Parks: Monthly Consumer Spending on OTT Video Services Doubled in 2020

Parks Associates March 25 reported that U.S. broadband households spent an average of $16 per month on OTT video services in early 2020, double ($8) what they spent in 2018. The Dallas-based research firm also found that 45% of survey respondents with traditional pay-TV said they are likely to switch to an online TV multichannel video programming distributor in the next 12 months.

Online TV platforms include market leader Hulu+Live TV, Sling TV, AT&T TV, YouTube TV, Fubo TV and Philo, among others.

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“Today’s video services market is in a historic state of disruption and disarray,” senior analyst Paul Erickson said in a statement. “Our Q3 2020 survey finds 29% of current subscribers to traditional pay TV are unhappy with the price and value of their service, and [online TV providers] are seeking to address that need with a variety of different bundles and value propositions.”

“We saw an unprecedented acceleration of consumer interest in aggregators and [online TV] in 2020, and there’s still a lot of room to grow viewership — especially through exceptional content discovery, 47% of viewers still turn to traditional pay-TV to find their next show, compared to 18% for [online TV],” added Nic Wilson, head of customer success at TiVo.

Parks: Online Video Topped Broadband Home Services During Pandemic

New data from Parks Associates found that online video service use jumped to 60% of U.S. broadband homes in September 2020, compared with 50% in July. The trend reverberated across other online activities, including video conferencing, ecommerce, remote working, schooling, and fitness.

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The Dallas-based research firm found that 51% of domestic broadband households bought at least one consumer electronics product between February and September 2020, including computing, networking, entertainment, and mobile devices.

The report found that as of September 2020, 41% of U.S. broadband households, representing 45 million households, were engaged in remote work or remote schooling; 62% of remote workers are using their home broadband more than usual, nearly double the rate of non-remote workers.

This research series leverages Parks’ ongoing consumer surveys of 10,000 broadband households per quarter, as well as targeted surveys of 5,000, to identify trends and deliver ongoing insights into how consumers are responding COVID-19, including the impact to market fundamentals and product purchases, service subscriptions and usage, and home services.

“With record-high unemployment, household spending is primarily on essential goods, as uncertainty about the future remains high,” Elizabeth Parks, president, Parks Associates, said in a statement. “Some technology products are viewed as essential tools. Companies have changed how they interact with their customers — leveraging e-commerce channels, offering new curbside pick-up and delivery options, and providing remote rather than in-home technical support services.”

Key findings include that overall churn rate for OTT services dropped to 38%, down from 46% a year ago. COVID-19 prompted roughly 33% of security system owners and intenders to avoid professional installers; 24% of households with fixed broadband service reported being likely to upgrade in the next six months.

About 60% of pay-TV subscribers are interested in content from an online video service as part of their pay-TV subscription. Use of telehealth services jumped from 15% in 2Q 2019 to 41% in 2Q 2020.

As previously reported, more than 15 million households have only a mobile broadband service, including more than 12 million that cut the cord on their home broadband and approximately three million that have never had home broadband services.

Parks: More Than 12 Million U.S. Households Have Cut Broadband Service

Parks Associates reported that more than 12 million U.S. households have canceled their home broadband service and use only mobile broadband for their Internet needs. The Dallas-based research firm finds there are more than 15 million domestic households that have only a mobile broadband service, which includes more than three million households that have never had home high-speed Internet service.

The finding is noteworthy since high-speed Internet access is key to over-the-top video consumption, and mobile broadband service providers cap user data at a far lower rate than traditional ISPs. Indeed, Comcast, arguably the largest broadband provider in the country, added two million high-speed subscribers in 2020.

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“High cost is the most prominent issue driving households to cut the cord and go mobile only, although service-related issues, from slow speeds to poor customer experience, also contribute,” analyst Kristen Hanich said in a statement.

Currently 94% of all U.S. broadband households use Wi-Fi networking at home, and more than half report problems with their Internet. Parks found that “smart Wi-Fi,” or mesh networking products that would improve Wi-Fi coverage are powerful incentives to staunch churn, as 75% of households likely to switch would stay with their current provider if offered these solutions.

The study said broadband ability to deliver the necessary speeds are more critical now as 41% of broadband households were engaged in remote work or remote schooling. The increase in at-home activity has renewed consumers’ focus on their broadband speeds.

“In September 2020, 9% of broadband households had upgraded their home’s broadband service in the previous 12 months, and the COVID-19 crisis was the main reason for 80% of those upgrades,” Hanich said.

