumers’ access to online video services. Second, the cost of pay TV packages is much lower overall in the region.
“This means there is no significant incentive for consumers to switch from pay-TV to SVOD from a purely economic perspective, which kick-started the growth of online video. in the USA.
Because pay-TV is holding up, partnerships between telecom operators and online video services are deemed “very important” for any streamer wishing to enter the market. For Pay-TV providers, offering Pay-TV customers the option to add an OTT subscription to their overall TV package means they can keep their customers happy and not lose them altogether, which further helps TV paying to hold on.
Ampere notes that attitudes towards SVOD will vary widely due to the wide range of pay-TV prices in the region, from $23 per month in Slovenia to just $2 per month in North Macedonia.
“International SVOD prices will need to match the needs of each individual market,” says Sillars. “Services like Netflix will never lead to cutting the cord in a market where pay-TV’s monthly ARPU is $2, while charging $7.99 for their cheapest tier. While pay-TV can be expected to have significant inertia, high-ARPU pay-TV markets in CEE may begin to experience a wave of cord cuts with the launch of new US SVOD services. offering a contract-free alternative to pay TV. ”