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The UK and France are leading deployments of over-the-top (OTT) video services in Europe, invigorating both free and pay-TV competitive dynamics from which new business models are emerging, according to a new report from SNL Kagan.

The report focuses on France, Germany, Italy, the UK and Spain, and notes an increase in OTT service launches in recent months, driven by broadcaster-led catch-up services that are "significantly" affecting how content is distributed and viewed online.

The research firm believes that the currently-fragmented hybrid broadcast broadband initiatives across Europe are being brought under a number of national-level umbrellas, such as YouView in the UK, MHP in Italy and HbbTV in Germany and France - enabling broadcasters to compete on content rather than technology while opening up significant opportunities for experimentation with interactivity.

There is also believed to be a strong opportunity for incumbent video providers to influence the near-term shape of OTT in their markets, given that broadband penetration in the UK, Germany and France is up at around 70%, while take-up of double- and triple-play bundles is also strong and rates are affordable.

Despite currently being nascent, TV applications ecosystems which have been created by consumer electronics manufacturers and deployed via "connected" or "smart" televisions are thought likely to reshape the market significantly in the medium term.

There is however believed to be considerable market variations in the viability of OTT services: Italy and Spain are described as having more limited mass-market penetration of video-on-demand, catch-up and PC TV services. In italy, SNL Kagan finds that the competitive environment is not conducive to new entrants building viable business models, although incumbent players such as Mediaset are "well positioned" to leverage hybrid DTT/OTT systems to make a big impact in the long term.

In Spain, broadband is far outpacing multichannel take-up, setting the stage for widespread online video adoption, while high subscription prices are limiting pay-TV affordability, creating a gap which OTT is positioned to fill, according to the report. However, widespread video piracy is predicted to drag on legal OTT uptake in the near term.

The report concludes by stating that incumbent pay-TV operators are not standing idly by: nearly all major cable, satellite and IPTV operators are exploring TV Everywhere systems in order to bring OTT into their walled gardens, while satisfying consumer demand for multi-screen access to content on-demand.

"Multi-platform video continues to gain momentum, as operators and broadcasters take the lead role with their own VOD, live and catch-up TV services, while also pursuing a TV Everywhere strategy," said Mohammed Hamza, Media and Communications Analyst at SNL Kagan. “However, sites of OTT gravity are also forming around new players in Europe, as entities including LoveFilm work to align content, distribution, brand and business model into sustaining businesses. Signs of traction are drawing the attention of global giants, with Amazon taking full ownership of LoveFilm in January, giving the retail behemoth a VOD presence in the UK, Germany, Denmark, Norway and Sweden." 

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