Parks: 40% of Broadband Homes Have Tried OTT Video During Pandemic

Homebound consumers due to the pandemic contributed to 40% of U.S. broadband households trying at least one OTT video service during the COVID-19 crisis, while one-third of smart home device owners have increased usage of these products, according to new data from Parks Associates.

The Dallas-based research firm’s whitepaper “2021 Consumer Tech Trends to Watch” highlights some of the biggest announcements from CES 2021 and the technology trends Parks’ analysts believe will shape 2021.

“CES 2021 saw the traditional TV market leaders like LG, Sony, and Samsung redoubling their efforts to differentiate their sets in the face of extremely aggressive competition,” senior analyst Paul Erickson said in a statement. “This new competitive environment has forced all CE market leaders to innovate in new ways, with new visual designs and [artificial intelligence] features.”

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Parks contends major TV manufacturers are looking beyond upgrades in display technology and performance to differentiate from competitors and add value to the home entertainment experience through services such as cross-platform gaming, exclusive streaming content, and even in-home fitness training.

Many product lines are looking to leverage the spike in OTT usage — subscriptions and viewing hours have increased and subscription rates for OTT services have risen from 71% of all U.S. broadband households to 78% in Q3 2020.

“As audiences remain in lockdown and COVID-19 continues to impact original content production schedules, library content continues to dominate in the streaming wars,” said research director Steve Nason. “Entertainment companies are looking for strategies to retain these new subscribers and emulate the live entertainment experience at home.”

Parks: 24% of U.S. Broadband Households Likely to Upgrade Service in Next Six Months

In an over-the-top video world, high-speed Internet service is a requisite. Parks Associates Feb. 11 released new data revealing that in Q3 2020, more than 50% of U.S. broadband households reported that their broadband usage had increased since the start of the COVID-19 crisis — which has seen an increase in at-home activities including work and schooling. While consumers report broadband performance is keeping pace with the increased demand, in Q3 2020, 24% of fixed broadband households reported plans to upgrade their speed in the next six months, compared with 18% in Q2 2020.

The largest cable and wireline phone providers in the U.S. — representing about 96% of the market — acquired about 1.53 million new broadband subscribers in Q3 2020, compared with a gain of about 615,000 subscribers in Q3 2019, according to Leichtman Research.

These top broadband providers now account for about 104.9 million subscribers, with top cable companies having about 72 million broadband subscribers, and top wireline phone companies having about 32.9 million subscribers.

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“Broadband upgrade plans indicate many households see some COVID-19-related changes as permanent,” analyst Steve Nason said in a statement. “For video services, OTT service stacking has been particularly pronounced, with 45% of U.S. broadband households subscribing to three or more services. Many consumers are planning to add new services such as Disney+, Apple TV+, HBO Max, and Peacock as a permanent part of their OTT service portfolio, beyond the traditional Netflix, Amazon Prime Video, and Hulu.”

Parks found that the pandemic continues to widen the OTT/pay-TV gap. As many consumers across the U.S. remain homebound, they are continually relying on video content to fill their time outside of work and school. Within video services, COVID-19 has accelerated the trend of video viewers accessing OTT offerings at much higher rates than a pay-TV service via a traditional or online provider.

“Many traditional pay-TV subscribers are migrating to online pay-TV offerings or standalone OTT services,” Nason said. “Traditional providers, who still comprise the majority of the pay-TV market, have to continually seek ways to integrate online video services into their offerings either through homegrown solutions or external partnerships.”

Parks: 55% of Pay-TV Households Say Live Sports Key to Keeping Service

Live sports remains a key driver in pay-TV as subscribers’ love for football, basketball, baseball and ice hockey outweighs dropping the more-expensive home entertainment distribution channel with over-the-top video. New research from Parks Associates finds 55% of pay-TV households in the U.S. report availability of live sports is important in their decision to keep their pay-TV service.

Major pay-TV operators Comcast Cable, AT&T U-verse, DirecTV, Disneh Network and Fios Video lost more than 5.6 million combined video subscribers in 2020. Charter Spectrum added 19,000 pay-TV subs.

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“The churn rate for pay-TV services continues to trend significantly lower than the rate for OTT services,” Steve Nason, research director of Parks Associates, said in a statement. “This is fortunate given the lack of live sports in the early stages of the COVID-19 pandemic. Over the past year, churn rates for OTT and [onlione TV] services both declined as consumers turn more and more to online video sources for their entertainment.”

