Streaming video brings pressures and profits to traditional U.S. pay TV providersTuesday, November 4th, 2014
TNS Survey Finds Emergence of Streaming Video Brings Pressures and Profits to Traditional Pay TV Providers
NEW YORK — The proliferation of streaming video alternatives, while still posing a long-term competitive challenge for traditional Pay TV providers, may also be producing beneficial results across the service category, as indicated by a recent consumer survey from global research consultancy TNS. As the economic climate has improved, the quantity and diversity of video content entering the home via paid programming sources appears to be growing, resulting in healthy demand for the industry as a whole.
According to ReQuest®, TNS’s survey of the telecommunications usage habits of nearly 25,000 U.S. households each quarter, about one in six (16%) Pay TV subscribers recently adjusted their level of video service – either upgrading to a higher tier or downgrading to a lower tier sometime during the past year. Pay TV households that also stream video are more than twice as likely as non-streaming households to have made a change to their service level with their Pay TV provider (25% vs. 12%), as might be expected given their penchant for acclimatizing new viewing habits.
What might be less expected, however, is that while streamers are more likely than non-streamers to downgrade their level of traditional Pay TV service (9% vs. 6%), they are also more likely to upgrade their level of service (16% vs. 6%). Moreover, service upgrades are considerably more common than downgrades among these streaming households. (Click here for further explanation).
“These findings suggest that streaming is contributing to an overall rise in consumer appetite – and demand – for video content, instead of simply stealing a finite share of Pay TV programming,” notes TNS Vice President Frank Perazzini. “Growth in the frequency of service upgrades is being driven almost entirely by households that also consume streaming video, leading to stronger ARPU performance by cable, satellite, and fiber television providers.”
TNS’s research also reveals that streamers who adjust their Pay TV tier tend to be younger – particularly the ones who upgrade their service level. Though adults under age 30 comprise less than 20% of all Pay TV subscribers with streaming technology, they represent one-third (33%) of households that recently purchased more channels and/or features from their traditional video provider. “Younger consumers are especially proactive and indulgent in their viewing habits,” comments Perazzini, “having come of age in a world of unparalleled variety and choice in video content. They know what they want, and also how to get it.”
Of course, some streaming video (e.g. YouTube) is free to the viewer. But fee-based streaming sources, like Netflix and Amazon Prime, are thriving:
U.S. Household Penetrations 3Q12 3Q13 3Q14 2YAGO ---- ---- ---- ----- % that streamed video in past month 27% 30% 34% +7 % that paid for streaming video in past month 16% 23% 26% +10 % that paid for streaming video from multiple providers in past month 3% 7% 9% +6 % with a traditional pay TV subscription 82% 82% 81% -1
The spread of streaming video, through both paid and unpaid providers, has so far had minimal impact on the incidence of traditional Pay TV subscriptions. This implies coexistence – rather than a competition – of video alternatives within many U.S. households.
But as Perazzini cautions, “Although this symbiotic relationship between traditional and emerging subscription video providers has mutually benefited both groups, there are portents of change that could further transform the customary business model for video delivery.” In particular, the expansion of higher-speed broadband Internet access has opened doors for streaming video to reach more homes than ever before, and programming providers may move to engage these viewers directly. “For example, HBO’s recent announcement of the launch of ‘a la carte’ OTT distribution for their content in 2015 could signal a shakeup among top cable, satellite, and fiber carriers,” says Perazzini, “as this strategic shift by a leading programming supplier would dilute one of Pay TV’s primary differentiators, weakening their competitive advantage.”
Nevertheless, it seems clear that as streaming providers have increased in scope over the past few years, they have also generated many favorable outcomes for their so-called “rivals” for subscriber dollars – most notably in the form of elevating consumer expectations for video service, along with their willingness to spend for it.