The online video landscape in the Netherlands is in a state of flux. More and more streaming services are being added, some are moving to advertising models and RTL XL is disappearing. We briefly take you through all the developments in the market and also show you the challenges and opportunities for advertisers. Indeed, with competition in the online video market, consumers are becoming accessible again with video ads.
Market development 1: Number of new streaming services peaks in 2022
2022 is the year of launches of new video-on-demand (VOD) services in the Netherlands. Last spring, Viaplay and HBO Max launched. This week, another platform joined them: SkyShowtime. This streaming services has content from several well-known studios such as Universal Pictures, DreamWorks, Paramount Pictures and the television channels, MTV, Nickelodeon and Comedy Central.
The arrival of this new streaming service brings the total number of paid streaming services in the Netherlands to 13. Besides the linear TV offer and the free online services such as NPO Start, KIJK.nl and RTL XL, the choice for consumers is enormous.
With every launch you can ask the question whether there is still room for a new provider. Looking at the numbers, it appears that so far the market is not yet saturated. Both Viaplay and HBO Max gained significant market share in 1 month (7% and 8% respectively). However, existing providers, such as Netflix, Videoland, Disney+, Amazon Prime Video and NPO Plus, remained stable or even grew a few percent. So the market does not seem to be eradicated yet although the ceiling is in sight. Only less than 25% of consumers under 35 do not yet have a subscription. 30% already have two subscriptions.
The challenge for advertisers: Can you still reach consumers with video ads?
That consumers have more and more choice has been reflected for years in their media consumption, which is becoming increasingly fragmented. The average number of viewing minutes has remained unchanged in recent years in the Netherlands, hovering around 200 minutes per day, according to SKO data. Through which channels people watch, however, has shifted from TV and broadcast missed channels with ads to the paid video-on-demand services without ads. Because of this development, the opportunities to reach consumers with video ads seemed to get smaller every year. On the other hand, demand from advertisers does increase because reach through TV is proving increasingly difficult to build and ad space is selling out faster and faster. A tipping point seems close at hand.
Market development 2: Consumers don't want to pay more to streaming services
This apparently substantial growth, of course, is going to level off at some point. And we are seeing that now, news regularly comes out that Netflix, Videoland and Disney+ are losing subscribers. In various surveys, 45% to 65% of Dutch people say they are considering switching their subscriptions. A large majority say this is due to cost. Half would reconsider a subscription if the price goes down, and many of them don't mind seeing ads. So it is not surprising that streaming services, for whom advertising was long a taboo subject, are now revisiting this.
A significant group now uses friends' or family's login credentials. According to the latest figures, Netflix accounts for 26% of all Netflix users. Several streaming services have now announced that they will block this possibility starting in 2023. Netflix this week confessed to charging an extra 3 to 4 euros for users outside their own family. Only 25% of people who now watch through someone else's account are open to subscribing. Almost half switch to another service or stop streaming altogether. Nearly three-quarters do not yet know what they will do. This group may well be open to a subscription with ads.
Market development 3: From subscription-based to advertising-based, an opportunity for advertisers
In the battle for viewers, streaming services are trying to distinguish themselves in offerings, including local content. But price is also an increasingly important factor in this for price-conscious consumers. Especially in times of high energy prices and extreme inflation. This signal is also picked up by streaming services. For example, at launches there are stunts with a lifetime discount (HBO Max and SkyShowtime) and more and more streaming services offer a cheaper subscription with advertising to win (back) viewers. This in turn presents opportunities for advertisers to reach viewers with the most impactful form of advertising: video.
Netflix announced this month that it will launch a subscription with ads in November in the first seven countries (Basic with ads). This subscription will be three dollars a month cheaper than their cheapest subscription without ads. The ads will last between ten and thirty seconds. No more than four to five minutes of ads would be seen per hour. It is not yet known when this subscription will also be launched in the Netherlands. This is expected to be in early 2023.
Netflix has already announced that it will not be possible to advertise around children's programs. Furthermore, it will be possible to target specific genres and Netflix is fully committed to brand safety by giving advertisers control to prevent their ads from being seen on content with which they do not want to be assimilated, such as violence or sex.
One uncertain factor is how fast Netflix's potential reach for advertisers will grow. In the Netherlands, over 70% use Netflix and the question is to what extent people will switch to a cheaper subscription with ads. Videoland already launched a cheaper subscription with ads in 2019 and at that time most of the existing users kept the premium subscription. Now, however, we do see a trend where consumers want to reduce the total cost of multiple streaming services. In this consideration, advertising has only a small impact (13%) on the purchase decision. Price and number of users are at least 3x more important as a deciding factor.
Disney+ also announced in March this year that it will come out with a cheaper subscription where commercials will be shown. This will be about 4 minutes per hour and will launch Dec. 8 in the U.S. and is expected to be rolled out internationally in early 2023.
Viaplay also appears to be testing in-screen advertising banners during Formula One broadcasts. A remarkable move, since viewers pay eight to fourteen euros per month to use the service. Consequently, this rather intrusive form of advertising is not appreciated by users. In responses to complaints, Viaplay says it considers this advertising no more than normal during live sporting events. In doing so, they seem to ignore the fact that people pay heavily to watch with them.
Market development 4: Consolidation, RTLXL merges into Videoland
RTL announced in September that it will merge RTL XL with Videoland. Active users of RTL XL will receive an offer to take out a basic Videoland subscription with advertising at a reduced rate. This week RTL announced that Videoland will also launch TVgemist in early 2023 where RTL programs can be watched back for free up to 7 days after broadcast. This is expected to keep ad space equal to the volume of RTL XL.
By merging, RTL wants to offer all programs centrally on one platform, making it easier and clearer for viewers. RTL's move to merge its services is not surprising. GFK's Trends in Digital Media study, published early this year, already showed that the number of users of RTL XL fell from 21% to 7% between 2017 and 2021. And the use of Videoland increased from 6% to 23%. Unknown is how many Videoland users have subscriptions with advertising.
In the U.S., HBO Max and Discovery Plus, both part of Warner Bros Disney, announced this summer that the platforms will merge in the U.S. next year to reduce subscriber losses and cut costs. To increase revenue, Warner Bros Disney is already pushing for cheaper subscriptions with advertising in the US. In addition, Warner Bros Disney also plans to offer a completely free subscription with probably even more ads. It is unclear if and when this will be rolled out in the rest of the world.
In the future Free Ad-Supported TV?
Perhaps this is a first step back to free services with advertising. Globally, there is already a trend toward Free Ad-Supported TV. NPO Start and KIJK are examples of this. Videoland does not rule out offering such an option in the future. However, although we see this trend, the question is whether this is a realistic picture of the future. With an eye toward maximizing revenues, subscriptions generally yield the streaming services more than ads.
Figures in this article are based on several surveys: SurveyMonkey and Momentive (May 2022), Time2play (June 2022), Simon-Kucher & Partners (August 2022)