The Diffusion Group Archives

Data: 60% of Connected-TV Households Stream Ad-Supported Content

Consumer interest in free ad-supported VOD (AVOD) content and live television (FAST) continues to proliferate. New data from The Diffusion Group suggests 60% of connected-TV households stream ad-supported content across myriad platforms — spearheaded by YouTube.

AVOD and FAST services driving the market include ViacomCBS’s Pluto TV, Fox Entertainment’s Tubi, Comcast-owned Xumo and Amazon’s IMDb TV, among others.

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TDG found that 24% of connected-TV households consume ad-supported streaming content on a daily basis, while 32% stream weekly. Among AVOD/FAST consumers, 76% stream YouTube, the longest-running streaming video platform, followed by Pluto TV, Tubi and Xumo.

“Clearly the effects of work-from-home and lack of traditional leisure options during the pandemic accelerated consumer use of free ad-supported streaming services,” Doug Montgomery, senior analyst and author of Back to the Future: The Rise of Ad-Supported Streaming Video, said in a statement. “Most major video providers have been preparing for this moment for years and thus able to quickly adapt to an accelerated timeline. It is a unique moment in the history of the entertainment business and those who move quickly and boldly will likely reap the benefits for years to come.”

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.

Report: 60% of MVPD On-Demand Viewers Report Increase in Use During Pandemic

Six in 10 U.S adult broadband users who use pay-TV on-demand services have increased viewing as a result of COVID-19 stay-at-home directives, with 19% reporting a significant increase, according to new research from The Diffusion Group (TDG).

“Much has been written about recent spikes in the use of on-demand streaming video services such as Netflix and Disney+, and for good reason,” noted Michael Greeson, TDG president and principal analyst, in a statement. “Our findings clearly demonstrate that, being largely confined to their homes, consumers see tremendous value in having access to on-demand shows and movies. And this holds true for all such services, including those offered by pay-TV providers.”

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According to TDG, 77% of adult broadband users that subscribe to a pay-TV service watch shows and movies via the service’s on-demand feature; of those, 60% report spending more time watching on-demand programming as a consequence of having to stay at home due to local, state or national directives related to COVID-19.

TDG also found that:

On-demand viewers under the age of 45 were almost twice as likely as those 45 and older to have significantly increased on-demand use (23% vs. 13%, respectively);
21% of those using virtual pay-TV on-demand report significant increases in viewing, a bit higher than their cable and fiber pay-TV counterparts at 19%. Satellite on-demand viewers lag in this respect, with only 13% reporting significant increases;
23% of pay-TV on-demand users in the Western U.S. report a significant increase in use, compared with 19% of those in the Northeast, 18% of those in the South, and 16% of those in the Midwest; and
Female pay-TV on-demand viewers were as likely as their male counterparts to have significantly increased on-demand viewing under stay-at-home directives.

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In late April 2020, TDG surveyed 1,997 U.S. adults with a broadband data service in the home about their TV and video behaviors. The resulting Quantum Media Behaviors study provides a timely analysis of the pandemic’s impact on media usage, particularly among legacy and virtual pay-TV users, and their counterparts (i.e., Cord Cutters and Nevers). For more information about TDG research, contact info@tdgresearch.com.

Research: Strong Consumer Interest Expected for Disney+ Streaming Service

Disney’s pending subscription streaming video service is projected to generate wide consumer appeal — if it is priced right, according to new data from The Diffusion Group.

When asked about the likelihood they would sign up for “a Netflix-like service” that included movies from Disney, National Geographic, Pixar, Marvel and Lucasfilm (Star Wars); Disney TV shows for children; and original content, 43% of survey respondents said they were likely to sign up, while 27% very likely to subscribe.

TDG surveyed 1,949 adult broadband users randomly assigning one of three price points for the service, either $5.99, $7.99, or $9.99 per month. Those under the age of 35 are twice as likely as their older counterparts to be strongly interested in Disney+, as are those with children under 18 living in the home.

“Based on our research, Disney+ will enjoy strong early demand,” Michael Greeson, president of TDG, said in a statement.

Greeson said Disney’s streaming service – which is slated for a public unveiling in April – differs from Netflix, Amazon Prime Video and online TV by only offering branded content.

