Market Insight

Deutsche Telekom takes MagentaTV OTT offering standalone

October 25, 2018  | Subscribers Only

Max Signorelli Max Signorelli Research Analyst – Home Entertainment, IHS Markit

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Incumbent German telco Deutsche Telekom have launched a virtual pay TV offer of its IPTV service. Magenta TV Plus is now available on a standalone basis, in addition to previously available multiscreen offer.

The MagentaTV Plus virtual pay TV service offers around 75 live channels (45 of which are HD) as well as Deutsche Telekom’s library content including exclusives such as The Handmaid Tale, Fox+ content including The Walking Dead and Deutsche Telekom’s upcoming first original series, Deutsch-les-Landes. Furthermore, a catalogue of more than 8000 titles from German public broadcasters ARD and ZDF’s ARD Plus/Plus Kids and ZDF Select/tivi Select libraries have been exclusively integrated into MagentaTV’s library.

MagentaTV Plus is available on mobile devices through applications, via PCs, and TV sets with Chromecast support. It allows users to download programs for offline viewing and supports up to 2 concurrent live TV streams on a maximum of 5 devices. The package is priced at €7.95 per month with a 1-month free trial but is also offered at a discounted rate of €4.95 to ‘Magentazuhause’ multiplay customers of MagentaTV.

Our analysis

MagentaTV Plus is not Deutsche Telekom’s first attempt at a standalone OTT platform. Now transactional-only service Videoload offered a subscription between 2008 and 2013. However, it struggled to gain similar traction to its pre-Netflix rivals: local media giant ProSiebenSat.1’s maxdome and LOVEFiLM (eventually acquired by Amazon and merged into Prime Video). In 2018, Deutsche Telekom are taking a different approach, offering virtual pay TV service to capitalise on its strengths as a TV provider. As the German pay TV market approaches its plateau point over the next few years, the move into a wider OTT market is a clear route to new and potentially leaving customers.

This launch comes as Germany’s OTT subscription market is set for a strong wave of new competition as local players rally against erosion to their traditional business. Perhaps the most prolific example in Germany is the joint venture between ProSiebenSat.1 and American mass media company Discovery, announced in mid-2018 and due to launch in H1 2019. The partnership will see ProSieben’s current OTT services, 7TV and maxdome fuse with Discovery’s Eurosport Player to create “the one central platform for TV and video content in Germany” according to ProSieben CEO Max Conze. As part of this effort to create the German content hub, Conze invited other German media companies to take part in the joint venture, even extending an invite to ProSieben’s direct competitor RTL. With local content providers starting to team up and bolster their portfolios with exclusive content, the implications of ARD and ZDF’s exclusive content integration with Deutsche Telekom are unclear but may hinder ProSieben’s plans for a single, unified German VOD portal.

Germany’s online video market is home to a significant number of virtual pay TV operators which can be reasonably broken down into two main categories. Operators such as Zattoo and Magine TV offer a direct substitute for traditional linear TV by aggregating live 3rd party channels on a completely OTT basis. Others such as Sky Ticket provide live channels but also have emphasis on their content libraries much like the online channels of Netflix and Amazon (although Amazon has recently started moving more into live TV offerings). In this sense, MagentaTV Plus falls somewhere in between the competition, offering the classic array of German live channels as well as the premium content library. Considering the value of this library content however, IHS Markit expects that MagentaTV Plus will compete more directly with Sky than with Zattoo as their libraries go head to head. In this context within the German market, at €7.95 per month MagentaTV Plus is priced around €2 less than Sky Ticket’s standard entertainment pass, the trade-off being Sky’s premium 1st party channels for the full portfolio of German FTA channels. The pricing structure of 7TV has yet to be revealed but any premium options will need to be competitive with the likes of MagentaTV Plus to suitably grow.

Although these online services are all competing for eyes and money, these virtual pay TV services will not be directly competing for space with the online channels of Netflix, Amazon or maxdome (pre-merger) owing to their inherently different business models. IHS Markit’s Connected Devices and Media Consumption Intelligence has found that over 41% of German OTT subscription consumers take more than one service as they increasingly show a willingness to take more than one online service to satisfy their content needs. This said, share of the market is still telling as Amazon and Netflix continue to lead with around 10 million video subscriptions between them. Local operators are beginning to react with promising offerings but will need to move and develop quickly to catch up as appetite for OTT continues to build.

Organization
Deutsche Telekom
Research by Market
Media & Advertising
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