Report: Pay-TV Subs Spend as Much on SVOD as Cord Cutters

A longtime marketing advantage of over-the-top video was its cost-effectiveness to traditional pay-TV bundle. As SVOD services proliferate, the combined cost of services is narrowing the pay-TV divide, suggesting relative cost savings moot. Notably, new data from Cordcutting.com finds that pay-TV subs are spending as much on SVOD as cord-cutters — around $45 monthly — while maintaining linear TV access.

Thanks to comparable streaming budgets, cord cutting savings remain clear. Pay-TV subscribers spend an average of $168 a month on TV entertainment and broadband, roughly double the cord-cutter average of $86 a month.

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Notably, cable and satellite TV customers subscribe to an average of 4.4 streaming services, which is greater than the 4.1 average for cord cutters. Indeed, pay-TV subs spend an average of $45 a month on streaming, which is greater than the $37 a month spent by cord cutters.

“Our findings suggest that convenience and other non-financial factors in streaming aren’t as important to the cord cutting trend as might be imagined,” read the report. “But, conversely, the high levels of streaming spending among cord havers suggest that convenience, original content, and other factors are more important — not to the narrow world of cord cutting, but to the broader world of TV entertainment.”

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.”

Report: 27% of U.S. Households Plan to Cut Cable TV in 2021

American households are cutting the cord on their cable TV subscriptions more rapidly than previously reported, according to a new survey of more than 2,100 U.S. consumers by The Trade Desk. The data shows 27% of U.S. cable TV subscribers are planning to cut their subscriptions by the end of 2021. That percentage is nearly double the 15% of cable subscribers who reported cutting the cord in 2020, and significantly higher than the approximate 3% annual decline cited separately eMarketer prior to 2020.

The coronavirus pandemic has accelerated consumer behaviors and trends that are defining a new era of TV consumption. With more U.S. consumers working at home, many under increased budget pressure, and with the broader availability of streaming services, streaming consumption now accounts for 68% of TV viewing versus 28% for traditional TV viewing.

Even live sports can’t keep viewers tethered to traditional TV as more U.S. households turn from cable to streaming platforms to watch their favorite teams. After a pause in live sports caused by the pandemic, almost 39% of sports viewers are now watching live sports events via connected TV such as ad-supported streaming and social media platforms, according to the survey. Only 30% of U.S. consumers cite live sports as a reason for maintaining a cable TV subscription — significantly down from the 60% that cited live programming, including sports, just nine months previously.

“COVID has accelerated cord-cutting trends that were already underway, to a point where less than 50% of U.S. households today have a cable subscription,” Tim Sims, chief revenue officer of The Trade Desk, said in a statement.

Sims said the decline is not because consumers have fallen out of love with TV, but that there are now more convenient ways of consuming it. That even applies to traditional cable mainstays, such as live sports.

“As more broadcasters launch and expand their streaming services, these gaps are only going to widen,” he said.

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As Americans shift to connected TV, there’s a limit to their tolerance for subscription services. Fifty-one percent of U.S. consumers are unwilling to spend more than $20 in total per month on streaming subscriptions, according to the survey. Furthermore, TV viewers are more than five times more likely to prefer free or low-cost streaming TV with ads, over streaming services with higher monthly subscription fees with no ads (72% versus 14%).

Advertisers Follow the Audiences; Rethinking Upfronts and CTV Skills Development

As traditional TV consumption declines and CTV viewership continues to rise, marketers are embracing the CTV opportunity. A separate survey of 150 advertisers conducted with Advertiser Perceptions found that, among marketers who had revised their TV plans as a result of the pandemic, CTV ranks as the #1 channel choice as marketers reallocate campaign budgets. Furthermore, marketers state that CTV now represents 18% of their advertising spend moving forward, a significant acceleration from a standing start in recent years.

But this shift means that marketers must rethink their longstanding ad-buying habits, as well as the necessary skills investments in their teams, to capture shifting audiences. For example, the majority (59%) of linear TV buyers said they are making fewer upfront commitments in 2021, with ad dollars moving from traditional TV programming to CTV.

