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Report: SVOD use rises, and with it so does intent to cord cut
Report: As SVOD use increases, so does intent to cord cut
Thursday, March 17, 2016

Globally, a new study found more than one-quarter of consumers (26%) watch broadcast or VOD programming via subscription streaming services like Netflix, Amazon or Hulu, and nearly one-third of them say they plan to cut the cord to pay TV.

North America has the largest segment of SVOD users, 35%, followed by Asia-Pacific (32%), Latin America (21%), the Middle East/Africa (21%) and Europe (11%).

And, U.S. consumers who use subscription video on demand services, watch less traditional TV, have higher TV-connected and digital device ownership and nearly one-quarter (22%) say they plan to cancel their pay-TV subscriptions.

SVOD UPS THE CORD CUTTING RISK

Globally, 32% of consumers who subscribe to a streaming service say they intend to cut the cord. Consumers in the APAC region – at nearly 44% -- show the highest intention to cut the cord and rely on an online streaming service only for their entertainment. In Latin America, about one-quarter (24%) say they’ll cut the cord, and in Europe, that number falls to 17%.

That data, from Nielsen’s Global Video on Demand Survey, shows an increasing migration globally to streaming services and a change in expectations about how future video entertainment likely will be consumed.

Not surprisingly, younger consumers are more prone to using a streaming service and show significantly more intent to cut the cord. But it’s interesting to note that subscribing to a streaming service and cord-cutting intentions are not absent in older generations.

Among the consumers surveyed who currently subscribe to a cable, satellite or telco (IPTV) delivered pay-TV service, 40% of Gen Edge consumers say they plan to cut the cord, followed closely by Millennials (38%), Gen Xers (30%), Baby Boomers (15%) and the Silent generation (9%).

As far as paying for SVOD, the distribution is similar, with 31% of Gen Edge and Millennials each subscribing to at least one streaming service, 24% of Gen X, 15% of Baby Boomers and 6% of those over 65.

CONSUMERS WILL MAKE TIME FOR THE RIGHT ADS

Nearly two thirds (65%) of consumers want the ability to block all ads on their streaming content, with 62% saying pre-, mid- and post-roll ads on VOD are distracting. And, 66% of respondents in all regions said most ads they see are for products they don’t want.

But, an almost equal number said they wished they “could only see ads that are for products that interest me.” About half also said they didn’t “mind ads that directly reflect purchases I’ve made in the past;” slightly more than half (51%) somewhat or strongly agreed that “ads give me good ideas for new products I want to try.”

Obviously, there’s a massive opportunity for using data to learn about the customer, their buying habits and needs and to use that data to help target relevant advertising to them.

For brands and advertisers, applying the right technology to help balance the mix of ad frequency and relevancy will be the difference between success and failure.

IS THE STATUS QUO SAFE?

Is the status quo of traditional pay TV safe? In a word, no, but that’s no surprise.

The margins of pay-TV providers have steadily been eroding and a new report from Digital TV Research recently posited that pay-TV revenues peaked in 2015 in North America – the most mature cable market in the world – and were expected to decline 12% by 2021. DTVR also said household penetration of pay-TV services in North America was steadily declining and would, by 2021, fall to 80%.

In its report, Nielsen put a positive spin pay TV numbers, contending that SVOD services likely were a supplement to current pay TV fare and noting that, “While some consumers are cutting back on traditional TV services, many aren’t severing the cord completely.”

While that, of course, is true, the reality is that more younger viewers are seeing pay TV as a supplement to their streaming services, as opposed to the conventional “streaming as a supplement” argument that has been around since Cloud TV began to go mainstream.

And, the growing use of SVOD services as a central component of home entertainment is only going to increase as discovery of the technology among Millennials increases beyond early adopters and they, in turn, push that discovery upstream to Gen X and Baby Boomers.

As Nielsen points out, the only constant in the media (at least recently) is change, and, the pace isn’t going to slow down anytime soon, meaning media companies, broadcasters, operators and studios are going to have to become more flexible and more adaptable.

While Nielsen posits that content remains king, I think it’s more credible to place the crown on the consumer who’s driving this evolution that is demanding more quality, premium content be made available anywhere, at any time on any device.

With that flood of content comes the need for discovery and personalization. Discovery is crucial to engaging customers, for getting them in the door and, then, turning them into to loyal consumers. Personalization means being able to not only deliver the content a consumer wants, but also being able to deliver it to the devices they favor and to keep non-relevant content our of their individual stream.

Monetizing that flow of relevant, premium content remains a major hurdle, one that’s evolving as consumers become more conversant and comfortable with streaming.

As much – perhaps, more so – as any other part of the ecosystem, making money in the VOD business is evolving… and there is no silver bullet.

But, the likelihood, in the long-term, is that it will be a combination of tactics that make up a winning monetization strategy. In all of them, quality analytics will be a determining factor.

Stay tuned.

Follow me on Twitter @JimONeillMedia and on LinkedIn

Jim O'Neill

An award-winning industry expert and futurist who specializes in the convergence of traditional TV and the Internet. My focus includes pay TV, Cloud TV, OTT, multiplatform media delivery, the ecosystem that surrounds it and consumer trends. A frequent speaker at CES, NAB, Digital Hollywood, Park’s Associates Connections events, Streaming Media and Digital Entertainment World, among others. I'm the Editor of Videomind, which in the past year has won awards from Editor & Publisher and Digiday. I'm also the Principal Analyst at Ooyala. I'm based in Michigan. I formerly was an analyst at Parks Associates and editor of FierceOnlineVideo and FierceIPTV. 

You can follow on Twitter @JimONeillMedia and on Linkedin