European TV Gets Ready to Fight Off Netflix and HBO

(Bloomberg Businessweek) -- For the past two decades, Spain’s state-run RTVE and private rivals Mediaset España and Atresmedia have been fighting for viewers’ hearts with slates of game shows, sports, comedies, and glossy morning news. Now, in a plot twist worthy of the steamiest soap opera, they’ve decided to hook up: This summer the adversaries are launching LovesTV, a shared 18-channel streaming platform with programming from all three networks. The goal is to “aggregate broadcasters and serve as a common entry point into the digital world,” says Arturo Larraínzar, strategy director at Atresmedia.

A similar script is playing out across Europe, as long-standing foes in Britain, France, Germany, and Italy set aside rivalries to co-produce programs or offer shows online. The reason: interlopers from across the Atlantic. Netflix Inc. this year is doubling its European programming budget, to $1 billion; Amazon.com Inc. will soon have at least a dozen original series from Europe, up from one in 2014. And Home Box Office Inc. is boosting its non-U.S. offerings this year by 40 percent, to 250 hours of shows. These newcomers could spur a mass defection of viewers to the increasingly more convenient web, and Europe’s traditional broadcasters are scrambling to find a response. “Consumers no longer care where they watch our content, so why should we still draw strict lines between linear and nonlinear, offline and online?” asks Bert Habets, chief executive officer of RTL Group, a traditional broadcaster that’s launched streaming sites in France, Germany, and four other countries.

The model the Europeans say they’re emulating is Hulu LLC, the U.S. streaming service owned by perennial antagonists Comcast, Time Warner, 21st Century Fox, and Walt Disney. Since its launch in 2007, Hulu has grown to 20 million subscribers, who pay $8 to $40 a month for access to hundreds of shows. Just as the U.S. networks have gone online to hold on to America’s 120 million TV-watching households—and the ad dollars they represent—so European companies say they can build a simple video platform to keep viewers from clicking away. “People want this overriding interface,” says Alan Wolk, co-founder of media analysis website TVRev. “It’s confusing to have a different app for every network.”

Building a Hulu in Europe, with its dozens of languages and patchwork of regulations, will be trickier than in the U.S. Broadcast rights for most shows are sold country by country, so it’s difficult to put together a seamless service for the entire region. Different rules about storing recorded shows in the cloud—France, for instance, has more relaxed guidelines than the U.K.—could be a roadblock. And regulators in Germany and the U.K., citing antitrust concerns, have blocked broadcasters’ efforts to cooperate. “I don’t think it’s going to be simple to do a pan-European play,” says John Turner, a partner at media adviser OC&C Strategy Consultants.

That hasn’t stopped the broadcasters from trying. In recent months, ProSiebenSat.1 Media SE in Germany has teamed up with Discovery Inc.—which owns the popular Eurosport franchise—to create a service called 7TV, and the two are seeking partners in other countries. Britain’s media regulator has encouraged a similar alliance between the BBC, ITV, and Channel 4. Spain’s LovesTV will offer livestreams of all three of its networks and allow viewers to see the past week’s shows to catch up on episodes they may have missed.

The American upstarts are also spurring erstwhile rivals to sacrifice exclusivity and share costs. The BBC and Channel 4 have teamed up with Hulu and AMC Network Entertainment. And public broadcasters in France, Germany, and Italy have agreed to cooperate on what they call “bigger” shows; they say they’d welcome companies in other countries as well. “If we pool our resources, we can have a strong voice on the international scene,” says Delphine Ernotte, head of France Télévisions SA.

Even with shared resources, they’re likely to lose some premier programming to the cash-rich Americans. Industry insiders say Netflix spent about $7 million per episode of The Crown, roughly five times what ITV—the U.K.’s biggest commercial broadcaster—paid for Downton Abbey (though the company doesn’t release figures for its shows). With so much money available, “screenwriters and directors increasingly want to work with the multinationals,” says Karin von Abrams, an analyst at researcher EMarketer Inc. “The funding is better, and they can actually see their projects become reality.”

The broadcasters will find themselves in competition with homegrown rivals such as the TVPlayer platform in the U.K.—part-owned by Hearst Communications Inc. and Walt Disney Co.—and French startup Molotov.TV. The two-year-old company has signed up 5 million users with its Netflix-like interface offering three dozen channels for free and premium bundles starting at €4 ($4.67) a month. Molotov founder Jean-David Blanc says he’s in talks with British, German, Italian, and Spanish companies to expand into those countries. “The content providers, the producers, they want to maximize their chances to find their audience,” he says. “So the world is changing, obviously.”

To contact the editor responsible for this story: David Rocks at drocks1@bloomberg.net

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