The Video-on-Demand Market in Germany: Dynamics, Market Structure and the (Special) Role of YouTube

Introduction

Watching video on the internet is still on the rise not least due to broadband connections as well as technologies favoring video usage on mobile devices (Crawford, 2015; Kupferschmitt, 2015). According to the ARD/ZDF Onlinestudie 2017, 72 per cent of the German speaking population from 14+ years watches moving images¹ on the internet at least rarely, whereas 53 per cent do so at least once per week (Koch & Frees, 2017, p. 443; Kupferschmitt, 2017, p. 448). The latter figures are highest in the young(er) age groups (14-29 years: 88 per cent; 30-49 years: 70 per cent), whereas consumption decreases in the older age groups (50-69 years: 34 per cent; 70+ years: 17 per cent) (Koch & Frees, 2017, p. 443). Altogether, consumption of video streaming services (e.g. Netflix, Amazon Prime Instant Video, Maxdome, etc.) has increased within one year by 11 percentage points (from 12 per cent at least once per week in 2016 to 23 per cent in 2017; Koch & Frees, 2017, p. 443). Lower frequency consumption even increased by 20 percentage points to 38 per cent in 2017 (Kupferschmitt 2017, pp. 448-449).

In line with consumption growth, the overall market for audiovisual online content in general and video-on-demand (VoD) in particular displays high dynamics. Among the various players are online media libraries of traditional TV stations (both commercial TV providers and public service broadcasters), video portals such as YouTube as well as video streaming providers such as Netflix and Maxdome – just to mention a few. Particularly, the market for video streaming services is currently highly competitive. At the beginning of October 2015 Amazon, for instance, announced to remove devices of Apple (i.e. Apple TV) and Google (i.e. Google Chromecast) from their website, informing the market place providers that from October, 29^th, 2015 on those devices cannot be sold anymore on Amazon (Horizont Online, 2015).² Watchever, the German VoD player of the French media company Vivendi, by contrast, launched a new content concept in order to set itself apart from its competitors in October 2015 – however, at the end of 2016 Vivendi shut down Watchever (Schobelt, 2015; Meedia, 2016). In addition to this, new and well established players from abroad have entered the market, such as Amazon Prime Instant Video in February 2014 or Netflix in September 2014. Both have taken leading positions in the German VoD market throughout the past years. In 2018, the traditional broadcasters such as ProSiebenSat.1 as well as RTL announced their plans to further expand their video-on-demand activities in order to compete with the leading players Netflix and Amazon (Meedia, 2018a, 2018b; Winterbauer 2018). Also, Deutsche Telekom aims to play a role in the market and announced plans to start investing in own content production as well as to open up their streaming-service Entertain TV for non-Telekom customers, the latter effective from October 2018 on (Meedia, 2018c).

This paper aims at providing insights into the dynamic VoD market and elaborating on the competitive environment. The authors therefore start with presenting recent developments in the German VoD market including business models, market structures and dynamics (section 2). Following in section 3, the authors focus on the (perhaps special) role of YouTube in the market for audiovisual (online) services. Thereby, arguments for and against YouTube exerting competitive pressure on other-non-linear audiovisual media services (i.e. VoD players such as Netflix and Amazon) as well as on other linear audiovisual media service providers (i.e. TV channels such as ProSieben and RTL) are discussed.