There’s never been a better time to be a connoisseur of video. The proliferation of platforms and content options across the media landscape is growing at a breakneck pace, and the amount of choice is only going to increase going forward. Surprisingly, however, people in the Netherlands are actually retracting from the abundance of choice. In fact, the time they spend watching video has declined over the past five years as the availability of newer options has increased.
In developed media markets, such as the U.S., the expansion of new video options has had the opposite effect. Case in point, Americans now spend just shy of six hours with their TV-connected devices each week. So we believe the downward viewing trend among the Dutch will reverse course over time. In the meantime, however, recent viewing trends highlight just how important every minute of video consumption is—simply because marketers have fewer of them to monetize.
The value of 14 minutes
In the grand scheme of daily life, 14 minutes isn’t overly significant. But in the media world, a quarter-hour represents a critical window of time to connect with an engaged and focused audience. It’s also how much video viewing time Dutch viewers shed between 2014 and 2018. But not only do marketers now have fewer minutes to reach viewers, they have more platforms to engage with them on—or more platforms to search for them on, depending on your perspective. This raises the stakes for any brand trying to justify ad buys for specific channels or platforms.
As with all media markets around the globe, traditional linear (scheduled) TV programming in the Netherlands still accounts for the majority of video viewing. Nevertheless, linear programming has been the most negatively affected by the rise of other video options, namely subscription video on demand (SVOD) and transaction video on demand (TVOD). Linear programming’s share in the Netherlands fell from 81% in 2014 to 67% in 2018. We expect this trend to continue, whereby viewers will steadily increase their time with options they pay for at the expense of traditional, ad-supported options.
Given the entrance of new video options, it’s not surprising to see consumers gravitating toward content that specifically appeals to them—and they’re willing to pay for it. And that willingness to pay for it represents more of an opportunity going forward than traditional ad-supported models—even though TVOD and SVOD viewing time has not fully offset the dip in traditional video viewing over the past five years.
Consumers spent €418 million on TVOD and SVOD in 2018, which is an increase of 235% from 2014. Between the two options, SVOD is the one to watch, as spend on SVOD has more than quadrupled over the past five years.
Importantly, household names Netflix and Videoland weren’t the first to introduce subscription video services to Europe. Their widespread popularity today, however, makes it easy to forget that subscription services in the Netherlands date back to the 1980s—although they, along with the tech needed to support them, was far less advanced than what we have today.
FilmNet, which later rebranded as Canal+, is an example of an early subscription video service that helped bridge the gap between traditional television and cinema. Back then, consumers could pay a monthly fee and see relatively new films at fairly regular intervals. Today, FilmNet looks very different and offers content to consumers in the same way that other streaming providers do—accessible via internet across devices and locations.
Consumers Will Drive VIDEO Success GOING FORWARD
In terms of business models, ad-supported video is still top dog. Ad spend across linear programming is still dominant, but that spend will continue declining as choice increases and consumer preferences evolve. The ad-supported video model is not outdated, however, as we’ve tracked a 154% increase in ad spend across ad-supported video on demand (AVOD) content over the past five years. And at the end of 2018, total revenue from ad-supported video was dramatically higher than viewer-supported video.
At a more granular level, the revenue potential for each viewing minute is much higher with consumer-funded models. Monetization growth exists across both business models, but we’ve tracked a much higher rate of growth in SVOD and TVOD than in ad-supported options over the past five years.
Taking note of the shifting viewing and revenue trends, the market is responding. For example, RTL Netherlands has historically operated as an ad-supported broadcaster. The company saw that change was coming, and purchased Videoland to both offset declining linear ad revenue and capitalize on shifting viewing habits.
Other traditional broadcasters will likely enter the viewer-supported space, and we expect some companies will experiment with hybrid models: Consumers will pay reduced subscription fees in exchange for content with fewer ads than they would see in traditional programming. Hulu, for example, found that $5 subscription fees for content with some ads yielded $17 per viewer in revenue, compared with revenue of $11 per person for ad-free subscriptions. FOX Sport Eredivisie is another hybrid model, and Videoland plans to experiment with a hybrid option in 2020.
The addition of new hybrid models and increased interest in subscriptions will shift the balance of ad- and viewer-supported offerings. Ad-supported video accounted for 89% share in 2014, but that share had fallen to 81% five years later. By the year 2023, we expect the balance to be closer to 54%-46%, with ad-supported content accounting for 54% share.
We also believe that one minute of viewer-supported video will generate twice the revenue of ad-supported video by 2023.
According to a recent survey conducted by Panelinzicht and published by nu.nl, almost one-third of Dutch consumers 18 and older say they are prepared to spend up to €10 per month on a streaming service, and 31% are prepared to spend between €10 and €20 per month on a streaming service. Smaller groups say they are prepared to spend even more. Only 27% say they’re not willing to spend anything. On an annualized basis, the potential revenue from the interested viewers amounts to just shy of €1 trillion (€955 million). We believe the actual revenue from SVOD will be closer to €930 million, based on the revenue trajectory between 2014 and 2018.
While we expect significant revenue growth from subscribers, advertisers will increase their expenditures over the next three years as well. That increase, however, will largely fall into the AVOD realm, while ad spend across traditional TV will decline.
The proliferation of new content options across the media landscape is unmistakable. Consumers are connected throughout their days, and digital will continue to permeate our lives. That will help us get more done, better communicate with one another and provide new forms of entertainment. Video remains a mainstay in the Dutch media diet, but the time people spend watching has dipped as new offerings have emerged.
Those new offerings, however, hold the promise of lucrative potential for content creators, content distributors, broadcasters, advertisers and brands alike. We include broadcasters in the mix because despite the rising popularity of viewer-supported options like SVOD and TVOD, ad-supported AVOD revenue is growing as well.
There is clear tension between traditional and newer business models. We know from recent history, as well as from other markets, that choice is not black and white when it comes to media choice. That is why we’ve seen different business models succeed. In the end, the content, not the business model, will drive success in the future. When consumers are presented with good content, they will seek it out and engage with it—regardless of business model. And that is what will drive the future of the market’s video industry.
The insights in this report were derived from the following sources:
- Audience measurement: Stichting Kijkonderzoek (SKO) and Media:Time
- Ad spend: Nielsen
- Viewer spend: Nielsen calculated using Telecompaper data + public data from subscription services
Linear TV viewing in the Netherlands is largely mapped out by the Dutch viewer audience measurement service (Stichting Kijkonderzoek, SKO), which determines and measures the currency in the Dutch market on behalf of publishers, advertisers, and media agencies. Media:Tijd conducts a biannual study of viewing on devices other than the TV set. We have used the sum of the SKO figures and the figures from Media:Time to determine the viewing time on the TV screen and other devices.
Nielsen tracks annual advertising spend. Originally, advertising focused on broadcast TV commercials. Over the years, however, Nielsen added online video ads.
Nielsen calculated viewer spending on the basis of Telecompaper data in combination with public data such as subscription prices and information from the Netherlands Film Fund (Nederlands Filmfonds).
To calculate the revenue from SVOD, we used data from Telecompaper, which tracks the number of subscribers from streaming services on a quarterly basis. Per year, we have calculated the average number of subscribers and multiplied it by the applicable subscription prices. To calculate the average number of subscribers, we have included both regular and trial subscriptions because it’s not possible to distinguish real and trial subscriptions over time and across all providers.