Professional Documents
Culture Documents
CCMP
G1914
Netflix: the SVOD
leader to conquer
the world *
Authors :
Christophe FAVOREU, Philippe
ROUSSELOT
Founding institution :
TOULOUSE BUSINESS SCHOOL - TBS
- The acquiring institution is authorized to disseminate the educational product to all of its teaching staff as part of
its teaching. The acquiring institution undertakes to:
- not to communicate or transfer all or part of the product to a third party who does not teach in the acquiring
institution
- Keep the logo(s) or trademark(s) mentioned in the product
All the rights related to the operating license are detailed in the General Terms and Conditions of Sale.
NETFLIX : the SVOD leader conquers the
world
© CCMP2017 – G1914
The purpose of this case is to question the performance and relevance of Netflix's strategy in the global
video-on-demand market. To do this, you will have to answer, in order, four questions :
1. Characterize the nature and importance of the type of competitive advantage developed
by Netflix in the streaming and subscription video-on-demand (SVOD) segment in the United
States as well as the key resources and skills on which this competitive advantage is based?
How is its business strategy evolving in this segment?
3. Analyze Netflix's ability to develop and establish itself significantly on the French market?
Through this question, you are asked to comparethe characteristics and competitive structure
of the American and French markets
4. In conclusion, what is your analysis of the current and future performance of Netflix and the
relevance of its strategy in the VAULT segment?
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
Rousselot 2
I. NETFLIX ................................................................................................ 6
A. ...........................................................................................................................
B. ...........................................................................................................................
The structure .......................................................................................................
of .........................................................................................................................
digital ..................................................................................................................
video ...................................................................................................................
consumption ........................................................................................................ :
respective importance .........................................................................................
of the ..................................................................................................................
VODA, ..................................................................................................................
EST.......................................................................................................................
and.......................................................................................................................
SVOD....................................................................................................................
segments .............................................................................................................
34 ........................................................................................................................
C. Nature .................................................................................................................. and
characteristics ..................................................................................................... of US
........................................................................................................................... SVOD
consumption ........................................................................................................ 35
D. ........................................................................................................................... The different
players ................................................................................................................ in the US
........................................................................................................................... SVOD
market ................................................................................................................. 36
1. .............................................................................................................. Subscription
.............................................................................................................. Streaming
Video ......................................................................................................
Platforms ................................................................................................ 36
2. .............................................................................................................. SVOD 38
customers
3. Suppliers ................................................................................................39
Figure 1: Evolution of Netflix's share price after the "split" (source: Boursorama) ...................... 10
Figure 2: Example of subscription pricing in France.................................................................... 16
Figure 3: The different stages of international development and the number of total international
subscribers ........................................................................................................................... 25
Figure 4: Number of VOD services available in European countries .......................................... 28
Figure 5: Global sales of connected TVs, PCs and mobile devices (in millions of units)................. 33
Figure 6: The U.S. video market (sales in millions of dollars). DEG 2015 - D.R ............................. 34
Figure 7: Revenue Generated by the Three Digital Video Segments ($ Millions ) ......................... 34
Figure 8: Share of SVOD and SVOD platform consumption by U.S. TV households ................... 35
Figure 9: The structure of VOD consumption in France (distribution in value and %)................... 41
Figure 10 : Media chronology at Numéricable ........................................................................... 52
Figure 11 : The three segments that make up VOD ................................................................... 54
Figure 12: The different modes of OTT and non-OTT video distribution ...................................... 55
Figure 13: Netflix Awareness Study ..................................................................................... 57
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
Rousselot 4
The results presented by the world leader in SVOD in terms of subscribers, its relatively ambitious
objectives in terms of internationalization, its very large catalog of programs offered at a very low price
as well as its colossal investments in rights acquisition and content production are all elements that
can be seen in the future.At the beginning of 2016, these fears are fully justified .
On the other hand, while growth in terms of turnover and subscribers has been meteoric in recent years,
the group has been on the verge of bankruptcy on numerous occasions andis still struggling to generate
profits internationally .
According to some, the business model as well as the strategy and competitive advantages developed
by Netflix would not be sustainable in the long term. Opinions are thus very contrasted between , on
the one hand, Neflix, perceived as a steamroller, with no competitive equivalent and whose accelerated
international expansion continues to feed its size advantage, and, on the other hand, Netflix, which, by
relying on an extremely efficient strategy and business model, is very competitive. fragile or even
not economically viable, would be closer to a colossus with feet of clay. It is very clear that the
international market is a fundamental growth driver and a necessity for companies.
However, there are a number of questions about Netflix's ability to impose its offering, export its
competitive advantages and, more generally, generate profitable growth. In addition, what are Netfli
x's capabilities to develop in Europe, and more specifically, in France, in view of its skills and
competitive advantages developed on the US market as well as the characteristics and specificities of
the French market (in terms of competitive structure , technology, demands and consumption habits)?
Is its leading position sustainable in the US market, a market that allows it to finance its international
expansion ?
Although the case is mainly about the SVOD segment, the other categories or segments will be discussed
and will need to be taken into account. Indeed, some of Netflix's players and competitors are
sometimes present in several segments. In addition, there may be substitution phenomena and
therefore some competition between the different segments (especially between VODA and SVOD). For
a definition of the different segments of digital video (VODA, SVOD, etc.), see Appendix 1.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
Rousselot 5
Born on October 8, 1960 in Boston to a father who was a famous lawyer and worked in
Richard Nixon's administration, Reed Hastings grew up in an upscale family . "He comes from the
highest American society, one could almost speak of nobility"2. He is the eldest of three children.
At the end of hishigh school studies, he decided to take a one-year break to sell vacuum cleaners door-
to-door. He later confessed: "As strange as it may seem, I loved the job. You meet a lot of people there
."
He then began brilliant studies in 1983 with a B.S. He graduated from the very posh University of
Bowdoin College in Maine and graduated with the prize for the best student in his class "with confidence
but without arrogance"3. After considering joining the Marine Corps for a while, he decided to teach
mathematics for three years as a Peace Corps volunteer in Swaziland5. At the same time, he discovered
artificial intelligence with passion and multiplied his reading in this field. This passion led him to resume
classes at Stanford University, from which he graduated in 1988 with an MS in artificial intelligence,
which confirmed his genius and passion for algorithms6.
In October 1991, at the age of 31, he founded the company Pure Software, which made life easier for
Unix users and quickly became a success. In 1995, the company was listed on the stock exchange.
However, Hastings is a brilliant engineer but a poor CEO. After a merger, Pure Software was sold in
1997 to Rational Software for $75 million. At the age of 37, Reed Hastings nevertheless became a
millionaire.
On August 29, 1997, with the financial capital generated by the sale of his company , Reed Hastings
teamed up with a developer friend Marc Randolph 7 to create the company Netflix. After hesitating to
start a DVD sales company, the two partners opted for a mail-order DVD rental service accessible
from the Internet. At that time, the economic model was daring: the DVD was still a rarely used
medium, when it was users resorted to buying rather than renting, the Internet was far from widespread
and DVD rental was only done via magas In the case of the United States of America, the United States
of The founders therefore bet on a triple break. At the time, the company employed 30 people. For Reed
Hastings, we should be able, like reading a book, to watch a movie or a series whenever we want,
wherever we want, and devour it if we want.
For observers, Reed Hastings is reputed to be a go-getter, with an exceptional intelligence that skilfully
combines intuition and methodical analysis: he was, for example, one of the first to understand the
importance of broadcastingfilms and series on the Internet, when in the early 2000s only 7% of
American households were connected and it took more than 16 hours to download a film via the Internet.
But, this personality will be very useful to him, in a way that is not so important.
1
P. Boulet-Gercourt, Challenges, October 19, 2012.
2
The Epix Battle for American Eyeballs, Gina Keating, Portfolio Hardcover, 2012.
3
Words of one of his teachers.
4
An independent agency of the U.S. government, created in 1961 by J.F. Kennedy with the mission of fostering world
peace and friendship, especially with Third World countries.
5 Southern
African countries landlocked by South Africa and bordered by Mozambique.
6 A set of operating rules that solve a given problem by means of a finite number of operations.
7
who remained a member of the Board until 2004.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
Rousselot 6
"At the very beginning, the company was dominated by marketing and creatives. They were the ones
who invented the interface, who really thought about how people would use the site. Reed had no
appetite for that aspect of things. In the eyes ofengineers, on the other hand, he was a rock star. He's
obsessed with two things: math, and the desire to make Netflix a global company. This was evident,
even in 2004, when they had to postpone their UK launch. I met with them quarterly for six or seven
years, and almost every time international expansion was a topic of conversation. 9.
At the end of 2005, Reed Hastings' genius was expressed in the creation of an algorithm that would
become legendary by surpassing those of his top10 engineers . But its management style is very specific.
Although he has very high demands on his employees, who are better paid than elsewhere, he is low-
key and has no office. He basically runs his business out of his laptop. And while Netflix is known for its
frequent layoffs and generous severance pay, its founder remains very committed to education and
says he is "acutely aware of the enormous role played by (his) education of first class."
In addition to his position as CEO of Netflix, Reed Hastings is now a member of the board of directors
of Facebook as well as numerous non-profit organizations. In 2015, his personal fortune was
estimated at more than $1 billion, materialized in the form of stocks and stock options in Netflix11
Legend has it that it was after havingto pay late penalties at a video store that Reed Hastings had the
idea of launching a similar service, offered with a flat rate subscription. In fact, the anecdote is
completely made up but it now fuels the genesis of Netflix12's success.
Initially, the business model proposed by Netflix, which led to the creation of the company in 1997,
consisted of offering a DVD rental servicevia the Internet. The customer can then rent DVDs from a
large library available on the Netflix website, and then receive their selection by the U.S. Postal Service
along with prepaid return packaging. It is not subject to any return deadline, any late penalties or
shipping costs. This concept is a complete break with the practice in place at that time. The U.S. market
was dominated by the giant Blockbuster Video Inc. whose network of convenience stores floods the U.S.
13.
In 1999, Netflix abandoned the system of ordering and paying by the unit for that of the monthly
subscription, the basic formula of which costs $8.99 per month. The company will then upgrade its
pricing to 9 plans with a base price of $4.99 per month. Each subscriber can rent 3 DVDs permanently
for as long as they want.
8
American company founded in 1985 operating a chain of DVD and video game rental stores. The company becomes the largest
video rental chain in the United States. In September 2010, Blockbuster Video went bankrupt, converting the bulk of its debt into
equity. The channel was taken over in March 2011 by the satellite package Dish (Echostar), which planned to develop
its VOD service, close a thousand stores and sell satellite subscriptions in the stores it had kept. The firm disappeared in 2014.
9
sic Gina Keating.
10
The secrets of Redd Hastings, the incredible boss of Netflix, P. Boulet-Gercourt, Callenges, October 19, 2014.
11
http://portfoliance.fr/etiks/biographie/reed-hastings-netflix
12
Nicolas Jaimes, JDN, September 15, 2014.
13
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquersthe world – Christophe. Favoreu Philippe.
Rousselot 7
But, gradually, Netflix's situation improved, thanks in particular to a technical innovation that improved
the service: a movie recommendation "engine", launched in 2000 and offered to subscribers. The
algorithm, which is constantly being improved,analyses the films watched by subscribers as well as
their ratings in order to offer them tailor-made choices. On May 22, 2000, Netflix listed on the Nasdaq
at an issue price of $15 per share. The company then claims
600,000 subscribers.
By the end of 2003, the number of subscribers had reached about 1.5 million members and the growth
in customers was confirmed year-on-year .
