The German video market stepped up its dynamic transition in 2018, driven by subscription spending.
Consequently, it is the 5th largest in the world with an estimated annual spend of around €9 billion in 2018, up 6% on 2017, according to the latest Video Insights country report from Futuresource Consulting. With a robust pay-TV market, rapid progression of subscription video-on-demand (SVOD) services and a growing acceptance of transactional digital video services, annual consumer spend is on course to exceed €10 billion by 2022.
SVOD is the key element of the German video market, which has shown impressive, continued growth. There are now over 10 million households subscribing to one or more services, which means that a quarter of German households are actively engaging with SVOD. “Amazon Prime Video remains the market leader, but Netflix continues to make strong gains, with 50% growth of subscriptions in 2018,” said Tristan Veale, market analyst at Futuresource. “The two services are mostly complementary and there is room for both to thrive.”
“Moving forward, we expect multiple subscriptions per household to drive the market and, outside of these two streaming giants, there is a growing number of specialist services available directly, or via aggregators such as Amazon Channels,” added Veale. “We also expect major direct-to-consumer launches such as Disney+ in the longer term, along with broadcaster led initiatives in the near term, which will help maintain strong subscription growth. In 2019, the German SVOD market will have doubled in two years and is forecast to exceed €1 billion in 2020.”
“Consumer spending on pay-TV accounts for two thirds of the video entertainment market and growing, even though many European markets are seeing stagnation or even declines,” said Veale. “However, in Germany there is increased dynamism in the market, with an increased number of providers offering low cost, ‘pay-TV lite’ services as a viable alternative to the entrenched free-to-air/basic cable plans and premium subscriptions from Sky which are currently available.”
Five years ago, packaged media accounted for 90% of spend on home entertainment video in Germany (box office and pay-TV subscription excluded). By the end of 2018 Futuresource expects it to have dipped below 50%, though Germany remains the shining light in Europe for blu-ray discs.
“Some, but not all, of this deficit is being replaced by growth of digital purchasing or rental,” said Veale. “By 2021, we expect consumers to spend more on renting or purchasing digital movies and TV shows than they will on DVDs and blu-rays. However, transactional home video sell-through and rental is a declining market segment overall; spend is expected to fall by an average of 9% per year between 2018 and 2022.”
Smart TV is the springboard to premium digital video for many in Germany, and Futuresource expects German household penetration to have reached 82% at the end of 2018.
“As a result of all this action, the German market is in good health, and we’re seeing more obvious changes in consumer behaviour here than in many other countries,” said Veale. “It’s an exciting time for many players in the German video entertainment market, as opportunities continue to present themselves.”
