Central and Eastern Europe have not so far been the focus of US-based streamers, but with rollout in Latin America and Western Europe complete, the focus has turned to countries including Poland, Czech Republic (Czechia), Bulgaria, Romania, Slovenia, and Hungary (with Turkey and Russia). Netflix is dominant with Amazon Prime also well-established, but the introduction of Disney+ and SkyShowtime have the potential to unsettle and perhaps even dethrone the market leaders.
In 2020-21, streaming services across the world experienced a boost resulting from stay-at-home measures relating to the pandemic and Central and Eastern Europe (CEE) was no exception. The overall number of online video subscriptions in the region reached 31 million in 2021, up from 25 million in 2020, according to Omdia.
As more OTT services begin to look to the region as an expansion point, CEE’s SVOD subscriber base is projected to grow over 60% from 2020 to 2022, primarily driven by Netflix, and the launch of HBO Max and Disney+, in figures supplied by Ampere Analysis. This strong growth is forecast to continue into the future supported by the launch of new services including SkyShowtime and the steady improvement of broadband availability.
For most countries in the region, the subscription OTT landscape was, until recently, essentially limited to Netflix and Amazon Prime Video. The lack of alternative OTT options has limited churn but that is set to rise. The average CEE SVOD user subscribes to 1.6 services, but with the launch of more US competitors, rotational churn (subscribing to different services at different points of the year) could occur for budget-conscious viewers, says Callum Sillars, senior analyst, Ampere. “As the market becomes inundated with a deluge of competing SVOD services, cheaper ad-supported tiers could prove the difference and key to growth in a relatively price sensitive market.”
The major international streamers in CEE
Though far from reaching saturation, Netflix faces increasing competition as international, local, and regional players begin to catch up. In Q1 2022 Netflix ceased operations in Russia, causing the loss of 700k subscribers, but outside of this Ampere expects continued growth. The majority of Netflix regional subscribers are in Poland–some 2 million according to Omdia. Its local original content production has been limited to Poland too.
“Netflix have been making a big push in Poland,” says Sillars. “In 2016 it was the first CEE market in which Netflix localized its services. It has over 40 Polish titles in production, and Poland has received over $100m in original content investment to date. A new Warsaw office will soon act as a hub for the region – a sign of investment to come, with Poland set to be at the heart of Netflix’s CEE plans.”
As elsewhere, Apple TV+ remains highly dependent on Apple device owners, with the service garnering limited interest outside the footprint of this core user base. “In CEE Apple device penetration remains much lower than Western Europe due to expensive devices presenting a barrier to entry, curbing Apple TV+ success in the region,” says Sillars.
Matthew Evenson, Research Analyst for TV and Online Video at Omdia adds that the region seems to be less of a priority for both Amazon and Apple at the moment, although Amazon launched a localized version of its ecommerce store in Poland last year, so it can now offer more of the Prime benefits which will increase the number of Prime subscribers and could, in turn, lead more subscribers to watch Prime Video content.”
Both HBO Max and Disney+ recently launched in CEE, in Q1 and Q2 2022, respectively. HBO Max benefits from the transition of its existing pay TV operations and quasi-SVOD service HBO Go to the pure SVOD platform that is HBO Max, “and therefore can expect a strong user base from launch,” suggests Sillars.
“Disney+ offers a new proposition for many CEE markets and provides significant potential for market disruption. Disney+ will see its launch subscriber base, buoyed by bundling deals in Poland, which makes the service available to millions of users, and strong growth will be expected outside of these bundles well into the forecast period.”
Paramount are yet to launch their rebranded Paramount+ streaming service, but Paramount hubs exist within local pay TV and OTT platforms. These are present in multiple CEE markets including Hungary, Poland, Russia, and the Baltics.
“Despite this, Paramount+ will not be launching their standalone SVOD platform in CEE, but instead will launch as part of SkyShowtime across the majority of CEE markets in the second half of 2022.”
Local SVOD players
A number of major CEE markets are home to a dynamic and unique SVOD marketplace where local players have been able to thrive.