In 2011, Netflix, under the impetus of Reed Hastings, made a surprising reconversion into streaming,
the success of which, at that time, was not obvious;its founding CEO took the decision to separate the
two activities inaccordance with the opinion of its shareholders. Netflix then decided to park the DVD
rental business in a company called Qwikster and increase the combined DVD-streaming subscription
price by 60%. The group quickly had to deal with the outcry of its customers , for whom the forced
migration to all-streaming represented an additional cost15. Convinced that the future lay in the
immateriality of videos, Reed Hastings is certain that he is totally right. However, in a few weeks, the
company lost 800,000 subscribers and in the third quarter saw its share price fall by 74%. This
disastrous plan was quickly cancelled. Netflix then changed its prices, separating its DVD offer from the
streaming offer, which is now offered at $7.99 per month for one, instead of $8.99 for both. Despite
this mistake, that year, Netflix generated about 30% of North America's evening Internet traffic and
began a major shift by entering content production. In March, the company announced the release of
the hit series House of Cards, the entire season of which will be broadcast from February 1, 2013 on
Netflix.
In June 2012, Netflix passed the symbolic threshold of one billion hours
of video viewed on the Internet in one month. At the end of the year, the
company signed a decisive agreement with Disney, allowing it to
broadcast Disney, Pixar and Marvel films exclusively from 2016 onwards,
a few months after their theatrical release. The agreement also covers
direct-to-video releases, starting in 2013. This is the first time a major
studio has bypassed an HBO or Starz.
14
The story would not be revealed until several years later, and only after the bankruptcy of Blockbuster Video Inc...
15
Le Point, 19 September 2014.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
Rousselot 8
In 2013, NetFlix's annual results were better than expected. During their presentation, Reed Hastings
claims that the American video streaming servicewill embark on a "significant European expansion"
later this year.
At the beginning of 2014, Netflix announced an increase in its prices to cope with its rising costs
and the heavy investments made in the production of its original programs . Netflix also announced
plans for major European expansion in the coming months. In February, Netflix agreed for the first time
to pay cable operator Comcast to improve the speed andreliability of its streaming service. In March,
the company surpassed 50 million subscribers (57 million according to Netflix's activity report) spread
over 50 countries, i.e. 2 billion hours of connection per month. The U.S. alone has 37.5 million
subscribers. But the competition is getting tougher with the arrival of Amazon in the sector, which is in
turn launching its streaming service. Netflix reacted with an ironic ad aimed at mocking the e-commerce
giant that plans to deliver its packages by drone by imagining the failures of a DVD delivery by drone.
In April, Netflix signed an agreement with the American communications group Verizon, formerly Bell
Atlantic Corporation, and in July, with ATT. These agreements now include plansto improve the speed
and reliability of the transmission of movies and series for streaming from Netflix. On September 15,
Netflix launches in France after Belgium, Germany, Austria, Luxembourg and Switzerland.
In 2015, after widespread controversy in Europe, Netflix moved its European headquarters from
Luxembourg to the Netherlands. The European media then echoed the concerns and questions of
the sector's players who had observed its dazzling success in the United States from afar: media
chronology, funding of creation, economic models of the players in place, etc. In the U.S., the group
is raising the price of its standard package from $8.99 to $ 9.99 per month.
On June 23, 2015, Netflix announced a "split"17 on its stock : a division of its stock into seven as
part of a stock market operation aimed at making its stock more attractive18. On July 14, 2015, all
16
In English: "a worthless."
17 Challenges.fr, 24 June 2015.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
Rousselot 9
During a conference call with analysts in early December 2015, Chief Content Officer Ted Sarandos
announced that Netflix would go from 16 original series produced this year to 31 in 2016 (i.e. 600 hours
of original content compared to 320 hours in 2015). In addition, he specified that while these productions
are one of Netflix's main expense items, but also one of the major assets to differentiate its offer in the
face of growing competition. On this occasion, he also maintained that Netflix was able to maintain
"quality and enthusiasm", citing the successes of "House of Cards" and "Orange is the New Black" as
examples, and recalled that feature films produced by Netflix were currently in production, with a target
of 10 titles to be released Article 19.
Announcement of
the increase in
Netflix productions
Q3 earnings
announ
cement
below
expectations
Success
of the
IPO
Increase in
packages
Figure 1: Evolution of Netflix's share price after the "split" (source: Boursorama)
18
However, the value of the shareholders' portfolio will not increase, since the value of each share will be reduced by the same
amount. For example, a shareholder who owns 2 Netflix shares will own 14 shares on the effective day of the split.
19
However, he tempered the objective of "being present everywhere on the planet by the end of 2016", stressing all the difficulties
that the teams would encounter, in particular with regard to the purchase of worldwide broadcasting rights. Sarandos said
the market was currently regionalized, and that Netflix was trying to globalize its offering by buying "global rights to
programs and movies," but was facing "strong resistance" from regional sales agents who feared
being relegated to a marginal position. Even though he recalled that in North America, Netflix had a particularly
strong position, with 37.1% of online traffic on fixed internet access during peak evening hours (audiences), according to data
from Sandvine, specialists in Internet equipment, the market punished the stock in the face of skepticism analysts'
recurring analysis.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
Rousselot 11
Working Capital Requirements (1) -106 152 -165 459 -181 186 -151 841 -135 598 -97 999 -192 009 -183 213 -295 845 -331 181 -408 499
Short-term investments 0 0 207 703 157 390 44 455 155 888 289 758 457 787 144 267 494 888 501 385
Cash Availability & Cash Equivalents 212 256 400 430 177 439 139 881 134 224 194 499 508 053 290 291 604 965 1 113 608 1 809 330
Total positive cash position 212 256 400 430 385 142 297 271 178 679 350 387 797 811 748 078 749 232 1 608 496 2 310 715
TOTAL ECONOMIC CAPITAL 227 094 415 332 434 444 401 929 453 365 593 488 1 844 141 2 291 964 3 258 360 4 393 497 6 673 247
Total Shareholders' Equity 226 252 414 211 430 749 347 155 199 143 290 164 642 810 744 673 1 333 561 1 857 708 2 223 426
Long-term debt 0 0 0 0 200 000 200 000 400 000 400 000 500 000 900 000 2 371 362
Leasing commitments
short-term portions)
(excluding 0 0 0 37 988 36 572 34 123 0 0 0 0 29 000
Other debts to L.T. ( finance lease liabilities) 842 1 121 3 695 16 786 17 650 69 201 801 331 1 147 291 1 424 799 1 635 789 2 049 459
Total financial debt 842 1 121 3 695 54 774 254 222 303 324 1 201 331 1 547 291 1 924 799 2 535 789 4 449 821
TOTAL FINANCIAL LIABILITIES 227 094 415 332 434 444 401 929 453 365 593 488 1 844 141 2 291 964 3 258 360 4 393 497 6 673 247
Source Infinancials : retraitem ent
(1) The negative WCR is largely due to trade payables but above all to the large deferred income in the absence of trade receivables and inventories
Note: The bulk of Netflix's assets are net intangible assets. Netflix obtains programming to broadcast through content
licensing agreements, direct purchases of DVDs that are locked in and then depreciated, andDVD revenue
agreements that are directly expensed. Content agreements are concluded in the normal course of Netflix's business
without its business really being dependent on any particular agreement with a particular publisher, thus
ensuring its independence.
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Number of subscribers 2 610 000 4 179 000 6 310 000 7 479 000 9 390 000 12 268 000 20 010 000 23 259 000 33 267 000 44 350 000 57 391 000 74 762 000
Note: The table above counts paid Netflix subscribers. Thus, the number of subscribers may differ from
the total number of subscribers if we include those benefiting from the free trial month offered to
potential customers.
PROFIT STATEMENT 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Net sales 682 213 996 660 1 205 340 1 364 661 1 670 269 2 162 625 3 204 577 3 609 282 4 374 562 5 504 656 6 779 511
Cost of production of goods and services -357 548 -469 849 -561 206 -667 557 -821 737 -1 018 660 -1 200 282 -923 783 -841 576 -970 962 -1 044 431
Research & Development Departments -30 942 -48 379 -71 395 -85 983 -114 542 -163 329 -259 033 -329 008 -378 769 -472 321 -650 788
,
Selling general and administrative expenses, -185 719 -261 679 -270 812 -253 731 -289 077 -364 394 -529 575 -604 416 -684 190 -876 927 -1 231 421
EBITDA or Gross Operating Income 108 004 216 753 301 927 357 390 444 913 616 242 1 215 687 1 752 075 2 470 027 3 184 446 3 852 871
Provisions -9 134 -15 903 -21 394 -32 454 -38 044 -38 099 -43 747 -45 469 -48 374 -54 028 -62 283
Depreciation -97 868 -141 233 -203 568 -209 757 -219 490 -300 596 -795 872 -1 656 614 -2 193 306 -2 727 770 -3 484 762
Net operating income 1 002 59 617 76 965 115 179 187 379 277 547 376 068 49 992 228 347 402 648 305 826
Outstanding result 1 987 4 797 14 196 6 327 4 560 6 094 0 0 -25 129 0 0
EBIT or operating income 2 989 64 414 91 161 121 506 191 939 283 641 376 068 49 992 203 218 402 648 305 826
Net cost of debt 5 346 15 904 20 340 9 994 253 -15 945 -16 546 -19 512 -32 144 -53 279 -163 941
Result before IS 8 335 80 318 111 501 131 500 192 192 267 696 359 522 30 480 171 074 349 369 349 369
Income taxes 33 692 -31 236 -44 549 -48 474 -76 332 -106 843 -133 396 -13 328 -58 671 -82 570 -19 244
Result after IS 42 027 49 082 66 952 83 026 115 860 160 853 226 126 17 152 112 403 266 799 122 641
Minority interests 0 0 0 0 0 0 0 0 0 0 0
Result does not 42 027 49 082 66 952 83 026 115 860 160 853 226 126 17 152 112 403 266 799 122 641
Ordinary dividends 0 0 0 0 0 0 0 0 0 0 0
Source :
Infinancials
Table 3: Evolution of Netflix's income statement
According to Netflix's strategy, its business is segmented into (1) two geographies (the United States,
its historical market and the rest of the world) and (2) into three areas: DVD rental in the United States
(its historical market ), streaming in the United States and streaming in the rest of the world.
(1) In 2011, Netflix did not break down the revenue of its streaming business in the US and its DVD rental business in the USSource: Infinancials
Note: the specificity of the year 2011 for which, in its activity report, Netflix does not distinguish between the
DVD rental activity and the streaming activity in the United States, stems from its decision to group these two
activities in the same subscription. Due to the commercial failure of this formula, Netflix reversed course by offering
two separate subscription formulas and returned to a distinction of domains in its financial publications in 2012 .
(1) In 2011, Netflix did not break down the revenue of its streaming business in the US and its DVD rental business in the USSource : Infinancials
Source : Infinancials
Source : Infinancials
PROFITABILITE 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Financial rate of return 21,97% 15,33% 15,85% 21,35% 42,42% 65,75% 48,47% 2,47% 10,82% 16,72% 6,01%
Rate of return on total assets 13,63% 10,08% 10,66% 13,13% 17,86% 19,36% 11,16% 0,49% 2,40% 4,28% 1,42%
MARGIN RATE 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
EBITDA / Revenue 15,83% 21,75% 25,05% 26,19% 26,64% 28,50% 37,94% 48,54% 56,46% 57,85% 56,83%
EBIT / Turnover 0,44% 6,46% 7,56% 8,90% 11,49% 13,12% 11,74% 1,39% 4,65% 7,31% 4,51%
Operating MarginRate 1,22% 8,06% 9,25% 9,64% 11,51% 12,38% 11,22% 0,84% 3,91% 6,35% 2,09%
Net Margin Rate 6,16% 4,92% 5,55% 6,08% 6,94% 7,44% 7,06% 0,48% 2,57% 4,85% 1,81%
CAPITAL STRUCTURE 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Debt / Equity
Financial 0,00% 0,00% 0,00% 11,27% 119,50% 81,40% 62,59% 237,26% 37,49% 48,45% 107,96%
Net debt (1) / Total assets -58,20% -65,78% -59,53% -41,77% 8,72% -11,63% -12,89% 25,68% -4,60% -10,04% 0,88%
Total Equity / Total Liabilities 62,04% 68,04% 66,57% 56,18% 29,30% 29,55% 20,94% 18,77% 24,64% 26,33% 21,79%
Dividend payout ratio 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00%
(1) Net debt = total financial debt (-) Positive cash placed and uninvested Source : Infinancials
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
Rousselot 14
1. The choice of a break from the existing offer and models within the
industry
Netflix, which was the pioneer of SVOD, is now asserting itself as the leader in Internet TV with more
than 62 million subscribers, a presence in 50 countries and an additional global market share66% of
streaming video. The group has experienced en In just a few years, there has been a meteoric growth:
Since its IPO in 2002, the stock's value has increased by more than 2,645% (a average of 240%/year).
