Catch the eye of consumers

By Ennèl van Eeden and Casper Scheffer

A four billion euro game

It is hard to recall what the world looked like when a television was the only screen in a household, perhaps even the only screen in our daily lives. The omnipresence of screens has changed our lives for good. Screens are never ‘off’ – with 24/7 connectivity consumers are almost guaranteed there will be something new every time they look. Enabled by technological developments, many market players jumped at the opportunities presented, new disruptors emerged (such as Netflix), and the more traditional players (e.g. TV broadcasters) feel discomfort. Today’s currency is the time of the consumer, such that it is your content or your ad that captures the attention of audiences. In this section, we take a deep-dive into the world of video entertainment. 

Netherlands Historical data Forecast data CAGR %
  2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 17-21
Pay-TV subscription 1,141 1,102 1,108 1,127 1,147 1,180 1,207 1,225 1,241 1,254 1.8%
Physical home video 227 176 136 108 86 74 67 64 62 61 -6.7%
OTT/streaming 29 53 84 158 242 290 323 342 362 375 9.2%
TV advertising 962 933 964 965 992 953 975 984 1,007 1,016 0.5%
Video games 518 534 639 738 840 931 1,006 1,065 1,113 1,160 6.7%
Filmed entertainment 250 255 256 282 294 296 299 302 305 308 1.0%
Internet video advertising 29 53 84 158 242 290 323 342 362 375 9.2%
Total 3,167 3,110 3,262 3,463 3,707 3,854 4,030 4,156 4,282 4,379 3.4%

Video games is closing in rapidly on Pay-TV

The video entertainment market, including video games, amounts to approximately €3.9 billion in 2017 and will increase in the coming years as part of the total market increase and will be around 28% of the total market. Pay-TV and TV advertising have been the largest contributors for many years. But video game revenues are closing in rapidly, and the continuous introduction of new OTT/streaming offerings, such as Facebook’s new video platform “Watch”, should be considered as a driver of change in this market.

Basically all demographics contribute to the video entertainment market. Where older generations are assumed to contribute more to Pay-TV and TV advertising, younger generations are associated with via Internet video (including online spots such as Youtube) and video games.

OTT on the rise, but still well below Pay-TV

The dynamics of the video entertainment market are changing rapidly, with traditional TV viewership falling as consumers increasingly prefer time-shifted viewing across a range of devices and platforms. According to SKO, the average daily TV viewing time in the Netherlands decreased to 183 minutes in 2016, down from 200 minutes in 2014. As illustrated in the graph, broadcasters have been able to increase total TV advertising revenues compared to 2012 levels. For 2017, we do foresee a €40m - €50m correction.

The impact of changing viewing behaviour on Pay-TV revenues is still limited. Pay-TV penetration is extremely high in the Netherlands, with households remaining eager to access premium video entertainment across a range of devices. Pay-TV revenues reached €1.1bn in 2016 and are set to grow at a 1.8% CAGR to 2021. Regardless of the high penetration rate, the market is keeping a close eye on global trends such as the rise of cord-cutters and cord-nevers. In particular, as the supply of online content is increasing rapidly (e.g. launch of live TV by NLZiet), terminating TV subscriptions becomes a serious option. As a response, Ziggo and KPN, by far the largest providers in the Dutch market, are increasingly moving towards quadruple play attempting to increase customer retention. 

Double down on blockbusters

OTT is growing at a faster rate than Pay-TV, with revenues of €242m in 2016 up from just €29m in 2012. With the strong broadband infrastructure, consumers have been attracted to the convenience and instant nature of buying, renting and subscribing to premium entertainment and sports content electronically across a range of devices.

Tablets have proven very popular in the Netherlands with penetration reaching 69% of households in 2016 (source: Telecompaper). This has had a significant impact on the way we consume video entertainment. Tablets are increasingly used for watching catch-up services from broadcasters; OTT platforms such as Netflix and Amazon; TVOD from iTunes; and online video and social media channels such as YouTube, Twitter and Facebook Live. With nearly 86% of mobile phone connections being smartphones in 2016 (source: Telecompaper), there is also widespread video uptake on phones.

Due to a growing number of ways in which audiences can be reached and the attendant rising competition, media companies place more emphasis on content and user experience than ever. In this enormous amount of content, blockbusters continue to dominate. Overwhelmed by content choices, consumers fall back on the familiar; relying on recommendations from friends, algorithms and rankings.

Video games market claiming its piece of the pie, with vast unlocked potential

Gaming is claiming an increasing share of the wallet and time of consumers. Thereby directly competing with other E&M segments. The video games market is growing rapidly, with revenues beginning to rival pay-TV subscriptions for the biggest stake in video entertainment. Traditional gaming revenues continue to expand, underpinned by the rise of online gaming and in-game microtransactions. Online and microtransaction revenues attributable to console games will exceed that of physical console games within the next five years, with customers preferring the instant nature of downloads and added features available online for additional fees. Social gaming is also a key growth area, with app-based revenue set to expand at a 10.5% CAGR, outweighing the contribution from console gaming for the first time this year.

Console competition is driving innovation, with Microsoft set to launch its new Xbox One X console in late 2017. Sony upgraded its PS4 console with the PS4 Pro in 2016, primarily aimed at enhancing 4K resolution capabilities. Sony also launched VR gaming, although the expensive entry point has limited take-up. Nintendo opted for an entirely different strategy by launching the Switch, an all-new hybrid console, in March 2017. The console has showed promising worldwide sales figures with 4.7 million consoles in the first four months since its introduction, even though there is only a small number of games available. The revenues are expected to increase in the coming years, with exciting new games on the ticket for the remainder of this year and further on.

E-sports are growing globally, with some 43 million people worldwide watching the 2016 League of Legends World Championships, rivalling the viewership of some major live sporting finals. Although e-sports is also growing rapidly in the Netherlands, it is not expected to have a real impact in the market and will remain relatively small in the near future.

Cinema is a steady market sector but should continue to ensure its appeal to younger audiences

With an increasing range of video entertainment options available, including easy access to pirated content, cinema is looking towards more premium experiences to grow the market. This has traditionally included developments in screen size and picture quality, but also encompasses 3D, which is an experience that is difficult to replicate on the traditional TV set. Some cinemas have even started offering 4D experiences (“4DX”).

In June 2017, 4D cinema company CJ 4DPLEX announced a partnership with French cinema chain Les Cinémas Gaumont Pathé to launch new locations across Europe, including the Netherlands. 4DX offers motion pictures, augmented with environmental effects such as seat motion, wind, rain and scents.

The rise of OTT has had a limited impact on cinema. This is primarily due to the cinema experience being valued as a popular social group activity. However, the decrease in cinema attendance of the younger generations will negatively impact the cinema market in the long-term if the industry does not manage to turn this around. Cinemas not only have to continuously innovate, but they also need to use new and more focused forms of marketing that are supported by data analytics, if they want to successfully target the younger generations.

In 2016, &Samhoud Media opened its first permanent VR cinema theatre in Amsterdam, claiming it to be the world’s first. The theatre does not have a traditional screen, instead using swivel chairs and individual Samsung Gear VR and headphones, allowing viewers to turn and see a movie in 360 degrees.   

Contact us

Ennèl van Eeden

Global Entertainment & Media Industry Leader

Tel: +31 (0)88 792 45 40

Casper Scheffer

Partner, PwC Netherlands

Tel: +31 (0)88 792 65 20

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