Netflix (NASDAQ:NFLX) is the largest streaming service in the world. It has 167 million subscribers, and is still growing. But it's not growing at the same rate everywhere. In the United States, the market is much more saturated by Netflix in particular and by streaming services in general. For big-time growth, services like Netflix have to look elsewhere.
Markets in Asia are obvious areas for growth. South America, too, is getting attention from Netflix and its competitors. But the market most similar to that in North America is almost certainly Europe, where living standards are high, the internet is widely accessible, and the home entertainment market is established and large. With that in mind, let's look at the streaming market in Europe. How is Netflix faring against competitors like Disney's (NYSE:DIS) Disney+? How are Roku (NASDAQ:ROKU), Amazon.com's (NASDAQ:AMZN) Fire TV, and Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) Android TV faring in the platform wars? Here's how things currently stand.
Europe and streaming infrastructure
Before looking at the specific streaming services and connected-TV platforms that are battling over Europe, it's worth pausing to talk about how the European market compares with North America.
Like the United States, Europe is full of internet and broadband connections. But connectivity in Europe isn't quite on the level that it is here. Though some European countries enjoy faster average connection speeds than the United States, the U.S. ranks ahead of many more, and easily bests Europe in broadband penetration, including in rural areas.
Streaming services recently saw firsthand how the limitations of European communications infrastructure can lead to issues, at least under extreme circumstances: With communications networks burdened by the COVID-19 crisis, services like Netflix and Google's YouTube voluntarily slashed video streaming quality in Europe to free up bandwidth.
On the other hand, the internet service that Europeans get is often a whole lot cheaper. That's largely because of the competition among European internet service providers (ISPs). While American ISPs appear to carve out regional fiefdoms to create monopolies, European ISPs generally have competition within their markets. (Whether the methods of the American ISPs are intentional, monopolistic, and/or illegal is well outside the scope of this article.)
Europe also has stronger net-neutrality protections than the United States, leaving ISPs and mobile carriers fewer options for bleeding bandwidth-hungry services like Netflix for cash.
Europe's pay TV market looks different from the one in the United States, too. Cable TV was born in the United States, as a way for suburban and rural residents to receive over-the-air (OTA) channels.
In much of Europe, satellite TV is the dominant form of live TV. Furthermore, many European satellite subscribers aren't really pay TV users or subscribers at all. Many Europeans can set up a satellite dish and receive free TV in much the same way Americans can use TV antennas to receive free OTA channels, except that Europeans get impressive cable-like channel packages that dwarf the OTA selection in the U.S.
And this, in turn, is because many European governments are heavily involved in TV broadcasting. In the United Kingdom, for example, the most popular form of TV is Freesat, a free satellite TV service run via a partnership between the government-controlled BBC and private company ITV. Also quite popular is Freeview, the terrestrial (cable) counterpart to Freesat's satellite system. The U.K. also has paid subscription TV, including satellite (Sky) and cable (Virgin Media). And the country has a tax on TV-watching households in the form of its television licensing program, which funds the BBC.
So the European TV landscape is a bit more complex than it is in the U.S. Free and semi-free services run by governments should deincentivize cord-cutting of the sort that we've seen in the United States, which helps explain why Europe is not seeing that trend at the same scale.
Finally, it's important to remember that Europe is not monolithic. The penetration of subscription video on demand (SVOD) is very high in some countries and relatively low in others. SVOD penetration stands at 85% in Denmark and 74% in the United Kingdom, but it's only at 28% in Ireland and 25% in Belgium.
Streaming services and market share
With all of this in mind, how are streaming services faring in Europe?
The simplest way to look at the European SVOD market is to view it as a duopoly. Together, Netflix and Amazon absolutely dominate the European streaming market. Their combined market share in European Union nations is nearly 80%. In certain countries, it's even higher. In France, for example, the two had 97% of the market locked down as of the end of 2018.
Of the two, Netflix is larger. It had 46 percent of the market in the EU as of the end of 2018, which beat out Amazon's 33%. Together, all of these services' competitors could only manage 21%.
The two giants have been relatively unchallenged, but that may be changing. In March, newcomer Disney+ made its way across the pond. Disney+ launched on time last month in much of Western Europe, and on April 7 in France after a delay related to COVID-19.
Disney+ isn't the only new streaming service on the block. Apple's (NASDAQ:AAPL) Apple TV+, Comcast's (NASDAQ:CMCS.A) Peacock, and AT&T's (NYSE:T) HBO Max are all newly arrived or expected shortly in the United States. But making it to Europe could present problems to at least some new services. In particular, those backed by media companies could have an issue: AT&T's HBO, for example, has existing deals with European TV providers (including government-controlled providers) that could hamper its efforts to get HBO Max up and running with all of HBO's content on board.
There are also issues with localization. Even Disney+ and Apple TV+, both of which are live in Europe as of this writing, will deal with regional difficulties. European regulations mandating that 30% of video content be locally produced are likely to be a headache for both services.
Europe's SVOD market isn't the whole story. Other types of streaming services exist. Taking a wider view of streaming in Europe, we can see that Google's YouTube is doing particularly well.
Streaming devices and market share
What about streaming devices?
Compared to its SVOD market, Europe's market for streaming platforms and devices seems pretty wide open. That may change soon. Amazon's Fire TV platform has footholds in the United Kingdom and Germany, and Amazon made moves in 2019 to expand that presence within and beyond those countries. Roku, too, is making big moves in Europe. Its focus has been on the U.K., where it hopes to break into the market with its Roku smart TVs despite the fact that its partners Hisense and TCL don't have strong market shares in Britain.
The streaming platform with the strongest position in Europe is Android TV, though it has gotten to the top of the heap without the cord-cutting focus that many American observers might have expected. Android TV is a relatively flexible media platform built on Google's Android mobile operating system. It's the basis for Amazon's Fire TV, among other offshoots. And it has grown under Google primarily as a licensed product. Though Google will reportedly soon have a flagship Android TV box of its own, Android TV has generally been licensed out to smart TV manufacturers and third-party makers of streaming devices. In Europe, Google's Android TV partnerships have generally focused on pay TV companies.
Among the TV providers using set-top boxes powered by Android TV are Denmark's Stofa, Sweden's Con Hem, and many, many more. As of 2018, Google claimed to have more than 100 pay TV partners, and most of those partnerships are based in Europe and Asia.
Google's deals with pay TV providers make Android TV the most popular streaming media platform in Europe precisely because it is found in the homes of those who haven't cut the cord (that is, legacy pay TV subscribers). That makes it tough to compare Google's Android TV market share to that of Roku or Amazon Fire TV, since they're targeting cord-cutters (though Android TV's competitors are getting into pay TV deals, too).
But it also suggests that Google's forthcoming Roku competitor would have an inside track with European cord-cutters, who might already be familiar with the Android TV interface that such a device would use. That's in contrast to how things are stateside, where Android TV's market share is relatively small, and consumer familiarity with the Roku and Fire TV platforms (which have a combined market share of nearly 70% in the U.S.) is a clear asset to those platforms and the products they arrive on.
The future of European streaming
The European streaming market is large, but not static. In some countries and areas, SVOD penetration remains relatively low. New competitors are still arriving in Europe, and big players like Disney+ may have something to say about the current dominance by Amazon and Netflix. Meanwhile, the streaming device market is dominated by set-top boxes and smart TVs, making it hard to predict how streaming boxes and devices aimed squarely at cord-cutters might fare as Roku and Fire TV expand -- especially given that Google may soon have a competitor that runs the platform Europe is most familiar with.