The boss of Netflix defines his business around the concept of Internet TV that it is oppose, and compare,
à the TV Traditional Said linear.
"We are an unlimited TV channel with No ads"..."The difference with HBO is that Netflix is cheaper,
there's more content, it's all on-demand, it's customizable and available on multiple platforms."20
Being at the origin of the emergence of the segment, and being therefore the only pure player during
the first years of SVOD, the group has long positioned itself (in terms of value created, competitors,
economic model) in relation to the media market and that of premium cable TV channels. The group
was able to anticipate and be the first to respond to the transformation of audiovisual consumption
practices brought about by the arrival and dissemination of the Internet and the digitization of content.
Netflix has positioned itself as an OTT distributor by offering video content directly on the Internet
(via terminals such as computers, game consoles, etc.) without necessarily going through
intermediaries offering TV decoders or boxes. In this way, he can pass over his actors and short-
circuitthem.21 In this sense, Netflix has profoundly changed the industry by merging two previously
separate activities: 1. content publishing and aggregation, 2. distribution. Above all, it has brought
total freedom in terms of the consumption of audiovisual content (in terms of viewing time and
time compared to the channels cabled ones ).
Its business model is based on subscriptions, which allows, after payment of a monthly fee, unlimited
access to the entire library of available videos without any advertising. 22 The group was thus the pioneer
in this type of video offer, which stands out from traditional American TV channels known as linear.
Since 2007, the group has developed a disruptive offer by offering this service to its DVD customers.
This new valuecreated for the customer – unlimited, ad-free and highly personalised consumption on
a variety of terminals23 – has been achieved through the proposal of a price that is much lower than
the package of channels offered by cable operators.
20
Reed Hastings, Business Insider, 2014.
21
The bandwidth would cost him 5 cents for a movie sent for streaming, compared to a dollar of postage for DVDs.
22
Since this model is based on a fixed subscription that excludes advertising revenues, revenue per subscriber is, according to some
analysts, relatively low and insufficient to finance international growth, which is very expensive in acquiring broadcasting rights.
23
Nearly 1,000 devices are now compatible with the Netflix service.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
Rousselot 15
Netflix was also the first to innovate in terms of broadcasting by offering its customers access to an
entire season of a series as soon as the first episode is released. This availability of all the episodes of
a season responds to a growing and increasingly valued practice, "Binge Viewing", which consists of
watching several episodes, or even an entire season, of a series in a row.
Initially, and until 2012, the group relied on a relatively large and diversified catalogue of content,
consisting mainly of films and series, which nevertheless consisted mainly of non-new and dated
programmes , known as second-hand. especially for movies). As far as flagship series or blockbusters
are concerned, the group generally only aired the old seasons; the last one was only available on the
major American networks and networks. The year 2012 marks a turning point in this regard. From a
content provider and broadcaster, Netflix is moving to the status of a content producer. The group's
objective is therefore to improve the customer experience through two main levers: (1) the quality,
exclusivity and diversity of the programs it offers, (2) the qualityof the web platform interface and
associated services. Finally, Netflix is aiming for a high degree of personalization of the service offered.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
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24
Amazon Web Services.
25
Traffic is routed primarily to the region that is geographically closest to the user.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
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“We want to offer a differentiated service. We are focused on becoming an expert programmer that
provides a high-quality, curated offering and therefore have increasingly licensed content on an
exclusive basis “. (Source: site internet de Netflix)
In 2012, the group signed an exclusivity agreement with the global entertainment giant Walt Disney
allowing it to distribute the studio's catalog as well as the works of Pixar and Marvel from 2016 and (2)
to have an exclusive distribution on films released from that date, with a reduced delay of 7 to 9 months
after their theatrical release Article 27. In order to ensure that both
26
These levels of expenditure and investment suggest that it will be difficult for Netflix's competitors to compete with Netflix .
Netflix is now far ahead of its main competitors: HBO, Amazon, Hulu, Showtime.
27
That agreement relates more specifically to the productions of the animation studios Pixar, Marvel and Disneynature, which
will then be available on tablets, smartphones and computers. A second deal is expected to grant Netflix the rights to
Netflix's catalog.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
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Since then, Netflix has developed and offered its subscribers more than 13 original fiction series, i.e. 8
new series and 5 continuations or new seasons of existing series (Orange is the new black, Marco Polo,
Dardevil, Hemlock Grove...). The group plans to release 10 new series for the years 2015-2016 28. For
the creation of its original series, Netflix selects the best writers and directors generally from the
world of cinema, as was the case for House of Cards or recently Sens 8, a series produced by Lana
Wachowski and Andy Wachowski, the American directors of the Matrix trilogy. In addition to a logic of
differentiation, the production of original content has a much lower cost than the acquisition of
exclusives. As a result, only 10% of content spending is spent on production, or between $300 million
and $400 million annually.
The last advantage is thatthe content produced by Netflix can be available to all its subscribers
simultaneously around the world. The current cost per episode produced for the series House of Cards
and Orange is the new black is $4 million. The group's aim is tooffer more than 320 hours of original
programmes in 2015, including films, series, documentaries and animation, three times more than the
previous year. As proof of the quality of the series produced and Netflix's know-how in this field, they
werenominated 17 times for the Emmy Awards in 2013 and 31 times in 2014.
Netflix's desire to produce its own content also applies to movies. In 2013, an agreement signed with
the American company "The Weinstein Company" allowed him to start the production of his first film,
which should be released in theaters in August 2015. Netflix is set to produce 4 more films in 2016-
2017. Due to the absence of a binding media chronology, as existing in France (legal provision imposing
a delay between the release of a film in the cinema and its distribution in SVOD ), Netflix films can be
simultaneously broadcast on its SVOD platform and in cinemas. This will be the case with Crouchning
Tiger, the sequel to the Oscar-winning film Tiger and Dragon in 2000, which will be available in 2015
both on Netflix and in IMAX theaters. This form of integration makes it possible to avoid complex and
lengthy negotiations over the geographical and temporal scope of broadcasting rights and their price.
It can also be explained as a reaction to the reluctance of some studios to cede their rights to a player
increasingly perceived as a competitor to the cable TV channels they own.
Even if Netflix seeks, and is increasingly, to enhance and differentiate its catalog through the
development of exclusive programs and the production of original content, it maintains in its library
a certain number of dated and/or totally unknown, specialized and atypical programs (such as B-movies,
Bollywood movies , etc.). ...). The latter are aimed at enthusiasts who, taken separately, do not
represent a large volume of customers but who, by aggregating, constitute a significant part of its total
subscriber base. The concept of "long tail", which Netflix practices, consists of draining small groups of
specialized customers who add up to ultimately form thousands of relatively loyal subscribers. It's
about making it possible for everyone to find their way through Netflix's content library .
Disney, including classics like Pocahontas, Dumbo and Alice in Wonderland. ($350 million /year).
28
If we count children's series, animations,
comedy series and documentaries, Netflix offers more than
45 original programs in 2015 and more than 29 productions planned for the next two years.
29
In order to finance that content development strategy, Netflix took out a loan of USD 1 billion in 2015, part of which will be devoted
to programme development and another to its international expansion. This announcement of recourse to the financial market
resulted in a downgrade of some agencies, including Standard & Poor's, which lowered Netflix's rating by one notch, from BB- to
B+. Some financial institutions take a dim view of Netflix's debt level, which will remain high in the coming years,
and the resulting negative cash flows.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
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30
Between 2006 and 2009, Netflix held a competition with a prize of $1 million to create the best collaborative filtering algorithm.
The goal was to best predict how users would vote in their movie choices. In 2009, this prize was awarded to a team that
managed to improve the predictive capacity of the algorithm by 10%.
31
Netflix's system significantly limits search times and dissatisfaction rates. Thus, nearly 75% of the use of Netflix by these
subscribers comes from the recommendation compared to only 25% which comes from the personal search of subscribers.
According to some analysts, by directing the user to pre-selected programs from the beginning, this search enginewould cleverly
hide the obsolescence and weaknesses of Netflix's content library .
32
This highly sophisticated algorithm makes it possible to draw up a sketch of successful series .
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
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d) Technological innovation
Innovation and software technology excellence have always been Netflix's top priorities, even if it means
sacrificing its short-term bottom line. Thus, in 2015, 9% of its turnover, i.e. $620 million (+52%
compared to 2014), was devoted to technological development. As mentioned above, these innovations
take place at different levels of Netflix's value chain.
Firstly, they relate to the management and optimisation of the data flows exchanged between the user
and the data centres managed by Amazon. Netflix is thus investing in software solutions that it owns to
allow it to optimally broadcast and avoid flow disruptions due to bandwidth congestion. Netflix uses the
adaptive streaming technique that allows you to switch from ultra HD to HD, which requires a lower
connection speed, for a few seconds, without the subscriber noticing, in order to avoid any interruption
of broadcasting. Netflix is known for the quality (HD offers an impeccable image) and the fluidity of its
distribution (cuts are very rare33).
Secondly, technological developments are focused on APIs (application programming interfaces ).
Netflix's SVOD is an open software platformto which other players (telecom operators, mobile or game
console manufacturers, etc.) can send their own services. "The service can be accessed from tablets,
game consoles, boxes, etc. An exemplary model of digital distribution, which makes the development
costs borne by the partners and guarantees very rapid growth. 34 explains Henri Isaac, professor and
project manager for "Digital Transformation " at the University of Paris-Dauphine.
Thirdly, and primarily, these technological innovations and improvements relate to its search engine
and algorithm described above.
33
When these occur, Netflix does not hesitate to aggressively and publicly point the finger at ISPs with a message broadcast to its
subscribers such as " The Verizon network seems to have someproblems ... ». This type of pressure, although widely denounced
by ISPs, appears to be relatively effective.
34
Delsol, 2014 The New Factory.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
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35
The arrival of Netflix would seriously and negatively threaten the French audiovisual ecosystem and call
into question French cultural production and exception.
36
Sources Ipsos and Médiamétrie.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
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38 It nevertheless coincides with the launch of streaming as a fully-fledged activity , separate from the DVD rental business.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
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Netflix is said to dominate the global SVOD market with 66% market share39. The group has always
developed through the creation of subsidiaries but would eventually consider, in the case of the Chinese
market, an alliance with a local player. In foreign markets, Netflix usually enters with its Hollywood
catalog and does not initially try to acquire or develop local content. The group focuses on geographic
markets where broadband Internet penetration is high and has a relatively homogeneous pricing policy,
which is very competitive.
39
OEA, 2015.
40
This was particularly the case for the first markets in which Netflix developed ; markets that were already accustomed to US
content broadcast in English (England, the Nordic countries).
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
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Licence Usage bride à : INSTITUTE MINES-TELECOM BUSINESS
SCHOOL
near of the U.S. price (8 dolla"I am not sure if I am However, this varies according to the average prices
charged by the competition local (cf. the case some country Northern).
2010 : Canada41.
2011: Latin America: Mexico, Brazil.
2012: England: the bridgehead of Netflix's European expansion, the 2nd
largest player in the market with a market share of 46.3%, Ireland, Sweden,
Finland, Norway and Denmark.
2013: Holland
2014: France, Germany, Austria, Switzerland, Belgium, Luxembourg.
2015: Australia, New Zealand, Japan, Spain, Portugal.
End of 2015: The service is available in 60 countries.
01/2016: Netflix announces its presence in 130 new countries.
