Research: A Quarter of U.S. Broadband Households Use AVOD Services

A quarter of U.S. broadband households have watched video on a free, ad-based OTT service in the past 30 days, according to research from Parks Associates.

No single AVOD service dominates this market, according to the report 360 View: Video Services & Connected Consumers. Among the leaders, 7% of U.S. broadband households use The Roku Channel, 6% use Pluto TV and 6% use Crackle, according to Parks.

“Entertainment and communication features like offline viewing are becoming an important part of consumer viewing habits, especially for younger generations. Nearly 50% of current pay-TV subscribers have a DVR,” said Elizabeth Parks, president, Parks Associates. “VOD and DVR are key elements in operator video strategies now that OTT on-demand services are mainstream. TiVo announced a 4K streaming device at CES that aggregates where content can be accessed from, putting an emphasis on search and discovery and an integrated experience for the consumer.”

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“Consumers and their entertainment choices remain the key driver of change within the entertainment industry,” said Parks senior analyst Steve Nason. “At CES, Quibi, led by Meg Whitman and Jeffrey Katzenberg, announced a mobile-only service featuring short-form content and subscription tiers with and without advertising, which will target younger, more mobile consumers.”

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The report’s other findings include:

  • One-third of broadband households are interested in vMVPD service bundles.
  • One-in-five pay-TV subscribers claim that they can access an OTT service via their channel guide or on-screen menu.
  • One-third of broadband households have trialed an OTT subscription service in the past six months.
  • 26% find purchasing items seen in advertisements appealing or very appealing.
  • 31% of US broadband households subscribe to HBO, the market leader in premium channels.
  • One-quarter of US broadband households use an antenna to watch live TV channels.
  • Overall 78% of broadband households watch live TV channels.
  • More than a quarter of U.S. broadband households are interested in innovative offerings accessed via television, such as offline viewing, video gaming, food delivery, ride sharing, and gambling.

Parks: CBS Makes Gain Among Top OTT Video Services

Parks Associates Dec. 5 said SVOD platform CBS All Access moved from eighth place to fifth in its annual Top 10 list of over-the-top video services.

This list is based on estimated number of subscribers through October 2019 and was compiled prior to the launch of Disney+ and Apple TV+, and includes paid subscriptions.

Major League Baseball’s MLB.TV dropped from sixth to eight place, despite having gained subscribers since 2018. Sling TV remained consistent with more than 2.5 million subscribers and No. 1 rating among online TV services, which includes Hulu + Live TV, YouTube TV, and AT&T Now (previously DirecTV Now).

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Top 10 US Subscription OTT Video Services
1 Netflix
2 Amazon Prime Video
3 Hulu (SVOD)
4 HBO Now
5 CBS All Access
6 STARZ
7 Showtime
8 MLB.TV
9 ESPN+
10 Sling TV

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“Competition in live streaming services is intensifying as several big brand names are competing for a small but growing slice of the OTT subscription base,” Brett Sappington, senior research director and principal analyst, said in a statement. “Consumers continue to sign up for multiple OTT video services. If this trend holds, many services can continue to grow as the market grows. However, a slowdown will suggest that consumers are finally drawing the line on the amount they will spend each month.”

Until then, Disney+ continues to generate headlines, acquiring 10 million subscribers upon initial launch, which would rank it fourth on the list, ahead of HBO Now.

“Their entry, along with Apple TV+ and other direct-to-consumer services upcoming in 2020, has been a major disruptor to the OTT space and will require all players from top to bottom to ensure they are delivering unique value to their subscribers in order to retain their base,” Sappington said.

Parks contends 71% of U.S. broadband households have at least one OTT entertainment product, such as a smart TV or streaming media player.
Nearly three-quarters of domestic broadband households now subscribe to an online video service. About 49% of recent OTT subs signed up through the service’s website; 33% through the service’s app; and 11% through a cable or satellite TV provider.

Research: Content Variety, Ease of Discovery and Original Programming Key in OTT

The top three reasons why consumers would recommend their OTT service are content variety, ease of content discovery and good original programming, according to research from Parks Associates.

