Analysis for 'The Diffusion Group'

  • Research: Roku Users Have Lower Pay-TV Subscription Levels

    The Diffusion Group has released new data showing that Roku users have the lowest levels of traditional pay-TV subscriptions and the highest level of cord-cutting. According to TDG, 64% of Roku box users and 66% of Roku stick users subscribe to pay-TV. 30% of Roku box users and 26% of Roku stick users are cord-cutters.

    For all adult broadband users, 73% continue to subscribe to pay-TV, with just 21% saying they’re cord-cutters. Other devices measured, including Fire TV, Apple TV and Chromecast all had slightly higher levels of pay-TV subscriptions and similar to lower levels of cord-cutting.

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  • Research: 22% of U.S. Broadband Homes Don’t Have Pay-TV, Double Vs. 2011

    As of year-end 2016, 22% of the 100 million U.S. homes that subscribe to broadband did not also subscribe to a pay-TV service. That’s up from 9% of the 85 million U.S. homes that subscribed to broadband but did not also subscribe to a pay-TV service in 2011. Over the course of 2016 alone, the rate of broadband homes subscribing to pay-TV declined from 82% to 78%, resulting in 22 million broadband homes without pay-TV at the end of last year, compared with 8 million in 2011.

    The data comes from a new report from The Diffusion Group, “Life Without Legacy Pay-TV: A Profile of U.S. Cord Cutters and Cord Nevers” that has just been published.

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  • VideoNuze-TDG Podcast #157 - More Thoughts on Cord-Cutters and Cord-Nevers

    I'm pleased to present the 157th edition of the VideoNuze-TDG podcast with my weekly partner Colin Dixon, senior analyst at The Diffusion Group. This week we devote the full podcast to discussing TDG's new report, "Pay-TV Refugees - A Primary Research Profile of Cord-Cutters and Cord-Nevers."

    Colin notes that U.S. households with broadband service that don't subscribe to pay-TV have grown steadily in the last 3 years, and are forecast to continue doing so over the next 5 years. We dig into the main reasons behind this - affordability and relevance, particularly for younger consumers.

    As I wrote earlier this week, the fundamental question here is what broadband users - presented with a huge new diversity of online video choices, the rising cost of pay-TV and a proliferation of new viewing devices - will do? Admittedly it's still very early in the game and hard to predict what's ahead. But it does seem inevitable, given human behavior, that some percentage will peel off, either dropping pay-TV or not subscribing in the first place.

    All of this - and more - is on the table for discussion at next Wednesday morning's VideoSchmooze in NYC. More info here.

    Click here to listen to the podcast (19 minutes, 12 seconds)

    Click here for previous podcasts

    The VideoNuze-TDG podcast is available in iTunes...subscribe today!

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  • Study: Cord-Cutters and Cord-Nevers Will Soar to 17.2 Million U.S. Homes by 2017

    New research from The Diffusion Group forecasts that the number of "pay-TV refugees" - U.S. homes subscribing to broadband, but not to pay-TV services - will increase 58%, from 10.9 million in 2012 to 17.2 million in 2017. Pay-TV refugees consist of both "cord-cutters" (homes that once subscribed to pay-TV, but no longer do) and "cord-nevers" (homes that have never subscribed to pay-TV). The percentage of broadband subscribers who are pay-TV refugees will increase from 12.5% in 2012 to 17.2% in 2017.

    Although it forecasts the number of cord-cutters to increase over the next 5 years, TDG's founding partner and director of research Michael Greeson believes the pay-TV industry's main concern should be with cord-nevers which will more than double during that period. Of the 17.2 million pay-TV refugees in 2017, TDG forecasts 40% or 6.9 million of them to be cord-nevers, up from 29%, or 3.2 million, in 2012.

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  • New Research Shows Netflix Is A Catalyst for Cord-Cutting and Cord-Shaving

    The Diffusion Group released interesting research yesterday which supports a view that I've had for a while: heavy Netflix streaming usage correlates with a propensity to cut back on pay-TV services. Although Netflix has strenuously tried to position itself as a low-priced compliment to pay-TV services, the reality is that for some pay-TV subscribers who have begun shifting their viewing hours to Netflix streaming, the two are more substitutes than compliments. As I've argued, these are primarily people who are entertainment-oriented, don't care about live sports, are comfortable with on-demand, not live-viewing, are budget-constrained, or some combination of all of these.