In addition, marketers are rethinking how they can better equip themselves with the skills and capabilities to develop the right teams to keep pace with the accelerated shift to CTV. According to the advertiser research, ad buyers will focus on CTV marketing skills in 2021, as 37% said they intend to hire new talent fluent in CTV. And more than half (55%) said they plan to take steps to ensure their current TV ad buying teams can navigate both linear and CTV channels.

Every aspect of the decision-making process of TV advertising, including measurement, frequency and creative, will have to evolve as more consumers shift to CTV. And marketers are recognizing just how critically important CTV is to their advertising strategies if they want to win the hearts and minds of consumers. According to the survey, the top focus areas for CTV ad buyers are:

  • The shift from a content-first to an audience-first approach — prime-time is now anytime, as marketers are no longer tied to a schedule.
  • More focus on integrated, cross-channel strategies — to improve the viewer experience, manage frequency and better target specific audiences.
  • Focus on non-traditional ad formats — especially shorter ads.

 

“The TV ad business is at a tipping point. Advertisers can reach more households via CTV than via traditional linear TV for the first time. That trend is not reversing,” said Sims.

Parks: Nearly 10% of U.S. Broadband Households Canceled a Video Service During the Pandemic

New data from Parks Associates research finds that, as of May 2020, 8% of U.S. broadband households canceled at least one video service due to the COVID-19 crisis, including 4% of that canceled a traditional pay-TV service, due in large part to the cancellation of sports programming.

“The lack of sports programming had a significant role in households canceling their pay-TV services early in the pandemic,” senior director Jennifer Kent said in a statement.

Kent contends that with all major sports leagues now resuming play, consumer adoption should bring back many of these canceled households, especially online TV subscribers, who have an easier path to re-subscribe compared to traditional pay-TV.

“However, the ongoing economic crisis could push additional households to trim services,” Kent said. “Service and video providers are shifting to focus on retention and finding ways to keep subscribers through innovative partnerships and unique content.”

Parks reports more than 40% of former pay-TV subs said they would re-subscribe once sports resumed, while more than two-thirds of former online pay-TV subscribers would sign back on.

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SVOD Subs to Overtake Pay-TV in 2020

Ongoing growth in subscription streaming video is projected to result in more global SVOD subs in 2020 than pay-TV, according to new data from Capgemini. In the span of a year, seven new major OTT players launched in the U.S. market alone, including Apple TV, Disney+, short-lived Quibi, NBCUniversal’s Peacock and HBO Max.

In the U.S., total SVOD subs are expected to reach 199 million, up 24% from 2019. Pay-TV subs are projected to decline 3% to 88 million.

In the U.K., SVOD subs will skyrocket 93% to 22.4 million subs, while pay-TV dips 5% to 14.3 million. In Germany, SVOD will soar 97% to 13.4 million, while pay-TV remains flat at 25 million. Both countries’ SVOD growth is driven by Netflix, Disney+, Amazon Prime Video and local services.

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The report says OTT video consumption is no longer a platform for the younger generation only. Where those under 35 years-old used to be the main users of streaming video, the service now leads in share of video consumption for those up to 50 years old and is nearly as popular as pay-TV for those over 50 in the U.S. and parts of Europe.

Indeed, in the world’s two most-populous countries: China and India, SVOD sub growth will leap 98% and 19%, respectively, to 198 million subs and 140 million. Notably, pay-TV will remain strong, up 2% respectively, at 347 million subs and 161 million.

“Traditional media business is declining,” Christian Grece, European television and VOD markets analyst at the European Audiovisual Observatory, said in a statement. “Streaming is the future because it gives the opportunity for stakeholders to establish a direct relationship with the consumer and eliminate intermediaries. Everyone is entering the race with the desire to access consumer data.”

Major Pay-TV Providers Stanch Q3 Sub Bleeding

Ongoing pay-TV subscriber defections cooled a bit in the third quarter, ended Sept. 30, according to new data from Leichtman Research Group. The firm found that the largest pay-TV providers in the U.S. — representing about 95% of the market — lost about 120,000 net video subscribers in 3Q, compared with a pro forma net loss of about 945,000 in the previous-year period.