“For consumers, video services are all about the content and experience,” Brett Sappingston, senior research director and principal analyst at Parks Associates, said in a statement. “While pricing does matter, people are ultimately looking for something to watch. So, having a compelling library with unique content is critical. Services that can quickly surface desired content will maximize viewing time and continue to prove their value to users.”

Other considerations in OTT recommendation were if the service has the genres desired or regularly adds new programs.

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Parks Associates: Top Reasons for OTT Service Recommendation

Parks Associates: User Interface Important in Video Service Satisfaction

Almost three-quarters (70%) of U.S. broadband households with a major video service consider its user interface to be good, with 48% rating it “very good,” and these scores impact their willingness to recommend the service to others, according to research from Parks Associates.

Analysis of consumer responses reveals quality of the user interface and the ease of finding content are the most likely factors to drive willingness to recommend a video service.

In addition, one-fifth of households cancelling an OTT subscription cited an inability to find something to watch as a factor.

“Consumers are interested in finding particular shows or genres of content and have less interest in browsing by channel,” said Kristen Hanich, senior analyst, Parks Associates, in a statement.

The new report UI Preferences and Content Discovery examines consumer preferences related to new UI options and the ways that consumers find, and want to find, entertainment content. It also explores preferences by owners of various in-home devices and examines interest in new innovations such as smart speakers, personal assistants and voice interaction.

“User interfaces are a key factor driving satisfaction for OTT services, and Netflix, Hulu, and Amazon — the big three in OTT streaming — have largely set the standard for content navigation and ease of use,” Hanich said in a statement. “Other services have had to follow similar structures established by these three, but as new OTT services launch with greater and greater expectations, innovations in UIs could be an even greater differentiator contributing to their success or failure.”

Other findings include:

  • 70% of CE purchasers said ease of use is a “very important” purchase consideration;
  • when searching for something to watch, 12% of OTT users consider recommendations from the service as their first step; and
  • Apple TV owners give high marks to the device’s UI.

Percentage of U.S. Households With Multiple OTT Subs Has Jumped by 130% Since 2014

The percentage of U.S. households with multiple OTT subscriptions has increased by 130% since 2014, according to Parks Associates research.

In 2019, 46% of U.S. broadband households subscribe to two or more OTT services. The report, Partnering, Aggregation, and Bundling in Video Services found only 33% subscribed to multiple services in early 2017 and 20% in 2014.

“The number of OTT services available in the U.S. increased by 140% in five years, giving consumers an unprecedented number of options to meet their video needs,” said Parks Associates senior analyst Steve Nason in a statement. “Most OTT households are anchored by one of the three major OTT services — Netflix, Hulu, or Amazon Prime Video — but consumers are finding they can’t fulfill all their interests through a single service. Many small and medium-sized services are building their brand and subscriber base by filling in these gaps in content.”

Several trends in the video services industry are shaping partnerships, including intense competition, the move of content providers to launch direct-to-consumer offerings, the lack of differentiation among OTT services, and the existing infrastructure and consumer relationships among larger players, according to Parks.

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While overall adoption and awareness of OTT video services as a category are high, awareness of any specific individual service is low, which will make it difficult for smaller services to match the scale, revenues, and marketing efforts of larger players, according to the research firm.

Parks Associates research shows nearly three in 10 OTT services in the United States are on Amazon’s Prime Video Channels aggregation platform, more than four times the rate from two years ago.

“Netflix can afford to license high-value content like ‘Seinfeld’ to supplement its original content, and Apple can buy commercial space during the Emmys and NFL games to promote its upcoming Apple TV+ service and its array of content and stars,” Nason said in a statement. “By contrast, smaller OTT services are having to harness the power of a partnership with an aggregator, bundling or content partner, or marketing and promotion partner to boost awareness of their brand and offerings.”

Additional findings include:

  • More than half (53%) of U.S. broadband households subscribe to at least one OTT service and a pay-TV service;
  • Nearly three-quarters subscribe to an OTT video service, up from 52% in 2014; and
  • Among the OTT video services available in the United States, approximately 90 have fewer than 50,000 subscribers and 72 have fewer than 20,000.

More Than 40% of U.S. Households Interested in 5G

More than 33% of U.S. broadband households cite some level of familiarity with 5G and more than 40% of U.S. broadband households are interested in 5G, according to new research from Parks Associates.

