Wednesday, October 10, 2012, 10:13 AM ET|Posted by Will Richmond
Here's a pretty eye-opening update of how pay-TV operators' VOD movies options are faring compared with OTT services like Netflix, Redbox, Amazon and others: just 22% of pay-TV subscribers order at least 1 VOD movie per month, whereas half of them use an OTT service. The data is according to a new study by Digitalsmiths of 2,000 pay-TV subscribers in North America over age 18 and speaks to the business opportunity in on-demand movies that pay-TV operators have left open for OTT competitors.
As to the reasons respondents prefer OTT services to their pay-TV operators' VOD service, 62.9% cited "cheaper," 41.6% "convenience," 33.3% "better selection," and 27.7% "easier to find what you're looking for." Digitalsmiths correctly observes the incongruity that many people would rather drive to a Redbox kiosk or wait for a disc in the mail than rent a movie from the comfort of their couch from their pay-TV operator. That behavior translates into huge lost revenue for pay-TV operators each year.
For the SVOD OTT options like Netflix and Amazon Prime, cost/value is clearly a big underlying driver here; paying around $7-8/month for the ability to watch an unlimited number of movies and TV shows is a far better value than spending $5 or so to watch an individual movie on VOD. This is all the more reason why pay-TV operators need to offer a superior user experience.
However, as the study also found, 61% of respondents said they don't even use their pay-TV provider's VOD search function, with 57% saying they would use it if it were easier to navigate. In addition, 87% said their pay-TV provider doesn't recommend TV shows or movies to them the way that Netflix, for example, has been doing for years.
Despite VOD's obvious deficiencies, and the raging debate over cord-cutting, the study also found that over 81% of respondents were either "satisfied" or "very satisfied" with the value they receive from their pay-TV operator. Of those dissatisfied, 74% - by far the largest amount - cited "increasing fees" as the primary reason value was diminished. Just 14% of respondents decreased or removed services in the last 12 months, with over two-thirds of them cutting premium channels like HBO, Showtime or Starz.
One of my takeaways from the study is that many pay-TV subscribers have come to view OTT services as necessary to enable them with an acceptable VOD experience, even though they cost extra. If pay-TV operators presented a better VOD experience they would likely put a huge squeeze on the OTT providers. But if most continue not doing so, they're allowing their subscribers to develop loyalty to OTT, which in the long-term creates new competition.
(Note: Digitalsmiths is a VideoNuze sponsor)
Categories: Video On Demand
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