Germany: Entertainment Market Still One of Europe's Strongest

Germany is Europe’s largest economy and its second most populous nation (after Russia). Its entertainment market is one of Europe’s strongest, particularly the theatrical and television sectors. IFTA’s Research Department spoke with buyers from the territory about the market’s current state and what opportunities remain for Independents. Despite a slight slowdown in international acquisitions, it remains a very viable sales territory.

The 2016 German box office totaled US$943.9 million, a 12.4% drop from 2015. The decline was two fold, as both local films and U.S. major studio tentpole films were unable to match their profits from previous years. For example, 2016’s Secret Life of Pets had 3.8 million admissions while Minions boasted 7 million admissions in 2015.

All top titles in 2016 were from U.S. major studios with Rogue One: A Star Wars Story taking the lead at US$46.6 million. Fantastic Beasts and Where to Find Them was second with US$36.5 million and Finding Dory was third, earning US$35.3 million. U.S. titles held a 64.5% share of admissions while German titles accounted for 22.7%. Only one local film broke into the top ten, Willkommen bei den Hartmanns, grossing US$28 million and ranked number seven.

The strength of domestic films in the German theatrical market caught the attention of the U.S. major studios. U.S. majors now pick up local titles or co-produce German language productions and self-distribute through local offices. In 2016, Disney was the top U.S. distributor but Warner Bros. had the heaviest investment in the local market with three co-productions and the acquisition of another three German language titles for release. Disney and Sony each acquired a local title while Universal co-produced a German language feature.  I thought local films had lost ground?

Outside of the blockbuster titles and other U.S. major studio films, German and other European independent and arthouse films typically perform well theatrically, especially titles from Scandinavia and France. There is not much of a market for U.S. arthouse films that do not get festival buzz or have a recognizable cast. The theatrical market has declined to accept genre based, lower budget, or direct to video types of films.

Most independent deals in Germany are struck as All Rights. TV stations would previously buy titles in direct TV deals but that has nearly become extinct for independent films. Some larger TV companies, such as RTL, partner with local theatrical distributors and acquire All Rights.

The territory has one of the strongest remaining DVD segments, accounting for 19% of all DVD sales in Western Europe. While DVD sales have plummeted across Europe, Germany consistently maintains lower rates of decline. The ability to retain profitable DVD sales is partially due to the resilience of “brick and mortar” stores that continue to stock product.

Germany is Europe’s top television market with the Free TV sector outperforming Pay TV in terms of audience share. The strength of television is due to the high rates of linear viewing, accounting for 80% of daily time spent watching TV and film content.  The wide variety of entertainment options available on free television has secured its popularity. In 2016, Free TV programs had a 97.3% audience share of all TV households in the country.

The top Free TV broadcasters are the publicly owned ARD and ZDF and the privately owned RTL and ProSiebenSat.1. Although the popularity of Free TV keeps Pay TV subscriber numbers low, the number of Pay TV subscribers rose in 2016 to around 7.6 million (reaching 19.44% penetration).

U.S. major studio content dominates international programming on Free TV. Acquisitions of imported independent titles have slowed in recent years as private broadcasters such as RTL and ProSiebenSat.1 depend more on locally produced content. These broadcasters acquire for their entire channel lineup roughly 10 independent titles per year which includes local and imported films.

Sky tops Pay TV international acquisitions but the company has recently become less willing to acquire independent films. Still, Sky typically acquires about 40-50 independent movies per year but often buys from German All Rights distributors with interest mostly in theatrical titles.

Online services originally struggled to gain traction in Germany but after a slow start, VOD is beginning to grow in popularity. The sluggish implementation of VOD can partly be blamed on the strong TV and DVD markets. Linear viewing remains strong and Germans still depend on DVD purchases rather than EST or TVOD.

The VOD market began to grow after Amazon and Netflix entered the territory. Now SVOD services control the online video market. In 2016 paid VOD revenues totaled US$589 million with three-fifths of revenue from SVOD services while EST and TVOD accounted for one-fifth of the market each. At Q3 2017, Amazon had the highest market share at 30.4%, followed by Netflix 21.4%, Sky (via two services) 15.3%, Maxdome (by TV company ProSiebenSat.1) 8.6%, Google Play 8.6% and iTunes 5.9%.