Cord-Cutting Hits European Markets, Report Finds

Netflix House of Cards - H 2014

Netflix House of Cards - H 2014

The traditional pay TV market declined across 12 European territories in the first quarter of this year as online services such as Netflix advance.

Cord-cutting, the bane of traditional cable and pay TV, may finally have reached Europe.

A study published Thursday by U.K. research group IHS Technology found that "TV cord-cutting is now an undeniable phenomenon in a large number of European markets" with growth in traditional pay TV declining in 12 European territories in the first quarter of this year.

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Until recently, cord-cutting — consumers canceling their cable or pay TV subscriptions in favor of lower cost online alternatives — has been largely a U.S. phenomenon. Europe, which has a lower level of pay TV penetration overall compared to the U.S., as well as cheaper cable bills on average, was seen as being immune to cord-cutting.

But the IHS report found that a dozen European countries saw a drop in pay TV uptake in the first quarter and six have seen declines in two consecutive quarters, "suggesting a sustained softening of pay TV across much of the region."

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Italy was the only one of the so-called big five European territories that saw a decline. Pay TV in Germany, France, the U.K. and Spain continued to grow above the European average in the first quarter of this year.

Hardest hit were territories in Scandinavia and the Benelux region as well as markets in Central and Eastern Europe. Along with Italy, mid-sized territories, such as the Netherlands, Poland and the Czech Republic, have seen consecutive quarters of decline. "[It's] a worrying trend for the industry as a whole," the IHS report concludes.

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While over-the-top (OTT) video services such as Netflix are likely a factor in pushing European consumers to cut their cords, the report finds "no obvious relationship" between the markets in decline and the launch of Netflix or other big OTT services in the respective territories.

"Further quarters will tell, but the current trend is likely a combination of factors, including an overhang from the recent economic downturn and the wider impact of new technology in the home, broadening the consumption choices of the average consumer," the report states.

Still, the new figures are certain to heighten tensions among traditional operators ahead of Netflix's big European push this September, when the company will launch in six new territories, including regional giants Germany and France.

Twitter: @sroxborough