Europe is a real accelerator of the group's international growth, in terms of the number of subscribers
and the number of business 42. In 2014, Netflix entered the German, French, Austrian, Swiss, Belgian
and Luxembourg markets and increased its number of international subscribers by nearly 75% in a
single year and gained nearly 2.6 millionnew customers in the first quarter of 2015 alone. In 2014,
Europe accounted for nearly 54% of international subscribers and 20% of total subscribers. The group
now acquires more customers abroad than in its home market: 2.3 million in the USA compared to 2.9
million abroad in the first half of 2015. In 2015, Netflix launched its service simultaneously in Australia,
New Zealand and Japan and aims to be present in more than two years
200 countries. To do this, Netflix decided, at the end of 2015, to shift a whole part of its marketing
budget from the United States to the international market.
Figure 3: The different stages of international development and the number of total
international subscribers
41
While Netflix's penetration rate is relatively high in the English-speaking part of Canada, it is low in the French-speaking part (5%
of households). The small number of programs offered in French and adapted to the tastes of French-speaking
Canadians explains this difference.
42
In 2013, revenues generated in Europe ($294 million) represented 53% of total international sales .
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
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As far as England is concerned, high content costs and strong competition from Sky and Amazon's Love
Film explain this situation. In October 2014, due to a lower gain in new international subscribers than
expected, and the high cost of international expansion, Netflix's stock was losing more than 26% of its
value. The losses incurred internationally are partly explained by expenses related to the acquisition of
content, but also, and of course, by the marketing expenses that Netflix has to devote to conquering
each new foreign market.
While foreign sales rose sharply by more than 49% in 2015 to $ 1.9 billion , losses continued
to accumulate. Netflix, which made a loss of more than $160 million in 2014, confirmed its
losses of $333 million in 2015 (up 108%), almost the same amount as the $389 million
loss in 2012. In total, and since its international rollout, Netflix has made a cumulative loss of
more than $1.27 billion. Interviewed on this subject, Reed Hastings emphasises the group's
difficulties in terms of internationalisation but also its strengths: "Our disadvantage is that we
do not know each culture as well as our local competitors, but we have advantages: our global
technical investments, the mastery of the process, knowledge of market data and brand
awareness'.
As previously mentioned, Netflix aims to be present in more than 200 countries by 2017. The
achievement of this objective depends on a number of elements over which Netflix has little control,
namely: (1) the development of the quality of Internet infrastructure as well as the bandwidth
capacity of each country, (2) laws and regulations Local
(3) the spread of connected objects and the evolution of behaviour in terms of viewing video content
(in particular with regard to the terminals used).
In addition, this very aggressive international growth and its financing will depend on Netflix's ability to
implement a truly global strategy, including obtaining global broadcasting rights . However, as
Howard Bass, head of media and entertainment at E&Y, points out, "You can have a framework and
a model that allows for a global presence, but you still need to understand each local market and learn
continuously ." In this context, analysts estimate that entry into each new European market costs
Netflix between €40 million and €70 million.
43 Partly because of increasingly intense competition from HBO, Amazon and Hulu (the site of NBC, Disney
and Fox), which are adopting a positioning similar to that of Netflix in terms of offer and value created.
44
While an average of 78% of households in developed countries have Internet access, this figure is only 31%
in developing countries.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
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European markets are at different levels of growth and maturity and demonstrate disparities in SVOD
spending. For example, England and the Nordic countriesaccount for almost 75% of all SVOD spending
in Europe. Countries such as France or Germany would be in an initial phase of growth but are
progressing very quickly. Other countries such as Italy, Spain and Poland are lagging behind in terms
of SVOD consumption. In the countries of the Rhine, as well as in Belgium and the United Kingdom, the
revenue generated by digital video has overtaken that of physical video, demonstrating a sustained
dynamism of the latter.
OTT revenues in the UK, for example, are expected to grow by 254% by 2017 to $613 million.
Those in the Dutch and German markets are expected to follow a similar rapid growth, with rates of
1,147% respectively. The most developed business model is fee-for-service and unit payment with a
price ranging from €0.60 to €8.99. The European market is home to a large number of players offering
a wide variety of content categories. Germany, France and England are the three main markets offering
the largest number of VOD services specialising in films and series.
45
the first European markets Netflix entered.
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While this market is highly fragmented in terms of supply, it is just as fragmented in terms of demand.
This makes it very difficult for SVOD platforms to develop outside their home borders. Apart from
cultural differences 46 and the language barrier, which are the main obstacles to internationalisation
by generating extremely high costs of geographical expansion 47, other factors limit the European
expansion capacity of SVOD platforms, namely :
differences in high-speed internet infrastructure equipment and penetration
rates of connected devices and screens; for example, while broadband is very strongly
established in the Nordic countries, it is much less so insouthern European countries,
including Spain;
the lack of available content due to the very strong competition between VOD players
to obtain exclusivity (creating a phenomenon of scarcity);
the differences in regulations in terms of taxation, taxation, but also, and above all,
the timing of distribution on the media.
Thus, it is just as difficult, if not inappropriate, to speak of a global market as it is of a European SVOD
market. Indeed, each market is different and a certain number of elements will have an impact on the
volume and nature of demand:high-speed internet infrastructure and the number of households
connected to the Internet, the implementation of IPTV solutions, the penetration rate of connected
equipment (Blu-ray, game consoles, etc.), legislation on media chronology and the obligation to
disseminateffusion of local works, consumption habits in terms of audiovisual content but also of viewing
medium or platform. For example, the French massively use their TV decoder to access their repplay or
VOD type program. The same is true for Belgium, where TV remains the most watched medium.
Europe is a developing market, but it does not seem to have reached a sufficient stage of maturity to
make it profitable. In particular, non-digital natives lack the technological knowledge and digital
practices that allow them to access this type of service. The current growth of SVOD is driven by a
number of factors and trends that are structuring and shaping this market and whose influence, if
confirmed, is likely to stimulate demand very strongly . These include:
the offer of premium content, acquisition of exclusive programmes and recent
successful series known as blockbusters,
original content via the SVOD players' own production,
46 which relate to the tastes and habits of audiovisual consumption specific to each country.
47
As a result of (1) the need to develop specific programmes adapted to local consumption patterns, (2) geographically targeted
marketing efforts, (3) the costs of adapting acquired content (dubbing and subtitling), (4) the acquisition of broadcasting
rights limited to certain countries and geographical areas, which thereby reduce economies of scale.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
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To take advantage of these challenges and growth factors, the size of SVOD players and their ability to
implement a global strategy will, according to some industry experts, be a key element. Thus, a large
number of subscribers will make it possible to amortize the costs of acquiring broadcasting rights ,
which are all the higher the more exclusive and multi-country they are.
In addition, the European development of major TV channels such as CBS and HBOwill accelerate
competition for licences and exclusive rights, leading to an accelerated inflation of broadcasting rights.
Finally, marketing and technological investments, particularly in the recommendation engine, will be
difficultto sustain for small players. Europe is also considering imposing quotas for the broadcasting
of European works for video-on-demand platforms such as Netflix (20% of the catalogue should be
devoted to European works)
b) Nature of the challenges and constraints that Netflix has to face in Europe
Netflix first developed in European countries with favourable conditions for digital services, i.e. a high
rate of high-speed internet and connected objects (smartphones, tablets, smart TVs, etc.) and for the
distribution of English-language content (England, Nordic countries, Holland49). On the other hand, the
French and German markets value visual contentin their own language as well as dubbed or subtitled
programmes, hence a later entry.
While we are starting to get a clear idea of the number of subscribers in England and the Nordic
countries, it is very difficult to estimate them in the last countries of Netflix's entry. The group does not
provide any data on its number of subscribers or on its results by country. However, it is estimated
that in France and Germany the subscriber base is between 1.5 and 2 million in each country.
The content offered by Netflix in the US and Europe differs significantly. For example, in the USA,
nearly 70% of the catalog is made up of series compared to 30% for films. The British as well as
subscribers in the Nordic countries are watching more films. Differences in regulations (and in particular
the broadcasting schedule on the media), the obtaining of limited and non-global broadcasting rights
(for example, some series can only be viewed in the USA and in the United States).
48
After the entry of Netflix and the takeover of Lovefilm by Amazon, the English market grew by
2,000% in 2012 and 126% in 2013.
49
Countries that are permeable to American culture and in which films and series are traditionally broadcast in original version.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
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The content and number of programs available also vary between Netflix's different European markets
. In Europe, the SVOD offer ranges from 1,500 titles to 4,000 titles depending on the country
and remains much lower than the American offer. Although the most important offers concern Anglo-
Saxon countries (Ireland, England) or countries familiar with the English languageand US programmes
in original version (Nordic countries), these are not entirely copy-pastes of the American offer.
Thus, in the case of England, and although the programming includes exclusive American series,
thedaring catalogue includes a certain number of programs not available to American subscribers (Glee,
Greys'anatomy, Law and order) or that are specifically English (Dowton Abbey, Paddington). Conversely,
the English offer does not include a number of series and films whose broadcasting rights have already
been granted to English TV channels. Another illustration, and because of French regulations, 25% of
the films offered by Netflix UK are not available on the French catalog because they are less than three
years old (legal deadline for distribution in France).
On average, however, local content represents only between 15% and 20% of the programme library
offered to European customers. The negotiation of broadcasting rights can give rise to situations
that are comical, even bizarre, to say the least: for example, the group's flagship series , House of
Cardscannot be seen by Netflix's French subscribers due to the transfer, by Netflix itself, of broadcasting
rights for 3 years to its French competitor, Canal +.
Table 12: Importance and nature of programs available in the USA and Europe
(Source: NY Times, 2015)50
50
S. HEYMAN, “Netflix Taps Into a Growing International Market” http://www.nytimes.com/2015/02/12/arts/international/netflix-
taps-into-a-growing-international-market.html?_r=1
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
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On this last point, the impossibility of acquiring worldwide broadcasting rights for certain programmes
presents a number of disadvantages, namely: (1) the increase in fixed costs 52, (2) the multiplication
of negotiations and (3) limiting the richness and size of catalogs available in certain countries, and
(4) reducing Netflix's ability to generate economies of scale globally. These difficulties encouraged the
group to develop its production of original series and to compete for worldwidebroadcasting licenses
53.
In the European market, the profile of Netflix's competitors is very diverse. These include :
traditional TV channels offering SVOD services (Tf1, BBC, Canal Plus, etc.),
telecom operators and ISPs (Telefonica, Orange CBS, BT Vision, etc.),
web-based video-sharing platforms such as Dailymotion,
pure players or OTT playersspecialized in SVOD like Netflix (Amazon, Wuaki, etc.).
While competition is moderate in the Scandinavian markets, it is relatively intense in England and even
stronger in Germany. We will detail these three markets because of their strategic importance in terms
of subscribers and growth potential for Netflix.
Netflix's main competitor is Amazon instant video, which in 2011 bought Lovefilm, a company that
originally specialized in DVD rentals and which launched in 2010 in SVOD services by relying on a large
customer base. Amazon Instant Video now offers an OTT service in the UK, but also in Norway,
Germany, Sweden and Denmark. Amazon's market share, which was higher than Netflix's in 2012,
is now half that
51
Like the Marseille series , whose production budget is 10 million euros for 8 episodes, or the Lilyhammer series
produced for the Norwegian market but designed for distribution in other countries.
52
The price of licences and broadcasting rights is not based on the number of consumers of the programme. New subscribers therefore
do not increase the cost of acquiring content.
53
with Sony Pictures Television for the worldwide broadcast
This is the case with the recent agreements negotiated
of the series "Better Call Saul" and with Warner Television for the series "Gotham".
54
For example, in Germany, Snap, the SVOD service of the pay-TV channel Sky Deutschland, increased its subscription from
EUR 9.9 to EUR 3.99. In the Scandinavian countries, HBO launched an SVOD service to compete with Netflix just after the
latter entered the region. In Denmark, a local cable operator has developed an SVOD platform called YouBio in response to the
arrival of the American platform.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
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Compared to Netflix's catalog, Amazon's has a larger selection of titles as well as a more recent selection.