The biggest SVOD catering solely to a home market is Russia’s KinoPoisk HD, part of Yandex’s all-in-one subscription—Yandex Plus. Similar to Amazon Prime, Yandex Plus offers subscribers access to music streaming, ad-free on-demand video, free delivery on online purchases, and more. It is the largest SVOD in CEE, with over 10m active subscribers, per Ampere.
Several pan-national services are also present in the region. Prominent among these are Voyo and Go3, each of which caters to a small number of countries solely within CEE (Go3 in the Baltics, and Voyo across South-eastern Europe).
“The Baltic states are one of the few regions where Netflix is not the market leader, here Go3 has pole position, with a market share approaching 45%,” says Sillars. “A local content offering as well as partnerships with both local pay TV providers and international OTT players has enabled this pan-national player to achieve a dominant market status with a subscriber base expected to reach over 400k by the end of 2022.”
Voyo is available across five CEE markets but has been most successful in its two core markets of Czechia and Slovakia where it beats out HBO Max and Amazon Prime Video to be the second most subscribed OTT service, behind Netflix.
Backed by broadcaster Central European Media Enterprises, Voyo is forecast by Ampere to reach 900k subs in all markets by the end of 2022, after beginning 2020 with just 150k of them.
Russia sits within its own niche with local services providing local content through a variety of monetization models. Russian protectionist policies have prevented international services from competing on an even playing field, allowing SVOD services unique to Russia to fill the gap.
HBO had a streaming service in some of the region prior to the launch of HBO Max, so it essentially expanded that service to become HBO Max in a lot if its territories. As such, it has a number of existing or upcoming local series (The Informant from Hungary, The Winner from Czech Republic).
Less well known is viaplay, but Omdia report that it already has a lot of original productions for its home Nordic territories. It launched in the Baltics in the first half of 2021 and then Poland in August 2021 and has a number of original Polish series in the works. Viaplay also acquired major sports rights for these markets to broaden the service’s appeal.
“Because there isn’t that cost saving incentive to drive Eastern European consumers to online video services, the quantity and quality of content offered by these services will be relied upon more heavily to drive new subscriptions,” says Evenson.
Pay-TV and OTT mix holds key
CEE’s average SVOD penetration sits at just under one quarter (22%) of households, limited primarily by broadband penetration, payment methods, and limited local content. This leaves the region’s SVOD market relatively undeveloped and with significant unexploited growth potential. Key to whether this potential can be realised is whether consumers consider SVOD services as supplementary to pay TV or as a suitable replacement.
“There is still room for growth but because of the more complementary relationship between pay-TV and online video, the ceiling on the online video market will likely be lower for the near-future,” says Evenson.
Evenson highlights two main differences impacting online video growth in Eastern Europe compared to Western Europe or the US. First, the penetration of both broadband connections and video capable mobile connections (4G and 5G) is much lower in the region, which limits consumer access to online video services. Secondly, the cost of pay-TV packages is broadly much lower in the region.
“This means there isn’t a significant incentive for consumers to switch from pay-TV to SVOD from a purely cost-saving perspective, which is what kickstarted the growth of online video in the US.
Because pay-TV is holding its ground, partnerships between telcos and online video services are deemed “very important” for any streamer wanting to establish a foothold in the market. For pay-TV providers, offer pay-TV customers the option to add an OTT sub to their overall TV package means they can keep their customers happy and not lose them altogether, which further helps pay-TV hold its ground.
Ampere notes that attitudes to SVOD will vary greatly due to the vast range of pay TV pricing across the region, from $23 per month in Slovenia to just $2 per month in North Macedonia.
“International SVOD prices will need to match the needs of each individual market,” says Sillars. “Services like Netflix will never drive cord-cutting in a market where the pay TV monthly ARPU is $2, whilst charging $7.99 for their cheapest tier. Though pay-TV can be expected to have significant inertia, high-ARPU pay-TV markets in CEE could begin to experience a wave of cord-cutting arriving with the debut of new US SVOD services providing a contract-less alternative to pay TV.”