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Maria Rua Aguete • Senior Director Media & Entertainment, OMDIA

“SVOD services must brace themselves for a much slower 2021”

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- The media expert commented on Netflix’s Q1 slowdown in subscriptions and other emerging trends in the current SVOD landscape

Maria Rua Aguete • Senior Director Media & Entertainment, OMDIA

We caught the opportunity to speak to Maria Rua Aguete, Senior Director Media & Entertainment at OMDIA. Our conversation revolved around Netflix’s Q1 slowdown in subscriptions and other emerging trends in the SVOD landscape.

Cineuropa: What happened to Netflix’s growth trends during Q1 2021? What about other major players such as Amazon and Disney+?
Rua Aguete: Netflix recently reported its Q1 net paid subscriptions figures, namely +3.98 million (against an expected 6.29 million/15.8 million new subscriptions in the first three months of 2020), reaching 207.6 million global subscriptions. Netflix said it only expects to add about 1 million subscribers in the current quarter. In this sense, Netflix’s relative shortfall is not caused by the increasingly competitive OTT subscription video landscape. Despite new services finding significant traction in various markets around the world, consumer thresholds for the number of paid OTT video services taken has proven to be a resilient and climbing statistic around the world.

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For the most part, there is still enough to differentiate the various services in terms of content at a price that still lends itself to taking multiple options at an affordable rate. In less than two years, Disney+ has grown to half the size of Netflix globally. However, consumers see the services as complementary and are keeping both as household staples alongside Amazon Prime Video. 2020’s extraordinary growth was more ‘front-loading’ for the industry, with the additive effects not set to manifest until the world returns to relative normalcy. This, combined with inevitable shortfalls in content production, even from services with heavy backlogs, will likely see relative shortcomings in growth for the first half of 2021.

Why this slowdown in subscribers?
It is not really the effect of Disney or Amazon. These three services will still dominate the streaming market in 2025. It was more due to the huge growth that streaming video saw in 2020. 2020 was a record-breaking year for SVOD, caused by the unexpected uplift from COVID-19. Households in lockdown have binged content, driving significant uptake of both incumbent and newly-launched SVOD services. But having exhausted the pool of new households to sell to, SVOD services must brace themselves for a much slower 2021. The closing year 2020 has seen SVOD grow at one of the fastest rates on record. In fact, in absolute terms, this year has seen more subscribers added to the VOD industry than at any other point in history, and most likely, at any point to come. However, all industries tend to move between waves of growth and pools of stagnation, and SVOD is no exception. While 2020 was a year that will go on record, 2021 will be a year of industry-wide cooling despite the myriad services coming from big Hollywood players including Discovery, NBC, Viacom and Warner. To grow now, especially when faced with new competition, services such as Amazon and Netflix must refill the pot and gain access to new sources of subscriptions. In essence, this means being more open to integrated deals with consumer gatekeepers, such as pay-TV providers and telcos. These deals will include further integrated libraries and even the bundling of SVOD services.

What type of counter strategies would you expect from streamers in terms of content production?
In 2020, Netflix transmitted original programmes from 43 countries other than the US. While the need to drive its services into more and more countries worldwide is key, Netflix is also looking for content that can resonate globally. Perhaps it’s no surprise, given the increasing popularity of South Korean content, that Netflix launched 392 hours of content from that country. Netflix has long-term partnerships with JTCB and Studio Dragon and says it has invested $700m in South Korean content since 2015. Other countries providing a large volume of content are the UK, Colombia, Spain and India, where Netflix planned to invest $420 million in 2019 and 2020. The streamer has also leased production facilities in Spain, South Korea and the UK, and this year made only its second production company investment when it acquired a 75% stake in Broke and Bones, owned by Black Mirror creators Charlie Brooker and Annabel Jones. Both Amazon and Netflix place a strong emphasis on drama — the genre represented 50% of their originals in 2020. Amazon offered 194 hours of drama, and Netflix 1,285 hours. Hulu, CBS All Access, Peacock and HBO all led with scripted drama as well, though in much lower volume. The advent of new D2C platforms has changed the mix somewhat — Disney+ has a strong offering of children’s and family content, while CBS All Access, Hulu and HBO Max also offer significant amounts of children’s programming. Disney+ has also drawn on the Nat Geo and Disneynature libraries to offer a lot of factual programming and documentaries, and YouTube now focuses on unscripted content after dabbling in scripted.

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