In Broadcast - July 2017 - 65

65

www.inbroadcast.com | Vol: 7 - Issue 6

InUSA

The Numbers Don't Lie,
Pay-TV Needs to Evolve
Contributing Editor Michael Grotticelli looks at how the centre of attention continues
to drift inexorably away from the television screen...

W

hile the latest numbers from TV
ratings provider Nielsen show
that 92% of all adult viewing in the
U.S. is done on a TV screen (spending
509 billion minutes viewing on TVs
and another 63.6 billion viewing on
TV-connected devices), what they are
watching and where they get their
programming from varies greatly.
The challenge for pay-TV operators,
who had their worst first quarter (in
2017) ever in terms of subscriber loss,
with more than 802,000 customers
cutting the cord, is to find the right
balance of standard TV fare and OTT
content. This quarterly loss comes
at a time when the U.S. added about
150,000 new households, bringing
total TV households to 118.4 million.
Platform Migration
Consumers are migrating (slowly,
but surely) to different delivery
platforms, thanks to the Internet.
Nielsen also reported that viewing on
PCs accounted for 31.7 billion minutes,
smartphone 10.9 billion, and 4.4
billion on tablets, for a combined share
of viewing of 7.6%. This is coupled with
the fact that, according to Ooyala's
Q1 2017 Global Video Index, in just
one year, long-form viewing nearly
doubled its share of time watched on
smartphones, laptops and desktop
computers (See Fig 1.)
Given these stats, pay-TV operators
(cable and satellite) should be worried.
The Ooyala report states that the
American Customer Satisfaction Index
(ACSI), which came out in May, shows
that pay-TV services lost roughly 4.4
million subscribers in the past year,
with more than 802,000 customers
cutting the cord, according to industry
research firm SNL Kagan.
Due to this portable preference, U.S.
operators (primarily cable companies)
added nearly one million broadband
subscribers in the quarter, as more
U.S. households now have a broadband
connection than a pay-TV connection.
Wireless programme viewing relies
on a broadband connection, so for
operators that's where the money is.

Legacy Models
So, where is everybody going? The
Ooyala report states that losses in the
pay-TV industry have been mitigated
somewhat by gains on the OTT front.
While Netflix and Amazon remain the
'Big Two' in the subscription video
on demand (SVOD) field, with Hulu a
distant third, operators increasingly
are looking to OTT to attract "cord
nevers" and cord cutters, especially
Millennials. And, to a degree,
services like Sling TV from Dish and
DirecTV Now from AT&T are helping.
Combined, they added about 375,000
subs in Q1; AT&T said it's happy with
how its OTT service is being received
and Sling TV continues to grow.
However, Ooyala's Video Index
states, there's still an issue. Both
remain tied to legacy business models,
offering bundles of content consumers
just don't find compelling. And
operators just won't change... which
leads to abominable ACSI scores,
indefensible subscriber losses and,
thus, opportunity for every content
owner on the planet.
There are a number of reports
that suggest the experience North
American operators are having
is unique. (Yes, Canada is feeling
the sharp scissors of cord cutting,
too: subscribers were down 2%
in 2016.) These reports claim that
cord cutting and cord shaving
(reducing a programme package and
supplementing it with an OTT service)
is not something other regions need to
worry about.
But the nature of operators'
engagement
with
consumers
everywhere is changing. Increasingly,
consumers are turning to SVOD
services as alternatives to their pay-TV
world.
Twin Channels
An Ampere Analysis study found that
40% of subscribers in North America
and Europe now take an SVOD service
in addition to a pay-TV service, up
from just 24% two years ago. The
number of consumers who solely rely

on pay-TV has dropped to 30%
in Q1 2017, compared to 49%
in Q3 2015, and Internet users
who only get SVOD services (or
supplement free TV services)
nearly tripled to 13% from just
5%.
In Germany, for example,
nearly one-third of connected
households (30%) have SVOD
subscriptions. SVOD is growing
faster than any other segment
of home video with sales
forecast at US$328.4 million in
2016, according to European
research firm GfK.
Those figures should serve as
a warning to operators, because
consumers who double-up on their TV
services - combining pay-TV with one
or more SVOD services - are, according
to Ampere, twice as likely to be
strongly considering leaving their main
TV provider in the next six months.
Content Driven
Ooyala says there's still room for
growth in the market for Pay-TV
operators. While the growth of SVOD
services seemingly has created
an abundance of content, there's
still significant demand for niche,
unique and original content. Original
content applies across all services
- such as House of Cards on Netflix
and 1963 on Hulu or Mozart in the
Jungle from Amazon. But services
without 80 million subscribers also
can have original or unique content
that is a major driver for SVOD and
AVOD adoption; it's something every
content owner needs to be aware of
and, frankly, to leverage as quickly as
possible.
Another recent report, this one from
Digital TV Research, said although
SVOD services like Netflix have seen
explosive growth, other SVOD services
collectively now have more subscribers
than the major players; in Q3 2016,
Netflix subscribers globally stood
at 86.5 million, but the number of
subscribers to other services was 115.9
million.

Fig. 1: Time watched for long-form
content on each device has increased
over the past five quarters
(Source: Ooyala Global Video Index Q1, 2017)

Many believe mobile will continue
to drive much of that growth. In Q1,
Ooyala's customers saw the amount
of time spent watching longer content
on mobile devices skyrocket, just as
the number of video starts on mobile
devices continued to grow.
Changing Choices
Of course, there are challenges
ahead, but Ooyala says SVOD services
will succeed if they are able to pivot
away from their legacy businesses
practices and embrace the new pay-TV
ecosystem.
The days of families watching
television together in the living room
may not be over, but it's more likely
now that Mom and Dad won't be
watching the same content as the
kids or, perhaps, even the same show
together. Making content available on
any screen in - or out - of the home
increasingly has become something
consumers simply take for granted.
Providers have to make sure every
screen delivers a complete experience
every time, and that mobile apps have
to have the same content available as
does a connected TV app. To maximise
engagement and time spent with
content, providers have to make sure
discovery and recommendation is as
efficient on a mobile screen as it is on
a PC or connected TV.
Indeed, while the Television may be
the screen of choice for many, it's no
longer guaranteed to be the centre of
attention.
http://www.inbroadcast.com http://www.ooyala.com/resources/online-video-index
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