Feature

Outflanked by Netflix, Amazon and Hotstar, domestic broadcasters rethink OTT

As Canal+ shutters its OTT service due to competition with Netflix, The Drum finds out how broadcasters and streaming platforms around the world are planning to compete with the US giant.

When Canal+ launched back in the 1980s it shook up the Frech media scene with a slate of American films and football. Since then it has become one of the most significant pay TV players in Europe and, via Studiocanal, one of the major funders in European cinema – through which it is obliged to spend 12.5% of its annual revenue on film production.

Given Canal Plus Group’s prominence, it was a surprise when, earlier this year, chief executive officer Maxime Saada announced its streaming video on-demand (SVOD) service Canalplay would be shuttered.

“It’s over for CanalPlay,” Saada told the French Senate. “In the last two years we have been taken off the map in this market.”

Amid the opulent surrounds of the Palais du Luxembourg, Saada explained that France's strict anti-trust laws, a loss of Ligue 1 sports rights and a shortage of exclusive content has left Canalplay “walking with a ball and chain” as it competes with Netflix and Amazon.

And the subsequent loss of funding for the local screen sector, he declared, means “French fiction will disappear!”

In May, Netflix surpassed Disney to become the most valuable US media company – the company’s stock has risen 70% since January. In June, Amazon began streaming coverage of the Queen’s Club tennis tournament and this month it holds exclusive UK rights to the US Open. Between them they reach 230 million subscribers worldwide.

Saada’s confession that Canalplay had been unable to secure exclusive content was candid, given the importance of original shows to Canal+’s offering. It was unsurprising, however, given the intense competition for quality content in local broadcasting markets. While the position of US streaming services seems unassailable, public service broadcasters, established networks and new players around the world are planning a counterattack.

With deep pockets and the agility to capitalise on hit shows, Netflix and Amazon have made serious inroads in the UK. “The growth of these services is astounding, considering how quickly it’s happened,” explains Tom Harrington, a senior research analyst and broadcast specialist at Enders Analysis.

“Linear television still accounts for the vast majority of television watched in the UK, but they’ve come from a very low base and now it’s quite normalised as a deliverer of content.”

Their progress has been aided by a run of bad luck for competitors. Broadcasters were thwarted when an early joint effort to launch an on-demand streaming service was blocked by former monopoly watchdog the Competition Commission.

Rights negotiations have since hamstrung efforts by the BBC, Channel 4 and ITV to boost the popularity of their own streaming services, explains Harrington, by limiting inventory. “It’s harder for broadcasters. If you commission something from a producer in the UK you’ll get to broadcast and provide about 30 days of catch-up, and then the rights return to the producer and they’re free to sell them on however they want.”

ITV's head of studios Kevin Lygo touched on the issue during a Q&A session at the Edinburgh International TV Festival last week. Exclusive access to new content was a "corporate responsibility" for the network, he said.

While broadcasters in the UK hold limited rights to content produced by third parties, many players are also held back by public service obligations, Harrington says. “They make content that isn’t necessarily popular but which needs to be made, like news or education or religious content, while purely commercial concerns like Netflix can concentrate on a narrower suite of content.”

Elsewhere in Europe, Netflix and Amazon are less popular but still ahead of established broadcasters in the streaming space.

The largest European media networks like Rai, ZDF and France Télévisions have been held back by rights deals and now face being entirely outgunned by Netfix’s original productions.

Co-production deals have been used as a way to divide and conquer the European production market, Harrington explains. “Not everyone wants to watch American stuff, and so Netflix is making more internationally.

"They know that the subscribers they're going to find in the future are outside the US, so in the last few years they've made a lot of co-productions with local broadcasters who sort of have to go into these deals with competitors because they wouldn’t be able to make these shows otherwise.”

Netflix has followed up a slew of co-productions on shows like Troy: Fall of a City, The Worst Witch and Lilyhammer with investment in European production hubs of its own, based from London and Madrid.

Despite their current success in Europe, US digital streamers have had a hard time breaking into the second-biggest online media market on the planet – India.

In fact, the most popular streaming service in India is Hotstar, which now boasts 150 million monthly active users despite launching just three years ago.

Ajit Mohan, who is the chief executive officer of Hotstar, tells The Drum that the streaming service has taken the lead because of the strength of its inventory – which includes a vast library of domestic television, Bollywood cinema and live Indian Premier League cricket, as well as American imports.

“Our catalogue is unlike any streaming service in the world,” he says, explaining that Hotstar sees “the role of originals quite differently to others,” though the service has produced several shows of its own through co-production deals.

“When we have seen the opportunity to build a story or a format that no one has done before, we have gone after it.”

The company’s edge in India, Mohan says, can be credited to it embracing both premium and non-premium users. With recent advances in 4G accessibility in the country, Hotstar welcomed millions of new users who access its content in exchange for being served ads, allowing it to reach viewers unwilling to stump up for Amazon and Netflix’s more expensive propositions.

He says that the company has copied the best parts of the traditional broadcaster model while remaining a tech company. “We are quite keen to keep the gate open for these new users while at the same time gradually nudging them to pay for the service.”

And while Hotstar maintains its lead over US competitors with a deep well of local content, Mohan suggests it might become a bigger producer of its own programming in the future – a development that could sharpen its competitive edge further.

“The volume of content created here has been some of the highest in the world, especially when you include cinema. We believe we can turn on that tap for creators and be a platform to showcase stories that have not been told in India.”

The lukewarm reception to Netflix’s second quarter results indicate that competition is beginning to slow its momentum. In the UK, Sky’s Now TV has made progress following huge marketing investment while the BBC, Channel 4 and ITV are in early-stage talks to launch a merged streaming service – a project which has already been passed through by Ofcom and which could be key to their long-term survival.

France Télévisions, Rai and ZDF are reportedly planning a similar initiative with pan-European ambitions, and Harrington notes that broadcasters have become smarter at distributing online content by putting entire series such as Sky’s Save Me and BBC-produced Happy Valley online all at once. “Broadcasters are beginning to replicate that distribution model.”

And while Hotstar’s hybrid model threatens to blot out the ambitions of its rivals in India, Netflix and Amazon will also soon find themselves challenged for domination of their core US market with Disney’s own streaming proposition looming over the horizon.

The proliferation of so many streaming services across the world, along with audiences hungry for content, has led to “a renewed focus on stories and the quality of scripts,” says Mohan. And while French fiction may yet disappear, viewer demand for better quality, domestically produced film and television looks set to drive production in markets outside the US for many years to come.

To read more on the changing shape of video – including interviews with livestreaming giant Twitch, upstart sports streamers Dazn and Game of Thrones actor Maisie Williams who has launched a new app aimed at creators – check out the September issue of The Drum magazine.