Amazon, having been established in the UK for longer than Netflix, was able to benefit from broadcasting
rights negotiated before the latter was settled. However, this lead is tending to shrink: while in 2012
the number of titles making up Netflix's offer was 1,668 (compared to
3,284 for Amazon), it is now 3,186 (compared to 3,778 for Amazon). Netflix is now the second largest
source of Internet traffic behind You Tube and is on track to become the number one by the end of
2015. Netflix had 4.5 million subscribers in the third quarter of 2015.
There is a very high penetration rate of TVs (96% for Denmark, 94% for Sweden ), the Internet
(Norway: 94% of connected households) and connected mobile objects (79% of households equipped
with smartphones and 52% with tablets in Norway and Sweden). The relatively high prices of local
OTTs have led Netflix to have slightly higher prices than in the rest of Europe: $12 for Sweden, $13.8
for Denmark, and $14 for Norway. According to Global Connect Innovation, in 2014, Netflix's
penetration rate inDenmark was 29% with 440,000 subscribers, 20% in Norway (390,000
subscribers) and 17 % in Sweden
( 940,000 subscribers).
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
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HD technology is present in more than 95 million homes and more than 70 million of them have devices
deploying OTT technology (game consoles, DVD or Blu-ray players, etc.). The time spent in front of a
traditional TV hasfallen sharply in recent years , from 5:04 to 4:15 in less than two years. On the other
hand, the time spent on smartphones and, more generally, on connected terminals for watching videos
( Blu-ray players, game consoles, tablets, etc.) has grown by more than 25% in the last five years.
This transformation of uses is logically correlated with the explosion in sales of mobile devices worldwide
and, conversely, with the stagnation, or even more recently, the decline of TV screens and PCs. Sales
of connected mobile devices are 5 times those of TVs and PCs. (see diagram below). Demand is thus
evolving fromlive viewing constrained by fixed broadcasting schedules to on-demand programme
consumption. We are therefore witnessing an amplification of the change in the structure of demand for
audiovisual content, to the detriment of linear television in particular .
Figure 5: Global sales of connected TVs, PCs and mobile devices (in millions of units)
(Source: @KPCB, 2014)
The shift of customers from traditional linear TV to linear video is more specifically about Generation Y,
whom Americans refer to as millennials or digital natives. Thus, in less than two years (2012-2014),
the average time spent on traditional TV has risen from 3.4 hours to 2.9 hours for this generation,
while it now represents nearly 5 hours for those over 35 years old. North American Internet users
havebecome accustomed to paying only for what they consume and are increasingly rejecting cable
subscriptions offering hundreds of channels at very high prices.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
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Figure 6: The U.S. video market (sales in millions of dollars). DEG 2015 - D.R.
If the US video market, which is now worth nearly $18 billion, has been steadily declining since 2006 (-
19% between 2004 and 2015, i.e. a loss of $4 billion in 10 years), it is mainly due to its physical
component: the sale and rental of DVD-Blu-rays. This market has halved in ten years and is clearly
in a phase of decline.
In the last quarter of 2014, digital sales ($2.1 billion) were on track to overtake physical sales
($ 2.3 billion). The physical/digital crossover is expected to take place at the end of 2015. In 2014,
the turnover of physical rentals fell by 13.68%. Conversely, revenues generated by digital (VODA,
SVOD, EST) increased by nearly 17%. Within the digital sector, the EST and SVOD segments are
experiencing relatively significant growth, with an increase of 31% for EST ($1.5 billion in revenue in
2014) and 25.8% for SVOD ($4 billion). Demand for VODA continues to decline (-14%) and now
represents $2 billion .
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
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Nearly 40.3% of U.S. households subscribe to an SVOD service, either through a single subscription
(27.8%) or through a double subscription by combining two SVOD providers (9.9%) or triple (2.6%).
The study of the profile of SVOD service consumers reveals a relatively young clientele, 49% of SVOD
subscribers are under 44 years old. Users are generally households with children, i.e. 45% of subscribers
to an SVOD service. In comparison, the clientele of so-called linear or conventional television is aging,
44% are over 54 years old, and the share of households with children is becoming a minority. Traditional
television no longer seems to meet the expectations of the younger generations.
A number of studies and surveys56 have highlighted the elements valued by US SVOD consumers in the
choice of a provider. Thus, access to a very large catalogue of films and series, which are also veryrecent,
appears to be one of the main factors pushing people to subscribe to an SVOD service. This reflects the
growing appetite that consumers, especially younger generations, have for exclusive content and,
more specifically, fororiginal 57 series.
The attractive price of SVOD is one of the other elements cited, especially in comparison with those
charged by cable operators to be able to access channels that can themselves be paid. Finally,
subscribers cite the great simplicity of use (recommendation, interface) as well as the great freedom
with regard to the viewing time "watch a programme whenever you want" and the quantity viewed
(strong interest in Binge Watching58).
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
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Netflix has long stood alone in the SVOD market, a market it has helped create and develop. SVOD
has in fact found itself in competition with traditional TV, or even VOD, for which it represents a threat
of substitution. Competitionis gradually being organised, but market shares remain unevenly
distributed. In 2014, Netflix claimed a 36% market share in the SVOD segment , compared to 13%
for Amazon and 6.5% for Hulu.
When it comes to internet traffic and bandwidth usage rate, Netflix would account for 35% of total data
streams compared to 2.58% for Amazon, 1.14% for Hulu, and only 1% for HBO Go59. While the services
of these three players are available on almost all connected devices, and are compatible with iOS,
Android, Windows 8 (with the exception of Amazon), access to Netflix is easier on TVs as well as Blu-
ray and DVD players.
Hulu Plus
Hulu Plus Access is an SVOD platform created in 2007 as a joint venture between Fox Entertainment
Group, NBC Universal and Disney. In 2014, the platform announced a turnover of one billion dollars
but refuses to communicate its results. Hulu has seen its number of subscribers grow strongly in
recent years: from 300,000 customers in 2010, the platform has grown to 2 million subscribers in 2012,
6 million in 2014 and claims between 7 and 9 million customers for 2015, an increase of 50% in less
than a year. The group relies on a mixed business model combining 60% advertising (59% of its
revenues) and subscription, which is similarly priced, although slightly lower, to Netflix ($7.99 per
month).
While Hulu has rights to the latest seasons of flagship series, some studios refuse to grant these rights
outside of PC viewing. Hulu streams the current seasons of 5 of the 6 most popular series in the USA.
Its movie library, on the other hand, is smaller than Netflix's. As with the latter, it's relatively easy to
subscribe and unsubscribe from Hulu61 and, unlike Amazon, only a monthly, not an annual commitment
is required to access the content library. All operations are carried out via the web.
Unlike Netflix, Hulu does not offer 4k or ultra HD and therefore offers a lower viewing quality. The group
has very ambitious targets for the coming years in terms of subscriber growth, abandoning its
international expansion in favor of the US market. Hulu's focus is:
the production of original series,
the development of its free offer62 and its accessibility to a greater number of terminals
(development of an I Phone application),
its compatibility with Chromecast63 and its desire to assert itself as an OTT broadcaster,
59
Another way of measuring the weight of the various SVOD players is that among all US broadband subscribers, 50%
are Netflix customers , 20% Amazon and 12% Hulu customers.
60 Part of its catalogue is thus accessible free of charge and financed by advertising.
61
The subscription may be cancelled at any time.
62
Previously only accessible on computers.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
Rousselot 36
Amazon Instant Video (AIV) is an SVOD service that was launched in 2011 by Amazon and is now
present on a large number of devices. The content offered can be viewed offline, which is not the case
for Netflix and Hulu. The subscription price is $99 per year. The group, which has exclusives (e.g. The
Walking Dead) from major labels such as PBS, Fox, CBS, is also starting to produce its original series
(4 new series in 2014) to compensate for content considered by some to be quite poor. AIV, which
has also embarked on the production of films that will be released in cinemas before accelerated
streaming distribution, has very ambitious targets in this area: 12 titles per year. Amazon spent $100
million on the production of original series, compared to $400 million for Netflix.
Subscribers, outside of SVOD, have free services such as offering delivery fees for orders made on
the Amazon platform as well as access to content for the Kindle e-reader. In 2014, a year that marked
the focus on SVOD, Amazon struck a deal with HBO to air the cable channel's key series, including The
Sopranos, Dead Wood and the Wire, three years after they first aired.
Amazon is the only player to be present in all three digital video segments, namely SVOD, EST64 and
the pay-as-you-go or VODA market, second only to Apple with 18% market share. The platform's
strengths lie in its user base and in the solid agreements concluded with the majors, such as Extant, a
science fiction series produced by Steven Spielberg and broadcast simultaneously on CBS and AIV65.
Series in
Number of original Number of North Number of Content Investment:
production and
American programs
series available available in
available
Price
Rights Acquisition
(*) 2015-2016 subscribers and Production
(in millions)
HBO
HBO, the leading cable channel and subsidiary of Time Warner, launched an SVOD service in 2010 that
was initially only available to subscribers of the channel. Considered the main competitor to Netflix by
Reed Hastings himself, HBO saw in 2013 and for the first time in its history, its number of American
subscribers being lower than that of Netflix (27.8 million compared to 30.3 million subscribers for
Netflix). In contrast, HBO has more than 114 million subscribers globally 66.
63
a connected device such as a smartphone
Google's HDMI multimedia dongle for receiving multimedia content from
or tablet via a TV and Wi-Fivia a Netflix, Hulu, etc.
64
Where it is only in fourth place with 10% market share , far behind Apple iTunes and its 67% market share .
65
According to Reed Hastings, AIV and Netflix are mutually exclusive services and therefore more complementary than they are.
66
With revenues of $5.2 billion, up 10% in 2014, and operating income of $1.4 billion (4.5 times that of Netflix and resulting in an
operating margin of 32.3% compared to 3.5% for Netflix), HBO generates a much higher revenue per subscriber than Netflix.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
Rousselot 37
The channel now spends more than $1 billion on the production of original content. Thus, the
competitive position of HBO and other pay-TV channels such as Showtime or Startz remains very strong
in terms of the production of innovative series. The fact that we are backed by a parent company with
substantial financing capacities has helped the channel a lot. In addition, it has gained a very good
reputation in Hollywood in film circles, which has allowed it to attract directing talent.
For a long time, HBO was dependent on cable operators but freed itself from them by launching, in early
2015, its OTT SVOD HBO Now service, i.e. streaming video available on the Internet without having to
subscribe to the channel. HBO Now is available on I Phone, I pad, and Apple TV. The group has bet on
quality more than quantity: recent feature films, cult series produced by the channel (The Wire,
Sopranos, Six Feet Under, Deadwood, Game of Thrones).
On the other hand, the number of programs available is much lower than that of Netflix. The service is
provided for free to subscribers of the channel and charged for others at $14.99.68 per month after a
one-month free trial, which is twice the price of Netflix. The interface is much simpler and more
uncluttered than Netflix's, even minimalist, does not integrate a recommendation engine and has
far fewer options. Thus, the app does not manage multiple user profiles.
The group would offer nearly 1,000 hours of original content per month compared to 100 hours for
Netflix currently. This choice to subscribe to an OTT service is partly a response to the phenomenon of
"cord cutting" reflects the tendency of cable subscribers to cancel their subscriptions or reduce the
number of paid cord shaving channels in order to redirect their programming towards SVOD platforms.
In 2014, 6.5% of U.S. households were cord-cutters (compared to 4.5% in 2013). This proportion is
12.5% for 18-34 year olds and 19% for households that subscribe to Netflix or Hulu. Since 2010, the
number of U.S. households subscribing to cable has declined by 17%. The number of households
subscribing to pay-TV channels increased from 103 million in 2013 to 100.8 million in 2014.
Recently, a few new players have entered this market, including Curiosity Stream and CBS All Access.
The latter offers more than 5,000 episodes from its classic series (Star Treck, Twin Peaks, etc.) but also
from the last seasons of series currently being broadcast. For these players, it is a question of
monetising their programmesand TV series broadcast within their network of channels (14 for CBS).
Spotify, the leader in music streaming, is also reportedly considering entering this market with its
database of subscribers' tastes and habits.
