February 3, 2021
New research from Parks Associates shows that 60% of pay-TV subscribers (accounting for nearly half of U.S. broadband households) are interested in streaming movies and TV shows from an online video service as part of their pay-TV subscription. Linear TV subs subscribing to online video services has increased 50% in the past year.
“If there was ever a time when entertainment service providers believed that OTT video was a phase, they are now convinced of its permanence,” senior analyst Kristen Hanich said in a statement. “In late 2019, the market reached the crossover point where the same percentage of U.S. broadband households subscribed to an OTT service as subscribed to a pay-TV service, and now OTT adoption outpaces pay-TV by double digits.”
Hanich said the good news for providers is consumers often have both pay-TV and OTT video, with 79% of pay-TV households having both pay-TV and OTT subscriptions.
“Providers are in a spot where they must redouble their efforts to engage these subscribers by executing new innovations and business models, or risk accelerating customer losses,” she said.
Dallas-based Parks said COVID-19 dramatically accelerated adoption of online video services, providing a small boost to online TV services specifically. The average number of OTT services among households that have any OTT service is 3.8, while households with pay-TV services plus at least one OTT service subscribe to 4.2 OTT services, on average.
At the same time online video grew, cancellation rates for traditional pay-TV accelerated, with millions more cancellations occurring in 2020 compared to 2019. The question now is how stable are the remaining pay-TV customers and how to ameliorate cancellations. Video streaming is the most popular value-added service among pay-TV households, but there is growing interest for other advanced features.
Parks found that 43% of pay-TV households are interested in having video calls on their TV; 40% are interested in controlling smart home devices and security systems from the TV; and 34% are interested in playing video games on the TV through a cloud gaming service.
“Pay-TV providers must keep offering their most valuable content, which includes live sporting and cultural events,” Hanich said. “Additionally, they must offer access to streaming, target new service to their interested customers, and perhaps be willing to take a hit on pricing until this chaotic market stabilizes.”