Who will win the Nordic streaming war?

5 March 2019

Competition on the Nordic streaming market is ramping up with several new services about to launch. Content investments are escalating and only partly offset by price increases. In the US, Netflix recently announced +13-18% on subscription fees. For the Nordic players, the prime question will be how to relate to this astounding surge of both services and content. One way forward could be a tougher attitude towards sharing subscriptions, something that more than 1 in 3 households do. In any case, we should expect new pricing and packaging strategies as the market is reaching maturity.

Nordic consumers have a wide range of online video services to choose from, both global and local. And soon the palette will grow even greater. Disney is about to launch  Disney+ (anticipated to be the biggest threat to Netflix’ dominance) with original content from Marvel, Pixar and other brands, as well as content from the recently acquired 21st Century Fox (including X-Men and Avatar). WarnerMedia, the division of AT&T that includes HBO, Turner and Warner Bros, has also announced the launch of a three tier streaming service.

It has also been speculated how much and what content will be removed from Netflix, as the fight between the US giants ramp up. Interestingly, in its Q4 2018 report, Netflix said it is more concerned about competition from other types of activities (especially mentioning Fortnite – currently one of the world’s most played video games) than from Disney. Earlier, in 2017, Netflix CEO Hastings made a similar comment when he mentioned “sleep” as a competitor to binge viewing.

The conclusion, nonetheless, is that we are facing even larger content investments. Netflix, for example, is expected to spend the almost incredible sum of USD 15 bn on content 2019. Likely, Netflix’s recent price hike on the US market is a result of increased content investments. And now the American giant is testing price increases in Europe. So far, trials have been reported in Poland and Italy. In the Nordics, no such move has been observed – yet. The latest price raise was in 2017 (chart below).

The price increase in Sweden did not (seemingly) impact Netflix’ customer growth; the number of subscribers has grown steadily ever since. Mediavision’s tracking of price and packaging for Nordic SVOD services show that most actors continuously adjust their prices – either by simply increasing the price, or by changing both content and price. To illustrate, TV 2 Play in Denmark offered three different packages in 2016 – today only two (Basispakken and Hele pakken), but with four different price options.

Another way for streaming services to increase ARPU, would be to become less generous in allowing households to “share” subscriptions. In H2 2018, on average 40% of the Nordic subscribing households said that they shared their SVOD subscription outside the household. Mediavision estimates that for Netflix in the Nordics this means losing out on revenues close to 10 million EUR each month. The giant stays positive on sharing however, claiming it to be a “great marketing” channel. Maybe another reason to sit back is the obvious risk that such a move would backfire in an expansive and unwanted mobility, i e churn.

So, who will be the winner 2019 on this quickly maturing Nordic market? Not an easy question to answer – and even tougher to execute. A balancing act for the streaming companies; the right amount of investment on the right kind of content with the right price tag. And as Netflix is the clear market leader, its’ price strategy will greatly impact all other services – local as well as new global. On the consumer side, maybe the conclusion is easier: Stacking will grow, resulting in bigger bills – even if prices are stable. Interesting times ahead!