2. SVOD customers
SVOD customers are mainly "digital natives" born in the 2000s. They are tech-savvy, accustomed to
consuming digital content in large volumes on a variety of media. They value original and recent series
and, because of the exclusivities held by the various SVOD platforms, tend to subscribe to several
competing services at the same time, in order to have access to all the content69.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
Rousselot 38
For SVOD services, piracy poses the biggest threat by offering very similar content (original and
exclusive series), or even identical, for free. One of the most active hacking sites is without context
PopCorn Time. Appearing in the spring of 2014, this site would generate as many Google queries in
certain geographical areas as Netflix.
Very easy to install and use, this platform, created by Kim Dotcom, inventor of the MegaUpload platform,
workson the principle of streaming: the film is watched at the same time as it loads with a waiting time
of no more than 30 seconds, whereas before, this time was 2 hours. In 2013, Reed Hastings
explainedthat Netflix's main competitor was piracy. In a given market, piracy can significantly influence
the pricing policy of an SVOD provider.
Thus, in geographical areas where illegal downloadingis a common practice, Netflix will tend to offer
lower subscription prices than at the global level, in the name of competitiveness. Piracy is also
sometimes used by SVOD platforms to adapt their library of content: Netflix orients its policy of acquiring
series broadcasting rights according to the most viewed programs on pirate sites.
However, this threat seems to concern the European continent more than the US market. A much less
restrictive media chronology, which means that new releases are very quickly available on SVOD after
their theatrical release, the quality of SVOD platforms in terms of content, services and ease of use, as
well as the habit of North American consumers to Paying for audiovisual content explains this lower
threat.
3. Suppliers
a) Film Studios
SVOD platforms source their content mainly from production and animation studios, which are
generally subsidiaries of large global groups specializing in entertainment and media. The production
of series and films is structured around six major studios, which now account for 80% of the market.
SVOD platforms negotiate and buy rights and licenses from these players that will define the possibilities
of broadcasting acquired content in time and space. These agreements will also define the exclusive or
non-exclusive nature of the rights granted. The characteristics of these groups are presented below.
Some of the media groups mentioned above also own television channels such as Time Warner, which
owns HBO, or are themselves cable operators such as Comcast, which owns Universal Picture
Group, and therefore perform ISP (Internet Service Provider ) functions such as Comcast and
Time Warner.
Digital revenues from the sale of rights to the three major SVOD players were $5.2 billion in
2014 and are expected to be $6.8 billion in 2014. 2015. In this way , the gap is closed
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
Rousselot 39
The increase in capital expenditure reflects not only the inflation of license prices, orchestrated by the
majors and the major production studios (whohave perceived the growth potential and financial interest
of SVOD) but also the very ambitious and aggressive strategy of SVOD platforms in terms of acquiring
exclusives. Faced with the number of subscribers and the financial capacity of some SVOD providers,
such as Netflix, the majors are increasingly inclined to sell their rights and sell their broadcasting
licenses recent and successful programs. However, and very recently, Time Warner is considering
turning off the tap of content and making access to its productions less easy for players such as
Amazon, Netflix and Hulu.
b) Network operators
The network operator market is dominated by a few large groups including AT&T, Comcast, Verizon
and Time Warner Cable, which have shared the market geographically American. In nearly 30 out of 50
states, a manager is typically in a highly dominant position with a market share ofbetween 35% and
55%. Five operators are responsible for 75% of data routing in a sector that is becoming more
concentrated. For example, Comcast's merger with Time Warner Cable would allow the new entity to
capture 55% of the U.S. market.
For a long time, the principle of neutrality or fairness of treatment, which is one of the founding principles
of the net, has made it possible to create a seal and a lack of commercial relations between VOD
providers and network managers (cable operators, ISPs and satellite operators). This principle, which
guarantees equal treatment for all web players and for all data flows, prevented telecom operators
from influencing or controlling in any way whatsoever the flows of information and data transmitted via
their infrastructures70. Network operators could therefore not be considered as suppliers to SVOD
players because they did not charge them for the ban on traffic and the routing of data. In recent years,
contractual agreements, put in place at the initiative of certain SVOD providers and aimed at
guaranteeing the fluidity of the data transmitted, have broken this neutrality. Under pressure, Netflix
entered into a contractual agreement with Comcast and then with Verizon to ensure the best speed
and quality of its video streams to its American subscribers with a faster connection speed.
This is the first time that a content provider has paid an ISP for access to its customers. For Netflix,
it is also a way to prioritize its streams over its competitors and increase the value of its offer71. While
denouncing pressure from ISPs and taking legal action against them, Netflix continued to enter into
contractual agreements (Time Warner Cable, AT&T). Very recently, regulatory actions, initiated by
Facebook, Google and Netflix, have led to making access to the web a service of public interest and to
giving the principle of neutrality a recognized legal and legal character. In France, and despite bills
being tabled, regulations of this type do not exist. The principle of neutrality is therefore not recognized.
On September 15, 2014, Netflix announced its entry into the French market.
70
either by degrading and limiting them or, on the contrary, by
promoting them.
71
During peak periods, Netflix alone would use between 30% and 40% of the total Internet bandwidth in the United States.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
Rousselot 40
€ million 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Physical Video CA 1 960 1 789 1 664 1 497 1 384 1 419 1 388 1 223 1 116 929 798
Dematerialized video turnover - - - 29 53 97 152 219 252 239 259
Total video 1 960 1 789 1 664 1 526 1 437 1 516 1 540 1 442 1 368 1 168 1 057
Table 15: Revenues Generated by the Video Industry and its Two Components
The growth of the dematerialized video market, which currently represents 25 % of the total video
market in France, is mainly linked to its SVOD component (+31%), followed by EST (+8%) and finally
to VODA (pay-per-view rental) transactional VOD.
On the other hand, and when we look at the weight in market share that each of these segments
represents, the hierarchy is reversed and seems very characteristic of the French market. Indeed,
transactional VOD (VODA) accounts for more than 69% of sales and therefore represents the dominant
business model, followed by EST with 17% market share and SVOD with 14% market share.
Studies show that, while SVOD is attracting growing interest in France, its growth remains very slow,
particularly in recent years, and its share remains a minority in the use of digital video 73. Thus, nine
years after its launch,the French dematerialized video industry has not managed to exceed 300 million
in turnover.
A study carried out by GFK in 2014 shows that while 20% of French people, or 13 million people,
have bought DVDs/Blu-rays and spend an average of 81 euros on Supports
72
That is, the sale and rental of DVDs and Blu-rays.
73
According to an Ofcom study, 26% of French consumers of television or movies on the Internet used this type of service in
2014, compared with 63% in the United States and 42% in Great Britain.
© CCMP 2017 – G1914 – Netflix : the leader of the SVOD to The Conquest of the world –Christopher.
Favoreu
Philippe. Rousselot 41
Paid digital seems to be suffering from competition from freely accessible content, which is often
recent, and from the consumption habits that Internet users have developed over time : catch-up TV,
DTT, 74 piracy, video streaming on free platforms such as You Tube or Daily Motion. While all French
television channels (TF1, France television, M6, Canal +) have developed fairly rich services and content
for pay-per-view video (VODA) and catch-up TV, on the other hand the supply of SVOD content, and
more generally, the number of SVOD platforms, is very limited.
The French context, in which SVOD is situated, does not currently seem particularly favourable to the
latter. Indeed, SVOD platforms find themselves in competition with more than 26 free-to-air channels
offering more than twenty hours of cinema per week, twice as many as in the United States, and a
free-to-air replay seven days after the TV broadcast of the programmes. In its study on the Internet
year 2014 , Médiamétrie published the number of Internet users subscribing to an SVOD service at
the end of 2014. They accounted for 2.5% of internet users aged 15 and over, or just over one million
active subscribers. For its part, Canal Play reported 599,000 subscribers at the end of 2014 but nothing
on the subscriber portfolios of other services and Netflix in particular.
According to a study by Kurt Salmon, replay, which for 73% of French people is the first service on a
connected TV, is mainly done on TV, with 2.5 billioncontent viewed in 2013. These figures are all the
more worrying for SVOD as the content offered in replay continues to grow: +30% in the number of
videos available and +20% in the hourly volume.
These online videos are mainly consumed on major video portals (46% of usage), on TV channel
sites ( pay-per-view VOD (VODA) or catch-up TV) and, more minority, on legal streaming sites
(11%). Studies also show a clear change in usage. Young people (15-24 years old) are increasingly
watching TV on computers (1 hour and 43 minutes per day) and, to a lesser extent, on devices such
as tablets or smartphones. Video-on-demand has gained strong notoriety in recent years (91%
awareness) and usage (+5%). The medium for viewing digital video remains the TV screen (89% of
VODists due to the weight of ISPs in VODA) followed by the computer screen. Although among the
components of VOD, SVOD is the one that has gained the most notoriety, 70% of Internet users are
familiar with this service compared to 59% in 2013, the use of this service remains low: 50% of Internet
users have used it at least once and less than 2.5% of Internet users are subscribers to an SVOD
service.
74
In 2014, and according to a study by the Association for the Fight against Audiovisual Piracy (ALPA), 13.2 million French people
(i.e. 1/3 of Internet users) consulted a site dedicated to the piracy of films and series. This figure, which has stabilised, increased
by +16% between 2009 and 2013.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
Rousselot 42
Table 16: Rate of French households equipped with Internet and connected equipment.
As for SVOD, the Ariase survey of 3,000 French Internet users in November 2014 reveals that 70% of
respondents have already heard of SVOD services. Among the brands mentioned, Canal Play comes out
on top with 39% awareness among respondents "subscribed to an SVOD service" (46% among non-
subscribers). For a detailed study of consumer perception
Netflix, see Appendix B.
77
It should be recalled that the French legal framework – commonly referred to as the media chronology – requires
SVOD services to respect a minimum period of 36 months between the release in of a film and its integration into an
SVOD catalogue.
78
P. Lechevallier for Digital Home Revolution, December 8, 2013.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
Rousselot 43
In T0+22 months Broadcasting authorisation on channels that have committed to devote 3.2% of their turnover. film co-production.
:
In T0+30 months : Permission for all channels.
In T0+36 months : Authorization to release on SVOD platforms.
Two reports have been commissioned by the French government in order to enlighten parliamentarians
on the evolution of this chronology: the Lescure report (May 2013), which advocates for a shortening
of the time between the release of a film and its availability on the Internet. SVOD platforms and
the Bonnell report (December 2014) entitled "Financing film production and distribution in the digital
age" which also includes this recommendation.
The broadcasting and financing obligations for French TV channels are set out in the Tasca decrees of
1990. They set the amounts invested by TV channels in audiovisual production. Thus, TF1 and M6 must
reserve at least 15% of their turnover for the production of audiovisual works, including 10.5% for
M6 in heritage works (fiction, animation, documentary, live performance) and 12.5% for TF1. France
Télévisions must invest 20% of its turnover in audiovisual works.
26% and 22% of their turnover annual net of the previous financial year when they offer
at least ten long-form cinematographic works annually within a period of less than twenty-
two months after their release in cinemas in France;
21% and 17% of their turnover. annual net of the previous financial year when they annually
offer at least ten long-form cinematographic works within a period of less than thirty-six
months and equal to or greater than twenty-two months after their theatrical release in
France;
15% and 12% of their turnover. the previous year's annual net in other cases.
The contribution is invested in the production of cinematographic works and in the production of
audiovisual works in proportion to the shares represented by each of these two types of works in
the total download or viewing of works by users of the service during the previous fiscal year.