“This is a major studio pooling what is arguably the largest library of high-value content on the planet to populate a single subscription service,” he said.

The report contends Disney+ will be a case study regarding the policy of media companies pulling select content from third-party SVOD providers for their own over-the-top video services.

Indeed, TDG found that while Disney+ appeals to a wide range of consumers, interest varies within several key segments.

Legacy pay-TV subscribers are more strongly interested in Disney+ than both cord-nevers and cord-cutters; Hulu subs are more likely to sign up than are Prime Video and Netflix subs.

“The amount of high-quality content being packed into the offering will make it not only appealing, but very sticky,” Greeson said.

Survey: Netflix Subscribers Sensitive to Price Increases

At $1 more a month, 16% of Netflix subscribers were likely to either downgrade or cancel their subscription, according to a survey by The Diffusion Group (TDG) conducted just before the service’s price increase announcement Jan. 15.

Netflix upped its monthly basic $7.99 single-viewer, non-HD plan to $8.99, standard $10.99, two HD streams plan to $12.99, and premium $13.99, four-stream HD plan to $15.99.

Those price hikes might have consequences, according to TDG’s ninth edition of Quantum Viewing Behavior, a survey of 1,940 U.S. adult broadband users completed in December 2018.

In the survey, at an increase of $3 a month, the rate of likely cancellations doubled, while the rate of likely downgrades tripled. At an increase of $5 a month, likely cancellations grew to 38% while likely downgrades tallied 17%.

“While TDG believes that Netflix will endure any short-term backlash from these increases, it is undoubtedly reaching a level of price resistance across all tiers,” said Michael Greeson, president of TDG, in a statement. “At an average increase of $3 per month, 33% of Standard tier subscribers are likely (though not certain) to downgrade to a less expensive plan and 10% are likely to cancel the service altogether, compared with 28% and 6% of Premium tier subscribers, respectively. These variances are not insignificant.”

Research: More Than a Third of Roku Users Don’t Have Pay-TV Service

More than a third (35%) of Roku users do not subscribe to a legacy pay-TV service, according to new research from The Diffusion Group.

That is notably greater than the 27% of adult broadband users in general, most of which enjoy streaming TV, according to the firm’s ninth “Benchmarking the Connected Consumer” report.

“Given its substantial footprint and brand strength, Roku devices are becoming a favorite of those living without legacy pay-TV,” noted Diffusion Group president Michael Greeson in a statement. “The assortment of free and fee-based video apps in the Roku portal is undoubtedly a reason why we observe these correlations. For many TV streamers, buying a Roku, and getting access to the Roku video ecosystem, is no longer just an easy way to supplement their legacy pay-TV service, but a means of replacing it.”

By 2020, The Diffusion Group forecasts that streaming sticks will near 45% penetration among U.S. broadband households, with iSTBs close behind.

“Should Roku remain the dominant brand, and continue to expand its vast OTT content ecosystem, legacy pay-TV will suffer,” Greeson said in a statement.

The annual “Benchmarking the Connected Consumer” report details the ownership, placement, connectivity, and use of media-centric consumer electronic devices in the broadband home.

Report: Facebook Watch Struggling for Recognition — on Facebook

Facebook Watch, the social media behemoth’s streaming video platform launched in 2016, has access to Major League Baseball and Premier League soccer, among other marquee content. But more than 50% of Facebook users don’t know what Watch is — and fewer still use it, according to new data from The Diffusion Group.

In a survey of more than 1,600 adult Facebook users, just 21% said they streamed content on Watch monthly. Another 14% said they streamed content weekly and 6% said they watched ad-supported content daily.

“Despite the slow build of Watch users, it would be remiss to underestimate Facebook’s long-term potential as a large-scale video provider,” Michael Greeson, president of The Diffusion Group, said in a statement.

Greeson said Facebook is employing Watch as a means of exploiting its “massive scale” to sell video, similar to what Amazon is doing with Prime Video. Indeed, Facebook reportedly is spending upwards of $1 billion in 2018 to fund original programming.

Programs include teen dramas, “SKAM Austin,” “Five Points,” “Sacred Lies,” and “Turnt,” in addition to comedies “Strangers,” “Starter Pack,” and “Sorry for Your Loss.”

