That younger consumers are turning away from traditional delivery of TV is no surprise, it’s a trend that has been surfaced before and talked about ad nauseam. It’s something I’ve talked a lot about over the past five years in Ooyala’s Global Video Index, as we saw an increasing migration to mobile devices for consumption of all OTT content, especially live sports, and all the while warning that the generation following Millennials could prove to be even less TV-centric.
But a new report from Nielsen shows that the “Golden Age of Television” may be just that, a medium that’s far more attractive to older viewers than the most valuable demographic, 18- 35-year-old Millennials and members of the following Gen Edge. The latest Nielsen numbers show the erosion of younger viewers from the traditional TV audience is happening at a faster pace in the past two years than in the previous two.
In 2014, the percentage of 18-34-year-olds watching TV – including DVR playback – in an average minute was 26.4%. It’s been dropping annually and in the first four weeks of October this year, it had dropped nearly 10 percentage points to 16.8, that’s a drop of more than 36% in four years, and more than 15% in the past year (compared to 11% in 2017, 7% in 2016 and 8% in 2015). Gen Edge, meanwhile, has abandoned traditional TV in even bigger numbers, according to the report, eroding to 48% since 2014 and 18% over the past year. Even older audiences, those 55 and above, saw a 2% dip between 2017 and 2018, admittedly small, but still worrisome.
“Younger generations are growing up with more choices at their fingertips," Peter Katsingris, senior VP of audience insights at Nielsen, told USA Today.
And older viewers are starting to catch that wave, because streaming content to connected devices and to mobile phones continues to grow cross-generationally, as I’ve written in the Video Index.
Many of those defectors from traditional TV have come from pay-TV services, which in Q3 watched as more than 1.2 million subscribers walked away. Some of that erosion was offset, slightly, by the 75,000 new customers to virtual MVPDs DirecTV Now, which added 49,000, and Sling TV, which added 26,000. But that’s really just a drop in the bucket. YouTube TV, PlayStation Vue, and Hulu’s Live TV don’t publicly report subscription numbers, but anecdotally I can tell you all three have seen gains and S&P Global posits the segment has gained 2.1 million subs this year.
Overall, cable operators and telcos lost about 475,000 subs in the quarter. The biggest loser was satellite. With DISH seeing 367,000 subscribers signing off in the quarter and DirecTV losing almost as many, 359,000. That brings 2018’s total losses to more than 2.8 million.
Those losses will continue, and accelerate, as more users become conversant in OTT and live linear increasingly takes a back seat to video on demand. The end of appointment television has been looming like gray clouds on the horizon for many quarters, and this is simply a reflection of that continued trend. With Disney+ and Apple’s services both on the horizon to launch in 2019 the storm facing pay-TV providers will intensify.
eMarketer forecasts a 30% jump in cord cutting in 2018, with about 10% of the U.S. population over 18-years-old – about 24.9 million persons – no longer having access to traditional pay TV. It expects that number to more than double in the next five years to 21% or 55.1 million persons.
Just four or five years ago, streaming services were being labeled as supplementary to pay TV, an inexpensive add-on that would offer viewers alternative content. The reality, now, is that OTT is on a decidedly upward trajectory while its competition is not. Current market pressures are increasing the cost of content at a time when original content is in demand, the basic law of supply and demand in action.
Cost – more than anything else – is going to be the determinant in who thrives in the new OTT environment. Content distributors who can’t maximize ROI or who can’t afford a continuous stream of new content are going to simply disappear.