Finally, the regime applicable to other service publishers, in particular those of transactional video-on-
demand (known as "pay-per-view video-on-demand" or VODA) is an obligation to contribute to
production :
Cinematographic: 15% of turnover annual net of the previous financial year resulting from
the exploitation of cinematographic works to expenditure for the development
of the production of European cinematographic works , of which at least 12% for
the development of production original French-language cinematographic works
;
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
Rousselot 44
1. Telecom operators
Until now, thehigh-speed Internet market has been mainly dominated by three players, Orange, SFR
and Free, which together have a combined market share of nearly 83%. Orange with a market share
of 40% had 10.4 million subscribers, SF R with a market share of 24% had 6.52 million subscribers
and Free with a market share of 22.59% representing 5.9 million subscribers Bouygues and
Numéricâble with market shares of 9.5 % respectively and 4.21% were only marginal. Recently, with
the takeover of SFR by Numéricâble and the failure of its takeover bid for Bouygues Telecom, the
structure of the market has changed significantly and tends to become more concentrated. Most ISPs
often offer their own VODA-type video-on-demand service via their set-top box. (see box below)
Telecoms operators are suppliers for SVOD platforms in two ways: on the one hand, as Internet Service
Providers (ISPs) by providing bandwidth (pipes) to SVOD platforms that use an OTT distribution mode,
and on the other hand, through their set-top boxes (or digital set-top boxes 79) that can offer,
alongside free-to-air and pay-TV packages, video-on-demand platforms. In return for this
intermediation service, ISPs charge a commission generally representing a share of the subscription
between 20% and 30% of the subscription.
Thus, video-on-demand platforms may have to pay ISPs twice, on the one hand to be present on their
box and, on the other hand, to be able to use their network and consume part of their bandwidth 80.
This remuneration can give rise to relatively tense and difficult negotiations between digital video
providers and ISPs. Netflix's example is illustrative in this respect.
79
And therefore their TV offer via subscriptions, generally Triple or Quadruple Play.
80
The higher the cost of the right of way over ISP servers, the greater the number of users of the service.
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
Rousselot 45
Like other French SVOD players, Netflix is more or less obliged to transit through ISPs. Whereas
traditionally French TV channels wishing to be available on a box have to pay a30% fee, it seems that
Netflix has only offered 10%82. However, it appears that the ISPs concerned, and in particular Orange,
charge Netflix for its use and bandwidth consumption in addition to the right to access their box .
Canal Play
available available available available available
VAULT
Netflix
available available available
VAULT
Video on Demand
available available available available Available
WATER
Vodéo.TV
available available Available
3000 documentaries in SVOD and VODA
TF1 Vision
available available available Available
VODA : 3000 videos on demand
Canal+ on demand
available available
Catch-up TV available available Available
and Concert
available available available
VAULT
Free Home Video
available
VOD: renewable film/week,
24/24 Youth Video
available
240 cartoons available
Orange Cinema Series GO
available
DOWNSPOUT, WATER , WATER
24/24 TV
available
Replay service France Télévisions
M6 Video Pass
available available Available
WATER
Movie TV
SVOD offer of movies renewed every month available available available
81
Free still refuses to include Netflix in its box, highlighting the low financial remuneration of the latter compared to other customers such
as Canal Plus.
82
http://www.igen.fr/apple-tv/2014/10/chez-orange-netflix-paie-pour-la-bande-passante-et-des-demain-chez-sfr-87995
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
Rousselot 46
Table 17: Comparison of VOD service offers (VODA and SVOD) available on French ISP boxes
In addition to the major international publishers and studios (Warner, Fox, Disney, etc.), the French
film and audiovisual production and publishing market includes three types of players:
subsidiaries of major TV groups , such as TF1 vidéo (TF1-Bouygues Group), France
Télévision Distribution (France Télévision Group), Studio Canal (Canal Plus-Vivendi
Group), Société Nouvelle de distribution (M6 Group);
integrated subsidiaries of film groups, such as Pathé Distribution and Gaumont Video;
subsidiaries of major American entertainment groups such as Warner Bros. Entertainment
France of the Time Warner group, publisher of 60 series in 2013-2014.
Expenditure on the purchase of broadcasting rights before the end of the shooting period (pre-purchase)
and investments in producer shares (co-production) declared for 2011 amounted to €773.3 million,
an increase of 10% compared to 2010. These expenses corresponded to the production of more than
10,000 hours of audiovisual works in two years.
After a strong start, it seems that the growth in the number of new Netflix subscribers is slowing down
in 2015. The number of French customers is currently between 500,000 and 750,000, depending on the
institute. Netflix would therefore bequite far from the 10% of French households, a figure that
represents the company's break-even point in each country where it operates.
In addition, the objective of 1/3 of French households (i.e. nearly 9.8 million subscribers) set by Reed
Hastings for the next 5 to 10 years will require considerable efforts and seems difficult to achieve today,
and in the current context. However, Future Source Consulting expects 3 million subscribers in 2019.
Having entered by offering three categories of subscriptions (see Figure 3 p.18), Netflix very recently
(August 2015) increased the price of its intermediate subscription by one euro . The standard offer
(programmes available in HD on two screens simultaneously) has been reduced from €8.99 to €9.9per
month. While this practice seems to be common in the company's internationalization process –
traditionally Netflix gradually raises its prices after having slashed them when it enters a foreign market
– it seems that it is accelerated in the French case. In both the US and the UK, Netflix has guaranteed
its subscribers an unchanged price for two years.
Canal Plus' activity is divided into: (1) publishing 6 premium pay-TV channels, 22 thematic pay-TV
channels and 3 free-to-air DTT channels, (2) distributing TV channels as part of specific subscriptions
on DTT, satellite (Canal satellite), fibre and cable, (3) video-on-demand service (Canal Play) and (4)
production, acquisition and distribution of films and series via its subsidiary StudioCanal. Over the past
few years, Canal Plus has developed a digital offer that is both diversified and highly complementary
to its Live offer – via the
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
Rousselot 47
Through replay services and SVOD, Canal Plus plays on the premium offers of its channels. The latest
innovation in this field is the launch in June 2015 of its own OTT box, theCube S, which allows Canal
Plus to free itself from ISPs84 and thus offer all of its85 services on traditional TV screens without going
through ISP boxes. On September 10, 2014, five days before the launch of Netflix, Canalplay organized
a major press conference to present its new features: the implementation of an elaborate search engine
(Suggest) and a significant investment in personalization and advice, the production of original series,
the promise of a a more extensive catalogue, or the project of an agreement with the American channel
HBO to buy previous series.
Canal Plus' SVOD offer offersunlimited, commitment-free, multi-screen streaming, which, like OCS but
unlike Netflix, allows offline playback. Two offers are available: one at €7.99 per month allows access
to Canal Play on mobile devices and computers, the other at €9.99 including, in addition to mobile
devices, TV and the possibility of being viewed on 5 screens simultaneously. Unlike Netflix, CanalPlay
offers only a few exclusive series and no new series so as not to compete with Canal Plus' premium
channels. The service broadcasts Hannibal, Lilyhammer, Once Upon A Time, Big Bang Theory, 24
hours and offers to watch Pretty Little Liars or Gossip Girl again. According to Canal Plus' executives,
introducing new content into a low-cost SVOD offer in terms of price (implied, like Netflix) is a
marketing argument that is not economically and financially sustainable and viable in the medium
term. 86 large selection of content with more than 2,000 films and 120 series , in addition to
documentaries and shows and offers all past seasons of hit series. The service adds hundreds of new
releases per month and has the advantage of being available on all ISPs' boxes, unlike Netflix. However,
the number of devices on which Canal Play can be viewed is still lower than the world leader in video
streaming87. To date, Canal Play claims about 600,000 subscribers.
83
That service, which is a variation of the TV subscription, has made it possible, inter alia, to prevent Canal Plus from fleeing its
subscribers to the Internet. At the end of 2014, MyCANAL had 5 million downloads, 30 million monthly visits and 1 million
daily users.
84
This box is compatible with all ADSL and cable operators and connects to the WIFI network. Canal Plus is thus seeking to become
one of the heavyweights of OTT in France, thus competing directly with Netflix by positioning itself at the same level as the latter.
85
That is to say, all the channels of Canal Plus and Canalsat, Canalplay, replay, plus services such as Deezer, Radioline, the
weather channel, etc.
86
According to the Huffington Post
87
Canalplay is not accessible via PS4, Xbox one and Chromecast.
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Table 18: Comparison of the programme offer between Canalplay and Netflix
(Source: Digital Home Revolution, October 2014)88
The bouquet of 100% cinema and series TV channels - Orange Cinéma Séries - was launched
on 13 November 2008, exclusively on Orange TV by satellite and ADSL. At launch, the package
includes Orange ciné max (HD), Orange ciné happy, Orange ciné choc, Orange ciné
Novo and Orange Ciné Géants89.
In September 2012, and with the entry of Canal into its capital, Orange Cinéma Séries became OCS and
is now accessible via Canalsat to all major operators (SFR, Free, Bouygues Telecom, Numericable). In
2014, the channel package offered its subscribers a video-on-demand service (OCS Go90) and
therefore developed a mixed model combining linear broadcasting and video-on-demand. The content
can also be viewed in offline mode via an app that allows you to download up to 5 movies to a mobile
device. OCS Go would offer more than 6,000 programs to its subscribers.
88
Analysis of offers carried out between 15 September 2014 and 22 September 2014, the date of the launch of Netflix in
France.
89
The 4 channels in the package are now OCS max, (big show channel), OCS city (HBO series), OCS choc
(documentaries) and OCS Géants (films).
90 OCS Go is in fact a kind of fake SVOD and is more akin to a catch-up TV service offered to
subscribers of the package.
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Licence Usage bride à : INSTITUTE MINES-TELECOM BUSINESS
SCHOOL
In January 2013, OCS announced that it had renewed the framework contract for a further four years.
links to HBO and thus offers subscribers on its OCS city channel the exclusivity and completeness of all
theUpcoming new productions as well as theIn the first place, it is not possible to use the series that
have already been broadcast on the channels. The great OCS's advantage is therefore to offer the
broadcast of episodes of American HBO series 24 hours after their appearance on the American small
screen. Its video-on-demand service (OCS Go) haslIt is also the complete catalogue of HBO productions
(les Soprano, The Wire, Six Feet Under, Bored to death) and the content is accessible 30 days after its
first releaseon the fetters of the bouquet.
In addition to this contract, OCS has Sony Pictures Entert Ainment agreements for the exclusive
broadcast of its films and series but also by other distributors such as TBS (Turner Broadcasting System
International), AMC, Starz. French subscribers of OCS can watch Game of Thrones and True Detective
exclusively. On the other hand, apart from HBO series, the catalogue remains moderately well 91,
especially on the cinema side, and this despite its agreements, such as a first-time exclusivity contract
concerningthe broadcasting rights of all new films and series from the Sony Pictures studio as well as
its catalogue films (multi-year agreement announced on March 3, 2015) or its exclusive rights to the
films of the American studio Metro-Goldwyn-Mayer. Throughan agreement with SND (the distribution
company of the M6 group), Orange has access to films from the mini-studio Summit Entertainment.
Orange has also signed with Disney regarding the Marvel films that Disney has bought and distributes
worldwide. Thus, in terms of the Back catalogue, Orange's channels draw on those of Marvel,
Touchstone Pictures (Disney), Paramount, DreamWorks Animation, Miramax, 20 th Century Fox and
StudioCanal.
Videofutur and Filmo TV have also signed an agreement to broadcast the Paramount Channel, Game
One and Disney Channel, which are included in the subscription. Thanks to this alliance, the two SVOD
services aim to have 50,000 subscribers by the end of the year. The SVOD offer Videofutur, which
includes that of FilmoTV, is available for the sum of 10 euros per month, without series but with an
offer of many films available. The service is accessible on the internet and via all boxes except SFR's.
Founded in October 2009, Vodkaster specializes in sharing film reviews in the manner of
Allociné and in the creation and animation of a database of film excerpts. Vodkaster launched its mobile
app on iOS in 2011 and on Android in 2013. Vodkaster's business model remains the implementation
of a remote DVD viewing offer. With no subscription or commitment, this service allows you to store all
the DVDs of Vodkaster members. They can access a DVD library on all devices (TV, tablet, etc.) thanks
to the content stored in the cloud. The user has the option of reselling his digital DVD library to other
users. Note an originality, Vodkaster has launched a parody site Notflix which strives to point out the
shortcomings of Netflix by listing in particular all the films that Netflix will not be able to offer in France
because of the chronology of the media. Django Unchained, the Batman trilogy,
91
OCS nevertheless broadcasts the latest seasons of the most prominent series (The Walkind Dead season 5, Breaking Bad
season 5, Misfits, etc.), but does not have access to all of them from previous seasons.