    The headline of the research is that the number of Netflix streamers considering downgrading their pay-TV service doubled year-over-year from 16% to 32%. But to me the key nugget is that among those who said they are likely to downgrade or eliminate their pay-TV service, 61% of moderate to heavy Netflix streamers cite online video usage as the top reason for doing so (with two-thirds of these citing Netflix specifically), while just 24% point to economic issues as their top reason. Conversely, for all Netflix streamers, almost half point to economic issues as their main reason (e.g. "cost of service" and "need to save money"), with just 34% pointing to online video usage as their top reason.

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  • New Research from TDG Sheds Light on Consumers' Three Screen Intentions

    This past Tuesday I highlighted some of Nielsen's recent data which showed, among other things, significant online and mobile video usage by younger age groups. In that post I noted that marketers need to pay close attention to these trends to ensure their products and services meet these users' needs and expectations.

    New research from The Diffusion Group (a long-time VideoNuze partner) provides a window into how users think about accessing video across multiple screens, and who the providers might be. TDG has recently completed a survey of 2,000 adults (18 or above) which tested interest in two-screen and three-screen services along with content and features. TDG has graciously provided a sample of the slides for complimentary download by VideoNuze. You can download the slides here.

    TDG defined a three-screen service as "a single video service which feeds all your household TVs, PCs and mobile devices, for a single monthly fee, from a single service provider, and with relatively equal content, variety and quality of service for all three devices."

    TDG found that almost 25% of those surveyed responded positively to such a package. Whereas video marketers would have traditionally considered heavy TV viewership (25 hours/week and above) to be the most important criterion for driving more video services adoption, these so-called "three-screen intenders" don't exhibit heavier TV viewership than non-intenders (though they're slightly higher in moderate viewership, 11-25 hours/week).

    Rather, the behavior that distinguishes three-screen intenders is how much online viewing they're doing. The intenders are far higher consumers of online video in general, and of online TV programs in particular. In other words, their behaviors are already self-selecting them as the targets for a three-screen service offering. That of course makes it much easier for marketers to find and target them.

    All of this certainly supports Comcast's and Time Warner Cable's recently revealed plans to offer their video subscribers online access to programs. Better news still for these companies is that TDG found that cable operators were the top choice by intenders as the preferred three-screen provider. Cable was chosen by 31.7% of intenders, almost double the amount that selected satellite operators. Translation: there is a sizable group of consumers interested in three-screen services and cable appears to be in the prime position to capitalize on this.

    Of course, the next question then is whether cable operators should charge for these services or imitate Netflix's example with Watch Instantly by including them as a value add to existing digital services. In my opinion, at least some of the online viewing capability should be included for no extra charge. That would go a long way toward establishing loyalty, and position cable for even greater competitive gains.

    Click here to download the complimentary slides.

    What do you think? Post a comment now.

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  • New TDG Research Provides Details of Broadband Video Advertising's Growth

    The Diffusion Group, a leading analytics and advisory firm specializing in broadband media and the digital home, is releasing a new report tomorrow entitled, "Online TV and the Future of Digital Video Advertising." VideoNuze is offering half a dozen slides as a complimentary download (note, VideoNuze has no financial interest in this report).

    Click here to download slides

    Though I haven't seen the full report, in a conversation with Mugs Buckley, the report's author (and also periodic VideoNuze contributor), I got a sneak peek at some of its key conclusions. The report is based on TDG's proprietary consumer research and modeling, interviews with industry executives, data from other firms and other secondary research. In sum, the report pegs '08 video ad revenue at $590 million, growing to $9.98 billion in 2013.

    To establish some order, Mugs first identifies four types of video, estimating each one's current market share in terms of stream count and ad revenue and then forecasting them through 2013. The four types are "user generated video," "long-form," "short clips" and "other" (which includes all paid models, adult content, corporate and educational videos, etc.).

    No surprise, UGV currently accounts for 42.4% of streams, but only 3.7% of ad revenues. Conversely, long-form accounts for only 2.2% of streams but 41.6% of ad revenues. Note the disparity would be lower if, instead of using streams (where one 40 minute TV show stream is equivalent to one 10 second clip stream on YouTube), the report used "minutes viewed" or another consumption-centric metric. I agree with Mugs though - in either case, the underlying point would still be true - long-form, higher-quality video is going to be where ad dollars are and will be concentrated.