Parks: 60% of Pay-TV Subs Covet Streaming Movies/TV Shows From Online Video Service

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.”

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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.”

Parks: 43% of U.S. Broadband Households With Pay-TV Likely to Switch to Online TV in Next 12 months

New data from Parks Associates found 43% of U.S. broadband households with pay-TV are likely to switch to an online TV platform in the next 12 months. While the absence of live sports and live performances during the coronavirus pandemic created challenges for online TV, services such as Hulu + Live TV and YouTube TV have been able to push the advantages in pricing, content and platform flexibility to drive subscriber growth.

Disney-owned Hulu with Live TV is now the largest online TV platform, with more than 4 million subscribers.

“Subscriber losses in traditional pay-TV continue, while the online TV category continues to grow, thanks to consumer price sensitivity and preferences for platform flexibility,” senior analyst Paul Erickson said in a statement. “Traditional pay-TV operators have online delivery in their roadmaps, if not already deployed. We expect online TV will continue to grow dramatically, and will gradually become the dominant offering in the pay-TV landscape.”

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Parks found that 17% of online TV subs switched from traditional pay-TV within the last twelve months. The factors driving defections include pricing and perceived value, while consumers positively respond to the flexibility of online TV to deliver unique and targeted content packages on a variety of connected entertainment platforms.

Prior to the pandemic’s effects on streaming video consumption, online TV sub growth was waning, with some services posting continued losses. Though COVID-19 has driven growth and in some cases recovery in the category, recent increases in online TV pricing make it uncertain how consumers will respond long term.

“Online TV has substantial opportunity if they can avoid the pitfalls that typically drive pay-TV customer dissatisfaction, such as rising prices and inflexible content and platform options,” Erickson said. “With content prices rising and competition increasing, online TV should remain conscious of consumer price sensitivity while keeping a strict adherence to a consumer-centric experience.”

Parks: Tech Use Among Seniors 65+ Skyrockets During Pandemic

The pandemic has widened the market for consumer electronics beyond millennials to include aging baby boomers, according to new data from Parks Associates. The Dallas-based research firm finds that during the coronavirus pandemic, 55% of seniors have an online video service subscription like Netflix, Amazon Prime Video and Hulu, while 29% of U.S. seniors ages 65 and older have used video conferencing services, 27% have used telehealth/remote consultation services, and 22% have used a grocery store delivery or pick-up service.

“The shift toward tech service solutions is very pronounced among seniors as a result of COVID-19,” senior analyst Kristen Hanich said in a statement.

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Hanich cited the use of telehealth services more than quadrupling among seniors compared to 2019. These changes pervade all aspects of life, including increasing adoption of video conferencing, over-the-top video and home delivery services.

“Companies deploying connected solutions need a comprehensive strategy that crosses multiple industries, including healthcare, automation, and security, to ensure they maximize the value proposition for their solution,” Hanich said.

Parks: 26% of U.S. Broadband Households Bought Consumer Electronics Device At Beginning of Pandemic

The ongoing coronavirus pandemic has been a boon for consumer electronics. New data from Parks Associates says 26% of U.S. broadband households purchased a consumer electronics device between February and May 2020, at the outset of the pandemic.

“U.S. households bought connected devices for entertainment, work-at-home, and remote learning use cases,” senior analyst Patrice Samuels said in a statement. “Broadband and traditional service providers have opportunities to generate additional revenue by bundling technical support services for emerging connected devices with existing services.”

Parks said the influx of new connected devices is changing the technical composition of the home and driving the need for data-driven support services. A higher percentage of smart home device owners have reported experiencing problems with their devices in 2020 than in 2018, increasing from 14% in Q1 2018 to 34% in Q2 2020. Several factors are driving this increase, including more users, immature technologies, and complex use cases.

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“Twenty-two percent of consumers who recently purchased and set up a CE device reported experiencing difficulty with the setup process,” Samuels said.  “These poor product experiences drive up long-term support costs for brands, but device-generated data, especially when analyzed within the context of a consumer’s technical environment or ecosystem, can yield insights that could reduce or even eliminate these challenges. We will continue to see companies pursue comprehensive support measures for connected devices in order to ensure superior user experiences.”

Bharat Chadda, SVP and global head of technology vertical at Sutherland, said consumers are increasingly looking for a simple product experience with digital and self-help options.

“The right customer experience is necessary to encourage device usability and adoption,” Chadda said.