COVID spike fails to move the needle for European AVOD

In its study, the analyst noted that if the lockdown context between Q1 2020 and Q2 2020 assuredly had a massive impact in terms of traffic, with growth rates twice as high as the previous trends, the market progression remained limited, as growth rates eventually retrieved their past value at the end of 2020.

While the European market used to grow at a 10% rate year-on-year on average, the last three years have seen growth rates between 16% and 20% overall. This growth was regarded as even more significant considering the fact that YouTube remains the dominant player, mechanically dragging growth down as the AVOD service reached its mature state in most European countries several years ago.
Dataxis added that while the number of active European AVOD services used to grow at a slow pace prior to 2019, the market expanded significantly in 2020 with the launch of 15 new services, and this evolution was also confirmed in the first semester of 2021. It attributed these trends to two main factors.

First, it highlighted the growing number of US services which have started to enter the European market to diversify their revenue stream while they were becoming more mature in their domestic market. The report cited Pluto TV, Discovery+, Tubi and Facebook Watch among others now widely available in Europe and accounting for a growing share of the AVOD space. Secondly, it said content offer and its curation have expanded tremendously both with the launch of new European actors like Watch4, Rakuten TV Free, Filmstream or Joyn, and with the increasing amount of aggregated content available by platform, providing alternatives to traditional broadcast VOD offers, which have captured the major share of traffic and revenues after YouTube.

However, Dataxis cautioned that the European AVOD market remains nascent and some warning signs need to be considered. It calculated that AVOD revenues were still increasing faster than the total monthly active users, driving up the ARPUs with the year-on-year growth has been decreasing steadily since 2017. Namely from 35% in 2017 to 23% in 2020 which that analyst said was far from being negligible in the COVID-19 context. In addition, the market still sees a significant share of revenues is still captured by YouTube and BVOD services across Europe, while smaller European pure players struggle to monetise their audience. Consequently, ARPUs remain low in the continent: as of Q1 and Q2 2021, only 15 players out of the more than 125 AVOD services available succeeded in generating ARPUs higher than €1 from their audience.

Looking at the future, Dataxis said if usage has surged since the beginning of the pandemic, the AVOD market still needs to secure higher revenues to become sustainable. This issue it said was more decisive for pure players than for BVOD services. For the former, acquiring content remained a major entry barrier, as well as traffic costs which have mechanically increased since Q1 2020, with the growth in audiences. It has since noted several services subsequently trying to diversify their advertising revenue streams, or to give more space to advertisers within their service. Rapid TV News