    The report's forecast reinforces the point: by 2013, long-form's stream share will roughly double to 4.1%, with its share of ad revenue growing to 69.4%. Conversely UGV's stream share grows a little bit, but its ad share shrinks to 1.8% . A wildcard in this mix is the role of short-clips, defined as 2-5 minute videos including everything from news/entertainment/sports videos to webisodes. Mugs is bullish on this segment, with its lower costs to produce and ability for users to watch spontaneously. This is where a lot of market activity and original programming is happening and it's still early to gauge its acceptance by users and advertisers.

    A key input to the revenue forecast is the underlying CPM forecast. Mugs said her approach was to be relatively conservative with CPM's predicting little more than inflation-adjusted growth. For long-form that means CPMs growing from $40 today to $46 in 2013, which feels pretty modest, especially if targeting and engagement tactics pay off (see more on Disney's efforts in this post). On the UGV CPM forecast, it's important to note the $15 CPM refers to YouTube's announced CPM target for partners' video, NOT pure UGV.

    There's lots more info in the slides, and if you're interested in the whole report, it's best to contact or 469-287-8050.

    Click here to download slides

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  • The Reality of Web Video Advertising Just Doesn't Seem to Add Up

    Today's post is from TDG's Mugs Buckley, who discusses the confusing state of video advertising projections.

    The Reality of Web Video Advertising Just Doesn't Seem to Add Up

    by: Mugs Buckley, Contributing Analyst, The Diffusion Group

    I used to think I was pretty good at math, but after trying to make sense of recent forecasts regarding web video advertising, I'm beginning to doubt my skills. Let it be known that I'm a big believer in the growth potential of the Internet video ad business; I'm simply struggling to follow the numbers that have been reported. Since no single analysis offers an "apples-to-apples" industry comparison, I thought I'd offer up some of the available forecasts and offer a few thoughts.

    So here's where I'm stuck.

    The estimates and forecasts for only video ads are all over the place. For example:

    • eMarketer estimates that US marketers spent $775M in 2007 and will spend $1.3B in 2008 for online video streaming and in-page ads.
    • Jupiter Research predicts that 2008 online video ads in the US will yield $768M.
    • comScore reported that online viewers consumed 9.8B videos in January 2008 (down from December 2007's 10.1B) of which 3.4B were Google/YouTube videos.
    • In a November 2007 Financial Times article, a leading media buyer for Starcom Media Group (who is well aware of her buys and rates) predicted that the 2007 market for "The Big Four" broadcast networks was likely to generate around $120M.

    So here's where it gets a bit confusing.

    • If we use the 3.4B monthly view Google/YouTube view estimate for January and run that out for a 12-month period, add some growth for fun, we come up with about 45B views for all of 2008.
    • YouTube charges $15 CPMs for their in-video overlay ads (down from the initial $20 CPMs used during beta testing).
    • If 100% of the 45B Google/YouTube videos were sold at $15 CPMs, that would yield revenue of $675M. But that assumes 100% inventory sold, which won't happen for a variety for reasons (in particular because YouTube only sells overly ads on their contracted partner deals, not user-generated content).
    • According to Bear Stearns, YouTube is set to generate $22.6M in revenue for video ads, about 3.3% of the possible $675M at 100% inventory sold.

    Hmmm. So if YouTube (at 34% of all web video consumed) could generate $22.6M in revenue in 2008, and the Big Four were running about $120M in 2007, how does one arrive at these impressive near-billion dollar predictions? Where else is this revenue coming from?

    Let's not rule out operator error - I'll quickly admit that I may have misinterpreted how these numbers were derived and what they represent. That being said, however, there doesn't seem to be a rational way to reconcile these disparate estimates. Can anyone out there help to square these numbers? Is it simply a matter of under- or over-reporting? Are the measurement systems currently in place so poor and mutually exclusive in methodology that they necessarily offer conflicting estimates?

    Something just isn't adding up. Yes, this may seem to be a bit nit-picky on my part; the rambling of an analyst with too much time on her hands. Then again, without accurate revenue and usage estimates, it is impossible to know the real value of any form of advertising, much less an emerging model such as web-based video advertising.

    Please let us know what you think!

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