• New Research Indicates Stability of Pay-TV Despite Rising OTT Usage

    New research from Digitalsmiths shows relatively muted interest in switching/dropping pay-TV providers, strong appeal of customized, a la carte pay-TV channel lineups, high awareness and usage of OTT services, and low adoption of TV Everywhere, among other things.

    Just 7.7% of respondents said they’d switched pay-TV providers in the last 3 months (up from 6% in Q2 ’14). Less than 15% of respondents said they might either cut their service, switch to pay-TV providers or move to an online app or rental service in the next 6 months, an improvement vs. Q2 ’14.

    While 76.6% of pay-TV subscribers are satisfied or very satisfied, 23.4% are unsatisfied, an increase of 6.1 percentage points since Q2 ’13. For those unsatisfied, the top 3 reasons were “increasing fees for cable/satellite service,” “increasing fees for Internet service” and “poor customer service.” Digitalsmiths found the top 3 predictors of satisfaction were monthly bill, ease of finding linear content and ease of finding VOD content.

    Digitalsmiths found that 79.4% of respondents said they’d be interested in a customized, a la carte package of TV networks. On average respondents cited just 17-18 channels should be in their ideal lineup, which they said should cost an average of $39.50 per month.

    The challenge for any provider of a “skinny bundle” of networks is illustrated by the huge dispersion of interest in the 75 TV networks respondents were asked about. Just 7 networks were cited by 50% or more respondents: ABC (61%), Discovery (61%), NBC (55.5%), History (55.4%), CBS (55.2%), A&E (53.7%) and National Geographic (50.4%). Another 8 networks were cited by between 40%-50% of respondents and another 10 networks were cited by between 30%-40% of respondents.  

    So for a skinny bundle to really succeed, it almost certainly has to have the top broadcast networks included (note to Sling TV), which are all very expensive, pressuring the retail cost of the skinny bundle. And then the dispersion of interest means hard choices for the provider about which networks to include and exclude. As I pointed out a year ago, how does a provider avoid creating a “Swiss cheese” lineup with so many missing networks that the offering quickly becomes unappealing to prospects?

    The survey also found that 57.7% of respondents use a monthly SVOD service, up 22.8 percentage points in 2 years. Amazon grew the fastest, up 6 points, followed by Netflix, up 5 points. 93.4% of respondents using an SVOD service do so on a weekly basis, with over a third of them watching 1-5 hours per week.

    Digitalsmiths coined the term “cord cheating” to describe how pay-TV subscribes use OTT services as an augment/replacement, especially for VOD. Convenience, ability to watch certain shows/whole seasons and cheaper cost remain the top cord-cheating enticements, with interest in all up over the past 2 years.

    Finally, Digitalsmiths found relatively stable levels of TV Everywhere usage. 24% of respondents have their pay-TV provider’s app, up 2.3% since last year. 45.4% of these use the app on a weekly basis. That means approximately 11% of all pay-TV subscribers use TVE on a weekly basis, which seems like a pretty low adoption rate given all the years of promotion TVE has received. The other 54.6% of those who have dowloaded a TVE app said they rarely or never use it. Clearly there is still a lot more work for pay-TV operators and networks to do to increase usage.

    Digitalsmiths surveyed 3,200 U.S. and Canada residents 18 years or older.

    The full report is available as a complimentary download here.

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