Regardless of the strategy, TDG contends Facebook – like Amazon and Apple – has the advantage that it is not dependent upon video for revenue growth or sustainability as are standalone video, music and gaming services.

“This is why technology companies are so dangerous to legacy media companies,” said Greeson. “Facebook, Google, Apple, and Amazon have such deep pockets and vast business empires that they can spin up a service in short order and lose money on it for years if it serves a higher purpose, like keeping Facebook users in the branded ecosystem for longer. For large tech companies, media services are commonly a means to a larger end, not ends in themselves.”

Research Shows Broadcast Networks Still Highly Desired by Consumers

Despite declines in viewing, broadcast networks top the list for most desired channel groups, according to research from The Diffusion Group.

Diffusion’s national study, Video Viewing Behavior in the Age of Quantum Video, examines preferred network groups by demographics and video behavior. The firm surveyed 2,030 connected consumers as to the five network families they’d prefer to have included in a five-group skinny TV plan. (Respondents were able to see which channels were included in each network group before selecting.) The big four broadcast network groups occupied four of the top five spots, led by NBC Universal (selected by 48%), followed by Fox (41%), Disney/ABC (41%) and CBS (38%).

“Live big-four broadcast viewing is diminishing, as with virtually every major network. This should not imply, however, that their death as brands or as major forces in consumer video is inevitable,” said Michael Greeson, Diffusion’s director of research, in a statement. “The value of their content is immense — top of mind for many viewers.”

The rankings offer important insight into the viability of direct-to-consumer services, according to Diffusion. For example, the fact that the ESPN family failed to rank in the top 10 suggests Disney’s decision to make ESPN Plus a premium add-on to its linear ESPN channel may have been a wise move, the research group noted.

“Many expected ESPN Plus to be the online equivalent of ESPN, but Disney decided that the risk of cannibalizing high-value linear pay-TV subscriptions would create substantial channel conflict and hasten the declines in pay-TV subscriptions,” Greeson stated. “This risk is inherent in the DTC model and must be addressed group by group, even channel by channel.”

For example, though ESPN Plus may be best positioned as a value-add to its live linear pay-TV service, Disney’s family-focused direct-to-consumer service appears destined to follow in the footsteps of CBS All Access – that is, serve as a full-on replacement to its linear channel, with a growing number of high-value titles reserved for the new service, according to Diffusion.

The standings also offer important insight into the viability of a new virtual MVPD entrant, Philo, which is populated by the channels A&E, AMC, Discovery and Viacom, the research firm noted.

“While this may at first glance seem too specialized to gain mass appeal separate from a broadcast bundle, the combination of networks may prove attractive,” according to a Diffusion release. “Keep in mind that A&E was selected as top-five by 37% of connected consumers, AMC by 28%, Viacom by 24% and Scripps by 21%.”

Netflix, Amazon, Hulu Ramping Up Original Content Spend

Netflix, Hulu, and Amazon Prime Video are switching from content licensing to content creation in a major way. By 2022, the investment in original movies and TV shows will triple to $10 billion annually, according to new data from The Diffusion Group.

“The Big-3 SVOD players own 60% of TV streaming time,” Brad Schlachter, senior advisor at TDG, said in a statement. “They are looking to maintain if not grow this share by creating compelling originals that serve both to attract new users and retain existing subscribers even as subscription rates increase.”

Indeed, among Netflix subscribers, 21% rate originals as “absolutely critical” in their decision to keep using Netflix, while 41% rank them “very important.”

“The data is unequivocal,” said Schlachter.

Netflix, Prime Video and Hulu – through sophisticated user data – have a much better understanding of the limits of licensed content versus the benefits of original fare.

TDG contends that as studios like Disney pull their most compelling content from SVOD platforms, the necessity of a strong slate of originals becomes all the more obvious.

But the Big-3 are not the only players eyeing a larger slice of the originals on-demand streaming market. In fact, companies such as Facebook and Apple are investing in original TV-quality programming to distribute directly to consumers.

“Of course, not all originals find an audience or generate a huge buzz,” said Schlachter. “But when they do, it can change the fortunes of a company. Just look at what ‘The Handmaid’s Tale’ did for Hulu, or what ‘House of Cards’ did for Netflix.”