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At the beginning of August 2014, AB Production92 launched its SVOD service Jook Video on
the Freebox and became accessibleat no extra cost to all Freenauts subscribed to one of the
Bis/AB packs. This launch takes place a few weeks before that of Netflix in France. The
monthly subscription is set at 6.99 euros, without commitment, online and on all boxes
with
the exception of SFR. Around 10,000 programmes are available, including films, series, manga and
concerts. The Video Pass is made up of 200 programs from Jook Video. In May 2015, on the
occasion of the release of version 2.0 of its applications, Jook vidéo indicated that it wanted to
"shake up the French SVOD market today by becoming the reference service. Groupe AB's SVOD
platform aims to be modern, innovative and bold"93. But, despite a lower price, it has clearly not
managed to make a place for itself between Netflix and Canalplay. The AB group, publisher of the
service, shut down Jook Video on June 30, 2015.
However, the AB group has announced its intention to continue publishing itsSVOD services. Thus, even
if it discontinues its generalist platform, it intends to offer new thematic services, representing an
alternative to generalist platforms and "already available from SFR and Numericable"94 without
specifying its future on the Freebox. AB announces the launch of Action Max, a new Theme Pass,
100% dedicated to action cinema.
At the end of 2009, M6 launched the M6 Pass. This service is available via the
Free and SFR boxes, for a monthly price of 7.99 euros per month, without
commitment and with unlimited access. It allows you to watch 800 episodes of
French series on
the day after they were broadcaston M6 (Desperate Housewives, Californication, Kaamelott...). One
year later, M6 launched the VIP Series Pass, which gives access to the entire M6 VOD offer of the
Classic Series Pass but also to American series the day after their broadcast in the USA95 such as Hawaii
5-0, NCIS, Elementary, Blue Bloods or Beauty and the Beast. The episodes are broadcast on a
streaming basis, in high definition and in the original version with French subtitles. Each of them
remains accessible for a period of one month after its release in the United States.
As of July 2014, Numericable, the main cable television operator and cable Internet service provider in
metropolitan France, is secretly preparing its offer of this SVOD platform, under the catchy name of
Serie-Flix whichshould only offer series even if this launch would be followed by another platform
dedicated to cinema (potentially called Movies-Flix).
In the end, when it was launched on September 15, 2014, the platform was called La BOX SERIES by
Numericable and offered an SVOD site competing with Netflix and Canalplay, on demand, unlimited,
focused on series and free. Renamed La Box Séries, this service offers access to more than 3,000
episodes of adult and youth series via the menu of its LaBox Internet TV box. In fact
92
In 1997, AB Productions, which was originally a company producing records and shows for young people, launched its satellite
package of 18 channels, AB Sat, via the Eutelsat satellite and thus became a broadcaster and an audiovisual group. In March
1998, AB bought RTL9 for 65 million francs.
93
Excerpt from AB Production's official press release quoted in, Brèves, Univers Freebox, 15 June 2015.
94
Excerpt from AB Production's official press release quoted in, Brèves, Univers Freebox, 15 June 2015.
95
This offer has already been offered by TF1, whose episodes of US series have also been available on VOD 24 hours after their
broadcast since the end of 2008, but through their individual purchases.
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On 17 July 2015, Orange announced the failure of the proposed alliance between Orange, TF1, M6 and
France Télévisions, to merge their video-on-demand services in order to create a "French-style" Netflix.
According to leaks to the press, the reasons for the failure include insurmountable disagreements. "
We're going to stop talking, we're going to go back to our homes and think, but for now, it's stopped,"
an Orange spokesman told AFP. Discussions to set up a competitive and attractive VOD platform have
failed mainly due to "disagreements over the business model "
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In a very general way, VOD96 is defined as a service through which the end user can, at his request,
select and view video content according to the temporal or sequential order of his choice (ability to
decide whether to start watching, stop it, resume, rewind, pause, etc.).Article 97.
VOD is therefore a mode and technique for distributing and broadcasting digital audiovisual content
(films, series, ports, documentaries, etc.) that is dematerialized and non-linearized. This allows
consumers to access video content without a medium, which they can watch in real time (streaming)
or download and watch on a delayed basis. More specifically, these two technologies associated with
VOD are:
Downloading: video files are downloaded and stored at the customer's premises either
temporarily or permanently on their hard drive. The user must initiate the download and
wait for the download to complete to view the content. This recovery mode, while consuming
less bandwidth, results in a wait time before playback. In addition, it promotes a risk of hacking
by transferring files to clients who can then distribute them.
Streaming or streaming video is the preferred mode of data retrieval by SVOD and which
allows a program to be played continuously (a technique used in particular by You Tube or Daily
Motion). In this case, the digital data is transmitted to the client from a server in real time and
in a continuous stream, as the video is viewed. The data provided is not stored by the user.
While this technology limits the risk of piracy, it is highly dependent on the quality and capacity
of the routing network (Internet, ADSL, cable, etc.). ) and consumes a lot of bandwidth.
Compared to physical video and traditional linear television, VOD has several advantages that can be
summed up by the slogan : "Any device Anywhere, Anytime". Thanks to VOD, consumers have their
own video club at home and can freely choose the content they watch. The VOD user is thus not
dependent on the content and programming times imposed. 98 In addition, and thanks to the
development of high-speed Internet and Wi-Fi, digital content can be consumed in a plurality of places
and on a variety of media or viewing devices. This technology allows you to interact and control the
viewing by stopping the playback and resuming it later at the precise point of the pause.
VOD, which can be likened to dematerialized video, and which is opposed to physical video, which is
based on optical storage hardware such as DVDs, is in fact a general category made up of four
subcategories that differ in terms of the method of payment and the method of data retrieval. Each
category or segment of VOD therefore corresponds to different technologies and business models. These
four categories are: EST, VODA, SVOD, FAD .
EST or Electronic Sell-Through: the consumer pays per unit for digital content, such
as series or films, which is stored, permanently or temporarily , 99on his computer. Hard
Drive
96
Video On Demand
97
ITU, 2009. ITU is the agency for information and communication technologies (ICTs)
United Nations specialized
98
The customer is therefore no longer passive and subject to the programming of the channels, but is free to compose his programmes.
99
Content may become unusable after a certain period of time and unviewable on competing platforms.
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Transactional video in Act100 or VODA: this category includes digital videos that are
rented individually for unlimited viewing for a given period of time (24 hours or 48 hours).
In this case, the user rents a virtual DVD. Unlike EST , content is not downloaded
to the user's devices. This service is generally offered by Internet Service Providers (ISPs) via
a triple Play offer ( such as Orange or Free) or by pay-TV channels such as Canal Plus,
or Canal Sat101. In most European countries, VODA ppredominates in terms of business
model.
There is a fourth category, but it appears to be more negligible within VOD and which will be
little considered in the future.
FAD: Downloadable programs and content are free to the consumer and fully ad-supported or
included in the subscription offered by ISPs. This service is usually offered by TV channels (paid
or free). In this type of service, we mainly find catch-up TV programmes offered by major
television channels such as TF1 or Canal Plus and which offer on-demand viewing of content
already broadcast in a linear manner.
The content offered in SVOD can be viewed on a variety of media (computer, TV, Smart TV or connected
TV, smartphone, tablet, multimedia and game console, DVD and Blu-ray player ) and is accessible via
a plurality of high-speed routing networks such as Internet, ADSL, cable, satellite, terrestrial radio.
VOD usually requires an internet connection to access a video library stored on a remote server. The
diversity of technical solutions associated with SVOD (routing network and support for
© CCMP 2017 – G1914 – Netflix: the SVOD leader conquers the world – Christophe. Favoreu Philippe.
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OTT is a mode of distribution of content (video or audio) via the Internet that takes place directly
between a user and a service provider, and withoutintermediary action by a third party (in particular a
telecom operator) outside the transmission of data by ISPs. Telecom operators, although carrying the
data, are not involved in the control or distribution of the content.The internet platform thus goes
above – Over The Top – intermediaries (especially ISPs and cable operators).
An over-the-top (OTT) service is a service for the delivery of audio, video and other media over the
Internet without the involvement of a traditional network operator (such as acable, telephone or satellite
company) in the control or distribution of the content. The Internet Service Provider distributing the
content may be aware of the contents of IP packets traveling over its network, but is not
responsible for, nor able to control, the display of the content, the enforcement of copyright,
and/or the redistribution of the content.
Thus, and as an example, when a customer accesses Netflix via a tablet, a smartphone, a smart TV, a
game console or a Blu-ray player, the streaming platform uses an OTT distribution mode. On the other
hand, and in order to be viewed on a classic TV (not directly connected to the Internet), Netflix is
obliged to go through a box (a digital decoder such as a Freebox) of an ISP to which it must pay a fee
(which is generally 30%). It is no longer an OTT distribution. Some Internet players have developed
their own digital decoder or OTT102 box.
Figure 12: The different OTT and non-OTT video distribution modes
102
Among the most widely distributed OTT boxes internationally are the Apple TV, Roku, Amazon Fire TV
and, for the French market, Videofutur's Box and, more recently , Canal's Cube S More.
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Some players in this sector can occupy several positions simultaneously: a content producer can be
both an ISP and have an SVOD offer (as in the case of Time Warner). The value-creating elements
(the competitive factors) are the price, the novelty and recentness of the programmes offered, the
renewal and size of the programme library, the user experience and the personalisationof the service
offered, as well as compatibility with the following conditions). mobile and connected viewing devices
103.
At the beginning of 2015, Netflix asked Médiamétrie to carry out a barometer on its French market. For
this barometer, Médiamétrie surveyed 2049 Internet users aged 15 and over between 19 February
and 5 March 2015, on the Internet and according to the quota method adjusted on the basis of
Médiamétrie's reference studies. A clear methodology, but one that, given the size of the sample, may
render some results insignificant.
This is more of a qualitative analysis than measuring the size of the subscriber portfolio. Because for
the moment, the number of Netflix subscribers in France remains a mystery and regularly feeds
newspaper articles. Thus, as soon as a statistic is published, the reader is entitled to a stream of articles
that for the most part, comment on the figures without being able to refer to an official figure from
Netflix or any official body. The objective of Médiamétrie's Netflix barometer was divided into four parts:
the evaluation of the service's notoriety, the measurement of Netflix's potential, the monitoring of the
evolution of subscriptions and the knowledge of other video practices
103
watch the service on all connected devices owned by the customer.
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According to the Médiamétrie survey, the 5 main strengths of the Netflix service are: technical quality,
subtitles, recommendation to friends, children's programs, search function. Médiamétrie notes,
however, that subscribers in particular are very dissatisfied with series.
"However, we are able to confirm that the figure announced several weeks ago by various research
companies (SNL Kagan, for the most recent) is close to reality: Netflix crossed the 500,000 active
subscribers mark at the end of 2014 and is recruiting just over 10,000 new paying subscribers per
month in 2015. This growth rate should lead Netflix to recruit more than 100,000 new paying
subscribers by the end of 2015. However, it is difficult to accurately assess the size of the subscriber
base for 2015 because, like most SVOD offerings, Netflix's is itscommitment, so it is necessarily
impacted by a high churn rate104. But for Netflix, the issue is not there: it doesn't matter if France has
500 or 600k subscribers, what matters now is its speed of deployment internationally. And the faster it
is, the less important the weight of France will be in the global strategy of theSVOD giant. 105. However,
the latest figures seem to show a slowdown in the growth rate of new subscribers.
104
The churn rate is the churn rate , which expresses the churn rate affecting the customer base of a company or
product. This rate measures the percentage of customers lost, over a given period of time, compared to the total number of
existing customers at the beginning of that period. ...
105
Digital Home Revolution, P. Lechevallier 28/4/2015.
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