Is Netflix Sporty Enough for Europe?

As Netflix (NASDAQ:NFLX) grows and expands, it may run into some serious competition in Europe. Professional sports may be a big element of that competition and a key factor in Netflix’s struggle.

Netflix has had great success since it first began. Just this year it more than doubled the value of its shares by adding more content and making exclusive deals with movie studios. In the U.S., Netflix is the most used subscription video-on-demand service by a long shot, easily topping all other competitors combined with a 90 percent market share.

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But, when it comes to parts of Europe, Netflix is not going to have as easy a time penetrating the market. In the time before Netflix made it over to Europe, other TV providers established their own Internet-based streaming services that could compete with Netflix.

One such service is Modern Times Group’s Viaplay. Modern Times Group, or MTG, is a Swedish TV broadcaster with significant strength in the Nordic region. Viaplay is the company’s online streaming service that complements the traditional pay-TV business.

Viaplay already had one advantage over Netflix when the American streaming service came to Europe: it already had an established customer base and leverage the customers of the MTG pay-TV service as well. However, that may not have been Viaplay’s greatest weapon against Netflix.

Viaplay is also armed with soccer balls, hockey pucks, and the like. With the help of MTG, Viaplay was more easily able to get rights to live broadcasting of many popular sports. “Having sports is a key differentiator,” said Nick Ekdahl, the head of Viaplay, in an interview. “It’s a premium offer and utterly important in setting ourselves apart from competitors.”

Getting the rights to broadcast sports is not a cheap or easy thing. Viaplay may not have been able to do so without the help of MTG. Streaming services like Netflix typically pass on the choice to pay for the rights. But, if Netflix doesn’t broadcast sports, it might have trouble rousing demand in Europe, especially in regions where Viaplay is offered.

Not only does Viaplay have a customer base already installed that it is likely to keep because of its sports, but it is also able to charge a high premium simply because of the sports. The monthly rate for Viaplay’s package that includes sports is more than three times the price of Netflix’s package in Sweden.

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Netflix’s entry to the market actually made the problem worse, as Ekdahl said Netflix came and “helped educate the market” about online subscription services, and that turned out well for Viaplay’s business. When Netflix first entered the market, Viaplay “continued to report strong subscriber intake and achieved record daily viewing figures around a number of key sports events during the quarter,” according to MTG.

While Netflix may be able to bank on its U.S. popularity to help it grow to a reasonable size in the European market, it will still have to contend with the lack of sports.

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