The top pay-TV providers now account for about 82.6 million subscribers — with the top seven cable companies having 44.3 million video subscribers; satellite TV services having about 22.6 million subs; telephone companies having 8 million subs, and Internet-delivered pay-TV services having 7.7 million subs.

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Satellite TV services lost about 775,000 in 3Q — compared with about 1.14 million subs in 3Q 2019. The top seven cable companies lost about 375,000 video subs, compared with about 410,000 subs a year ago. Telephone providers lost about 5,000 video subs, compared with about 210,000 subs in 3Q 2019. Online TV services, which include Hulu + Live TV, Sling TV, AT&T TV Now and fuboTV, added 1.03 million subs, compared with about 815,000 net adds a year ago.

“With the return of live sports in 3Q 2020, Internet-delivered vMVPDs had more net additions than in any previous quarter, and pay-TV overall had fewer net losses than in any quarter since 1Q 2018,” analyst Bruce Leichtman said in a statement.

Leichtman said Hulu + Live TV is now the fifth largest pay-TV service in the U.S., and YouTube TV now has over three million subs, including 1 million net additions thus far in 2020.

Pay-TV Providers Subscribers at end of 3Q 2020 Net Adds in 3Q 2020
Cable Companies
Comcast 20.09 million (273,000)
Charter 16.23 million 67,000
Cox 3.71 million (60,000)
Altice 3.03 million (86,400)
Mediacom 663,000 (13,000)
Atlantic Broadband 317,387 5,542
Cable One 277,000 (13,000)
Total Top Cable 44.33 million (372,858)
Satellite Services (DBS)
DirecTV 13.6 million (690,000)
Dish TV 8.96 million (87,000)
Total DBS 22.56 million (777,000)
Phone Companies
Verizon FiOS 4 million (62,000)
AT&T U-verse/AT&T TV 3.5 million 100,000
Frontier 518,000 (42,000)
Total Top Phone 8.01 million (4,000)
Internet-Delivered (vMVPD)
Hulu + Live TV 4.1 million 700,000
Sling TV 2.45 million 203,000
AT&T TV Now 683,000 (37,000)
fuboTV 455,000 169,000
Total Top Online TV 7.69 million 1.03 million
Total Top Providers 82.61 million (118,858)

Study: 33% of SVOD Users Sign Up Just to Watch One Show

Free access coupled with a pandemic has created a perfect storm of developments to accelerate the consumer shift toward subscription streaming video as the destination for consumers’ favorite shows, according to a new report.

Hub Entertainment Research, citing data from an October survey of 1,604 U.S. broadband consumers who watch at least 1 hour of TV per week, found a widening gap between online video sources and traditional pay-TV as the go-to platform for new shows.

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Hub found that 68% of viewers watch their new favorite shows online, compared with 26% from a traditional pay-TV source. Netflix continues to be the top individual viewing source for new content, with 38% watching their recently discovered favorite on the SVOD pioneer’s platform. That’s 18% higher than those who watch a new favorite show on pay-TV.

The report cited “dramatic differences” in how viewers discover shows they watch online versus those they watch on pay-TV — the latter typically driven by advertising, while favorites watched online spread organically from person to person.

Indeed, when asked how they first found out about their favorite online show, the largest percentage of respondents (33%) said they heard through word-of-mouth. For favorites watched through a pay-TV platform, the top discovery source (30%) was advertising.

“Online sources are now the clear go-to for consumers’ favorite shows,” Peter Fondulas, co-author of the study, said in a statement. “What’s especially astounding is that Netflix, by itself, is far more likely to be the viewing home for new favorites than all linear networks combined.”

Notably, when asked what streaming service offers more, less or about the same number of original shows as other platforms, other than Netflix, Amazon Prime Video, Hulu, and Disney+, half or more of respondents couldn’t venture a guess.