The report Technology Market Assessment: 5G Network Services examines several aspects of 5G, including the condition of the mobile market, consumer sentiments toward 5G services and products, service availability, use cases, and competition. It explores the impact of 5G on fixed broadband, wireless services, and includes a five-year forecast for 5G and other mobile data services.

“More than half of U.S. broadband households are unfamiliar with 5G, despite aggressive marketing from mobile service providers,” said Craig Leslie, senior research analyst with Parks Associates. “Limited service availability is impacting consumer awareness; however, once the technology is explained to them, almost half are interested in replacing their fixed-line internet service with 5G home services.”

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Limited 5G availability also means that it will not replace 4G LTE or fixed services anytime soon, the firm predicts.

“With spotty coverage, providers will need to run 4G in parallel with 5G services so there is ‘fallback’ connectivity for areas lacking coverage,” according to the firm.

Providers see the need to offer 5G services, though, as their availability is a significant influencer in service provider selection, even if consumers are unwilling to pay more for 5G, according to Parks.

“Beyond higher speed, consumers are failing to see the value of 5G over their current subscriptions — only 13% of smartphone users are willing to pay higher subscriptions fees for 5G mobile services,” Leslie said. “Operators will need to increase consumer understanding through better communicating 5G use cases and benefits in order to convince them to upgrade services.”

Additional research findings include 31% of U.S. broadband households consider 5G availability to be very important when choosing a new mobile service provider and 20% of U.S. broadband households purchased a smartphone in the first quarter of 2019, down from 40% in the first quarter of 2016.

Parks: SVOD Accounts for 86% of Consumer Online Movie, TV Spending

New research from Parks Associates finds that subscriptions, formerly representing just over half of total online video spending in 2012, now account for nearly 86% of all internet spending on TV and movies.

The Dallas-based research follows analysis of market trends and profiles of OTT video service providers in the U.S. and Canada, including Netflix, HBO, YouTube, and Amazon as well as new services Disney+, HBO Max, and Frndly TV.

“The new services launching over the next several months are taking different approaches as they enter a crowded OTT market,” said Brett Sappington, senior research director and principal analyst. “While the U.S. market is important for Disney, the company will ultimately measure the success of its Disney+ service on a global scale.”

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Sappington believes AT&T sees its formerly branded DirecTV Now (now AT&T TV) service as the evolution of its core pay-TV business rather than as an extension of its vMVPD efforts.

The Frndly TV is a niche play Sappington says is targeting a specific group of consumers with a low price and family-friendly content.

Parks says the new services, including Apple TV+, will drive consumers to increase spending on internet video and maximize the proportion of spending on subscriptions. The increasing number of new services will also test consumers’ tolerance for adding new accounts to their monthly expenditures.

“The amount of money consumers spend per month will spike, at least in the short term, as new services such as Disney+ and Apple TV+ become available. Tradeoff decisions will come later,” Sappington said. “To keep consumers spending at this higher level, services will have to consistently deliver volumes of compelling content within an engaging user experience.”

Parks: More Than 50% of Connected Homes Find Voice-Activated Software Appealing

Voice-activated speakers and movie, TV show searches on connected televisions isn’t just a fad.

New research from Parks Associates finds that more than half of domestic broadband households consider voice control of connected entertainment devices to be appealing.

Voice functionality has also become an important buying consideration, with 12% of U.S. broadband households stating it is a top feature when buying a new smart TV.

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“Voice has made a sizeable impact in the smart home and connected CE space, with four out of ten U.S. broadband households currently using some form of smart speaker,” senior analyst Dina Abdelrazik said in a statement. “Since their introduction in 2014, smart speakers have quickly risen in popularity among consumers as an important interface to control and connect the many different devices in the home.”

Voice is extending beyond the smart speaker into smart home adjacencies such as smart appliances, smart doorbells, and smart TVs.

Parks Associates: Method of Controlling TV Via Voice

In 2017, only 3% of CE device users reported using voice commands when watching a movie or TV program; Parks Associates’ latest research finds that almost a fifth of consumers now use voice commands to control their connected entertainment devices several times a week.

“Voice interfacing with the entertainment ecosystem is improving the overall user experience through ease of content discovery and recommendations,” Abdelrazik said. “Custom installers can benefit with the use of voice to connect entertainment and smart home systems in the home via a natural and easy-to-use interface.”

