The number of AVoD users increases significantly in Europe

In his latest report, Dataxis highlights that although the COVID pandemic had a strong impact in the first and second quarter of 2020, with growth rates twice as high as previous trends, overall, there has been a notable acceleration of growth in terms of global traffic in AVoD services since 2018 on the continent.

While the European market used to grow at a year-on-year rate 10% on average, in the last three years there have been growth rates of between 16% and 20%. This increase is even more significant if one takes into account that Youtube is still the dominant actor, mechanically dragging growth downwards, as the AVoD service reached its state of maturity in most European countries several years ago.

Regarding competition, while the number of active European AVoD services used to grow at a slow pace before 2019, the market expanded significantly in 2020 with the launch of 15 new services, and this evolution was also confirmed in the first half of 2021.

Main factors

Dataxis highlights that the trends can be explained by two main factors. On the one hand, a growing number of American services have begun to enter the European market, to diversify their revenue stream while becoming more mature in their domestic market: Pluto TV, Discovery Plus, Tubi or Facebook Watch and many others are now widely available in Europe and represent a growing part of the AVoD space.

On the other hand, the content offering and curation have expanded enormously, both with the launch of new European players such as Watch4, Rakuten TV Free, Filmstream or Joyn, and with the growing amount of aggregated content available per platform, providing alternatives to traditional BVoD offerings, which have captured the majority of traffic and revenue after YouTube.

It is also worth noting that while AVoD revenue continues to grow faster than total monthly active users, driving ARPUs, year-on-year growth has steadily declined since 2017: from 35% in 2017 to 23% in 2020.

A significant portion of this revenue comes from Youtube and BVoD services across Europe, while smaller European pureplayers struggle to monetize their audience. Consequently, the ARPUs remain low on the continent: in the first and second quarters of 2021, only 15 actors of the more than 125 AVoD services available managed to generate ARPUs greater than 1 euro from their audience.

In the end, if usage has increased since the beginning of the pandemic, the AVoD market still needs ensure higher income to be sustainable, says the Dataxis study. This issue is more decisive for pure operators than for BVoD services. The latter have been amortizing its linear contents through traditional television channels, as part of its long-tail strategy. But for the former, the acquisition of content remains a significant barrier to entry, as well as traffic costs, which have increased mechanically since the first quarter of 2020, with the growth of audiences. Several services have then attempted to diversify their advertising revenue streams, or give advertisers more space within their service.