Among those who did have an opinion, Netflix was far and away perceived as the original content leader, with two-thirds of viewers believing that Netflix produces more originals than other platforms. That led to one-in-three respondents saying they signed up for a streaming service to watch a single, exclusive show — most likely from Netflix, followed by Hulu and Disney+.

About 74% of these single-show subscribers decided to keep their subscription after the show has ended. That left 25% of respondents who canceled service once they’ve finished watching the show.

“As new streamers proliferate and as word-of-mouth and social continue to strongly influence the discovery of online content, it’s becoming rarer and rarer for viewers to turn on their pay-TV set-top box when they’re settling in to watch the shows they’re most eager to watch.”

Report: 60% of U.S. Households Have Pay-TV and SVOD Service

New consumer research from Leichtman Research Group finds that 60% of U.S. TV households have both a pay-TV service and at least one SVOD service. In addition, 20% of TV households have an SVOD service, but not pay-TV, 14% only have a pay-TV service, and 6% have neither pay-TV nor SVOD.

Among traditional (cable, satellite or telecom) pay-TV subscribers, 79% have an SVOD service, and 96% of those getting live pay-TV from an online TV service also have SVOD. Comparatively, 76% of pay-TV non-subscribers have an SVOD service.

These findings are based on a telephone survey of about 2,000 households from throughout the United States, and are part of a new LRG study, Pay-TV in the U.S. 2020. This is LRG’s 18th annual study on this topic.

“Traditional pay-TV services from cable, satellite, and telco providers are now in less than two-thirds of U.S households, while an increasing number of households are opting to get live pay-TV from [the Internet],” analyst Bruce Leichtman said in a statement. “Consumers continue to choose the video services that best fit their households’ needs.”

Other survey findings include:

  • 74% of TV households in the U.S. get a live pay-TV service (via a cable, DBS, telco, or online TV) — compared with 85% in 2015, 88% in 2010, and 82% in 2005;
  • 81% of adults ages 55+ have a pay-TV service — compared with 76% of ages 35-54, and 63% of ages 18-34;
  • 27% with both pay-TV and SVOD are ages 18-34 — compared with 46% with SVOD-only;
  • 38% of those that moved in the past year do not currently get a pay-TV service — a higher level than in any previous year;
  • 33% of pay-TV non-subscribers last had a pay-TV service within the past 3 years, 34% last subscribed more than three years ago, and 33% never had a live pay-TV service;
  • 13% of all TV households are pay-TV non-subscribers with a TV antenna.

 

Analyst: Nearly 40% of Pay-TV Subs to Drop Service by 2025

Cord-cutting among pay-TV households is increasing. So much so, one research firm is revising its forecasts. New data from The Diffusion Group finds that 36% of pay-TV subscribers will drop service by 2025 — up 9.5% from the previous five-year period.

TDG had previously estimated that by the end of 2020, pay-TV households in the U.S. would range from 83.5 million to 87 million. Instead, pay-TV households fell to 81 million at the end of last year.

Last year, TDG again recalculated pay-TV households going forward ranging from 75.7 million households to 76.7 million. Through six months of the year, pay-TV households held around 77 million.

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The same trends apply to online TV, which includes services such as Sling TV, AT&T TV, Philo, YouTube TV and Fubo, among others. TDG had projected online TV households would reach upwards of 14 million by 2019. Instead, there were less than 10 million (9.8 million) households subscribing to online TV through June 30 this year.

“Our 2017 forecasts underestimated the growth in cord-cutting and overestimated the uptake of [online TV],” Michael Greeson, president and principal Analyst at TDG, said in a statement. “Beginning in 2007, our five-year forecasts have been eerily accurate, but it was obvious that 2017 forecasts needed to be tweaked. We were within 5%, but at two years out versus five.”

According to TDG, in 2015, 16% of broadband households were likely to cancel their pay-TV service, with 7% moderately likely or definitely doing so. In 2020, 25% of broadband households are likely to drop service (up 56% from 2015), with 13% definitely doing so (up 86% from 2015).

As a result, TDG believes 14 million U.S. broadband households are more than likely to drop pay-TV going forward, with about half of that number doing so this year.