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Ahead of the Curve®

Assessing Video Trends in US, UK, Germany, and Japan

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THE COWEN INSIGHT

Our new consumer Video surveys in Germany, Japan and UK plus our US data were most bullish for YouTube, the unrivaled Mobile Video leader. YouTube was stronger in non-US markets as a clear leader in the living room. Netflix has the #1 content in US & UK, #3 in Germany & #4 in Japan, a big opportunity given local originals ramp. It’s earlier for streaming share gains from linear in non-US markets.

New Recurring Surveys In Germany, Japan & UK

In ‘19, non-U.S. operations accounted for 31% of Amazon’s revenue, 54% of Google’s, 52% of Facebook’s, and 53% of Netflix’s. Since Jan. ‘16, Cowen’s monthly proprietary consumer Internet survey has provided insight into key US Video consumption trends. We are now augmenting this data with parallel surveys in Germany, Japan and the UK. In total, our monthly surveys now represent about 45% of global GDP ex-China, and we believe these surveys will be a key tool for investors to track the progress of major Internet companies outside of the U.S.

In this report, we examine emerging non-US video streaming trends and contrast vs. US focused takeaways from our Nov. ’19 Streaming Wars report, including i) Mobile will drive Video growth for years to come, with results in UK, Germany, and Japan echoing this trend; ii) The battle for the living room TV is early, and younger cohorts are a leading indicator for Netflix; iii) YouTube’s global strength is even more pronounced than the US leadership we noted in November; and iv) Prime Video engagement in UK, Germany and Japan adds new insights to support our US thesis.

How The New Data Inform Our Stock Calls

We raised our Netflix subscriber forecast in 2H20 and ’21-’30, as ramping local originals, in addition to other content, could drive further subscriber penetration in non-English markets, where Netflix has a big opportunity. We are more bullish on YouTube’s opportunity, given its strength in non-US markets, as the platform is more widely viewed as the leading Mobile Video platform and holds a bigger living room presence in non-US markets relative to the US.

YouTube – Transcending Borders & Video Form Factors

50% of US respondents indicated YouTube was the leading Mobile Video platform, and UK was similar at 49%, while responses were higher in Germany (58%) & Japan (76%). YouTube transcends borders given its depth of content, much of which is local & user generated.

Netflix – Leading Paid Streaming Service

Netflix has the best Video content in the US (30% of total respondents) and UK (28%) relative to linear and other streaming services. The results diverge in the two non-English speaking markets, ranking #3 in Germany (19%) and #4 in Japan (5%). Of note, Netflix’s content ranked even higher with respondents aged 18-34, particularly in UK (47%) & Germany (40%). This provides an opportunity with Netflix ramping its local language content, particularly in large non-US markets. For instance, Netflix is launching 130 local originals shows in 2020 vs. 100 launched cumulatively since launch in non-English markets in 2011.

Netflix non-US Competition

Emerging streaming players, like Disney+ (Disney is covered by Doug Creutz), are launching several non-English European markets in late March. There will be an initial base level of subscriber penetration given the strength of the various Disney brands, in our view, but it will likely trail Netflix’s penetration in those markets for several years for two reasons: depth of English content and lack of local language content.

YouTube’s Nearly $50BN Opportunity

YouTube is the #2 most used platform to view Video content on TV in Germany (tied with Netflix) & Japan, behind broadcast options in those countries, while it was #3 in the UK and #4 in the US. Alphabet recently broke out YouTube’s ad revenue and given our survey data, YouTube is well positioned to take share of the $48BN non-Digital ad market and $24BN TV ad market in UK, Germany and Japan, in addition to the US and other markets.

Amazon – Prime Video #1 Paid Streaming Subscriber Penetration in Germany and Japan

In terms of paid subscriber penetration, Amazon rated in the top 2 across our surveyed countries. In the US, Netflix led with 55% penetration, followed by Prime Video with 43%. In the UK, 37% of respondents are Prime Video subscribers per our survey (behind Netflix with 41%); in Germany, Prime Video leads with 33%; and in Japan, Prime Video leads with 24% (ahead of Netflix at 7%). A key differentiator for Prime Video, particularly in Germany and Japan, is that it’s included as part of the broader Prime service, which launched in ’07 in those markets vs. Netflix’s launch in Germany in ’14 and in Japan in ’15.

Mobile Will Drive Growth in US & Non-US Video Consumption

Mobile Video share is significantly closer to TV among younger respondents (in all surveyed countries), so we view this as a generational change as engagement with shorter form content via YouTube and/or Social media platforms, among others, will likely persist over time. In turn, the Mobile device will comprise a major growth channel for Video content providers over the coming years. In the US, 42% of daily Video content among age 18-34 respondents is consumed via TV, higher vs. Mobile at 31%. In non-US markets, the most pronounced shift is in Germany, where our age 18-34 survey respondents consume more of their Video content on Mobile vs. TV.

See additional insights from the International Consumer Internet Survey Series:

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