Parks is presenting the findings during a Sept. 14 presentation at CEDIA Expo in Denver.

Parks Associates: Average Standalone Pay-TV Service Revenue Per User Declined 10% from 2016 to 2018

Research from Parks Associates finds the average standalone pay-TV service average revenue per user declined 10% from 2016 to 2018, when consumer-reported monthly spending on pay TV declined from $84 to $76.

According to 360 View: Entertainment Services in the US, pricing pressure for consumer services is forcing increasing conflict in carriage negotiations, which in turn fuels the interest among providers in continued vertical and horizontal consolidation.

Self-reported expenditures on non-pay-TV home video entertainment also declined 30% per month over the past seven years, peaking at nearly $40 in 2014 to slightly over $20 at the end of 2018, according to the study. Spending on DVD and Blu-ray packaged media has steadily declined since 2012, while spending on movie theaters declined by 50% from 2014 to 2018. Spending on internet video is the only category to hold steady throughout the time frame, staying at $8-9 per month since 2014, showing the power of streaming and downloaded content from the internet.

“Traditional pay-TV providers (MVPDs) have faced continued subscriber losses due to increasing consumer choice from OTT services, so they are deploying skinny bundles and vMVPD services to create more choice among viewers,” said Elizabeth Parks, president, Parks Associates, in a statement. “For pay-TV service providers, traditional and online, they are exploring new areas in content ownership and development, and to be successful in these efforts, understanding consumer activity and motivation related to adoption and use of their services is critical.”

“Subscription online video is the only growth category for consumer-paid video entertainment beyond pay TV. Operators, struggling with declining ARPU for standalone pay-TV services, are anxious to leverage this trend,” said Brett Sappington, senior research director and principal analyst, Parks Associates, in a statement. “Operators are taking differing approaches. Some, including Comcast and DISH, are offering subscriptions to third-party OTT video services and are integrating them into their discovery interfaces. Partnering gives operators a chance to serve as content aggregator, a familiar position. Others, including AT&T and DISH, are expanding their competitive reach online and have introduced vMVPD services.”

Other highlights of the study include:

  • 20% of U.S. broadband households do not have a pay-TV services;
  • NPS for traditional pay-TV services is weaker than for other content service types;
  • in 2018, the average number of connected devices per broadband household, excluding smart home devices, reached 8.4;
  • and 12% of US broadband households eliminated pay-TV service (cut the cord) in 2018.

Parks: Streaming Media Player Ownership Flattening With Roku and Amazon Leading Space

More than a third (39%) of U.S. broadband households own a streaming media player, but that’s a mere 1% increase from 2018, according to new research from Parks Associates.

Ownership has flattened, the firm noted, although purchase intentions are higher for 2019 compared to previous years.

The report, 360 Deep Dive: Adoption and Use of Connected Video Devices, found connected video device manufacturers may need to shift focus from hardware sales to service and advertising revenue, as ownership reaches saturation, according to Parks.

“Streaming media has reshaped how U.S. consumers interact with entertainment content and services, so as the market matures, sales increasingly come at another vendor’s expense,” said Parks senior analyst Kristen Hanich in a statement. “Video-quality features are the most important factors when consumers buy a connected video device, although Roku and Amazon have certainly benefited among streaming media players by having broad product portfolios that include lower price points.”

Among streaming media players, Roku and Amazon’s Fire TV are the clear market leaders with almost 70% of the installed base of streaming media players in the United States, according to the firm. Consumer-reported data reveals that between Q1 2017 and Q1 2019, Roku’s share of the U.S. streaming media player installed base grew from 37% to 39%, while Amazon’s share of the installed base increased from 24% to 30%.

The report looks at the state of the connected video device space, including smart TV platforms, streaming media devices, smart set-top boxes and gaming consoles, examining the changing roles of these devices and how consumers are engaging with new functionality, such as voice control and live TV integration.

“As the addressable market shrinks, rivalry increases,” said Parks senior analyst Craig Leslie in a statement. “The combined installed base for Roku and Amazon is three times larger than the nearest competitor. The adoption of Roku and Fire TV streaming media players continues to grow at the expense of Chromecast and Apple TV.”