European FAST services must diverge from the US playbook
If there is one thing we know about the FAST channel market in Europe, it is this: it is going to be very different from its US counterpart. European FAST services face much stronger competition from FTA TV, will struggle to grow to a similar size, and will be less disruptive in Europe. Just because it worked in the US doesn’t mean it will work here.
However, getting it right could pay dividends…
Early indicators suggest that the European FAST market could be worth as much as $700 million - $800 million by 2028 – not bad for incremental revenue. But is this just a redistribution of revenue from linear and BVOD or could it significantly increase the total pie?
Factors for success in the US are much weaker in Europe
Limited access to free TV in the US
Historically, free content has been hard to access in the US. So, viewers who cut the cord typically can’t get linear TV and see TV adverts. This has created a significant gap in the US which FAST services have filled with some success. In 2022, Tubi stated 56 per cent of its audience couldn’t be reached via traditional media.
In Europe, where FTA and free BVOD services are robust and widely available, the appetite for FAST channels is small. However, the potential FAST audience is set to grow as viewers shift away from watching broadcast TV and engage less with PSB services. Has FAST’s moment arrived?
Strength of the FAST channel proposition
Driven by the strength of their content offerings, Roku Channels, Tubi and Pluto captured approximately 3% of US viewing in May 2023 according to Nielsen, and we estimate they generated $2.4 billion in 2022. This level of viewing compares favourably to Netflix, YouTube, and Disney+ (7.9%, 8.5%, and 1.8% respectively), especially considering FAST’s far lower content investment. With investment in content in FAST expected to grow in 2023, this gap in viewing is expected to close further.
On the other side of the pond, European FAST services lack the high-profile films and shows their FAST peers in the US provide as a matter of course. This paucity of content means European services may struggle to retain their viewers after the novelty of watching a beloved show from childhood has worn off. This isn’t helped, of course, by the fact that European audiences can access so much other good content from existing free services.
Key differences in the ad markets impact the consumer experience
US network TV has roughly 60% more advertising minutage than its European counterparts, who are more closely regulated. This abundance of advertising minutes has yet to invade US FAST services. How refreshing for the US FAST audience! However, in Europe, the difference in ad minutage between FAST and broadcast TV is marginal so viewers are unlikely to see the appeal as clearly as their US peers.
The role FAST can play in Europe
So European FAST services have their work cut out. The need to launch services in over 51 countries, each with their own unique dynamics, will slow FAST take-up and preclude a one size fits all approach. Those contemplating launching a FAST service in Europe will have to consider a range of issues. Firstly, their existing role in the market, the availability of FTA, and the relative strength of FTA players. They will also need to explore local agreed terms of trade between content owners and producers, the desire of consumers to move away from pay TV, and the size of the online ad market.
They will need to respond creatively to all of these issues and consider the pitfalls.
FAST offers traditional players an opportunity for increased differentiation and monetisation of existing IP
In the last year, European broadcasters have started to embrace FAST with ITV, RTVE, TF1 and UKTV all launching their own channels within their apps. Those broadcasters willing to bring popular, premium content to their FAST channels, e.g. ITV’s Love Island channel, will enjoy more success than those relying on dusty content found in the archive.
Other broadcasters are experimenting with distribution via Smart TVs, TV platforms, and pureplay FAST services like Pluto or Tubi. Time will tell if this is the right strategy.
Two weeks ago, Channel 4 launched two thematic channels (4emergency and 4adventure) on Tubi, Plex, and Xumo in the US. With a UK broadcaster now testing the water in the States, this is another angle for European broadcasters looking to adopt FAST to consider. If these services bring high-quality content from their local markets, the rewards could be significant.
Content owners similarly need to carefully consider their strategy in relation to FAST. Selling everything to everyone all at once might not be the best strategy in the long-term. Holding back and thinking about exclusivity might pay off.
Pure play FAST and aggregators services must move quickly in land grab phase
If pure play FAST services, such as TUBI, are to launch in Europe, there is a need to do so sooner rather than later. Their position as a natural aggregator of FAST content is already being challenged by both Smart TV and pay TV platforms who are looking to perform this role. And broadcasters are also muscling in.
European TV platforms such as Virgin Media have launched FAST channels within their EPG with the aim of reducing churn. But with little original or exclusive content, their propositions are at risk of looking unappealing, which is a shame because, if TV platforms can offer FAST channels access to viewer data and drive up CPMs, both may benefit.
It might however be the TV manufacturers such as Samsung and LG who ultimately wield the power in the FAST market throughout Europe. By incorporating access to FAST channels onto their devices and benefitting from their Pan-European presence. they may become the dominant aggregators.
FAST can accelerate shifts away from pay TV in some markets
In Germany, the end of mandatory cable payments is driving pay TV churn. This might well have created an audience in search of a FAST channel. DAZN has already announced that it is launching FAST channels to cover football, martial arts, and darts in Germany. Other markets like Belgium. with its high pay TV penetration and relatively small FTA broadcasters, may also be ripe for disruption.
Online ad markets fragmentation
The maturity of the online video ad market is inconsistent across Europe. Territories with more developed ad markets such as the UK, the Scandinavian countries and Switzerland should offer easier opportunities to monetise FAST. In large economies with relatively low digital spend per capita, such as Italy or Spain, broadcasters and international FAST players may need to find partnerships to succeed, rather than going it alone. Local broadcasters in smaller markets seeing strong digital growth, for instance the Czech Republic and Estonia, should consider adopting FAST to cement a strong position in their online ad markets. Again partnerships, either with other broadcasters or international players, will be helpful to establish viable ecosystems quickly.
Some people will make good money from FAST in Europe, but they will need to get the proposition right … O&O can help with that.
We have considerable experience leading content strategy and advertising projects across all European markets and are well placed to help all players across the value chain optimise their FAST strategies. We can do this by helping you to:
Size the opportunity in terms of audience levels, ad yield and revenues
Determine if FAST offers an opportunity to exploit content in the US market
Choose the right investment levels in the right markets across Europe as the size and type of opportunity will differ markedly
Strike partnerships with the right local players
Understand how best to monetise ads in a very fragmented market
Reach out to Andrew Ladbrook at andrew.ladbrook@oando.co.uk if you would like to know more.