TiVo: Viewers will pay more for sport-specific networks

TiVo has released its 18th edition of its quarterly Video Trends Report, covering key topics across pay-TV, VoD, OTT, TV Everywhere, streaming devices, home assistant devices and content discovery.

Based on a survey of over 3,050 consumers, TiVo’s Q2 2017 Online Video and Pay-TV Trends Report illuminates many insights, including:

1. The state of pay-TV – While satisfaction may be on the rise, understanding the roots of pay-TV customer frustration is still important. For the second quarter in a row, the top reasons for dissatisfaction are:
1. “Too expensive / Increasing fees for cable/satellite service”  -77.8 pr cent, a decrease of 3.6 percentage points q/q 2. “Poor cable/satellite service”  – 34.1 per cent, a notable increase of 4.2 percentage points q/q
3. “Poor customer service”  – 29.3 per cent, a decrease of 3.6 percentage poin

Of the 83.9 per cent of respondents who subscribe to pay-TV service, 8.9 per cent have switched providers in the last three months. This audience increased slightly y/y and over two years, and nearly 3 percentage points over three years. In addition, when asked if they planned to leave their current pay-TV providers in the next six months, respondents answered as follows:

• 6.3 per cent plan to cut their pay-TV service.
• 8.1 per cent plan to change to another pay-TV provider.
• 4.5 per cent plan to switch to an online service or app.
• 30.6 per cent are on the fence, answering “maybe.”

These figures total 49.5 per cent of respondents — meaning almost half of respondents could potentially leave their current pay-TV provider in the next six months. Additionally, when the three categories of planning to leave their current providers are combined, the number of respondents planning to cut, change or switch is up slightly q/q and y/y, 4 percentage points over two years, 5.3 percentage points over three years, and 7.5 percentage points over four years.

2. Are vMVPDs’ skinny bundles what consumers really want? — The ability to deliver video OTT created the virtual multichannel video programming distributor (vMVPD) trend. While these companies try to appeal to consumers by offering smaller channel packages at a lower cost than traditional MVPDs, the challenge is: which channels should be included and excluded?

While neither MVPDs or vMVPDs offer the true à la carte model that 77.5 per cent of respondents want, TiVo set out to understand how current options stack up to respondents’ wishes. The report shows how the industry’s most popular skinny bundles (i.e., Sling TV, DirecTV Now, PlayStation Vue) compare to respondents’ most desired channels in an à la carte pay-TV package. The analysis also revealed all currently available skinny bundles only match the preferences of 43.6 per cent of respondents.

3. Consumption of Sports Content is Evolving— The report highlights the top 10 channels respondents will pay the most to watch. Contrary to expectations, and possibly because of many recent news articles referencing its struggles, ESPN was not among this list. However, what did make the list were league-specific broadcast networks, such as the NFL Network and the MLB Network. Most notably, respondents are willing to pay more for the NFL Network ($2.13) and MLB ($2.04) than ESPN ($1.81).

Considering these individual sports networks do not air the bulk of league games, it’s surprising consumers value their content over ESPN.

4. The truth about voice search— In Q2 2017, 10.9 per cent of survey respondents used voice search functionality to find something to watch on TV. This is the highest voice search adoption rate across all survey results since the question first appeared in Q3 2015. Additionally, another 19.3 per cent of respondents want this functionality.

Of respondents using voice search, 87.4 per cent do so weekly, and weekly usage increased by 9.8 percentage points y/y. But, how are consumers using it today? After reviewing 10 months of voice search data, TiVo’s Data Science team concluded:

Nearly 92 per cent of all voice searches are for a specific title or channel.

Roughly 4 per cent of searches are conversational searches, or requests for video content personalised to the end viewer (e.g., “What’s on TV tonight?”; “When do the Yankees play again?”; “Find me comedies”).

Because just over 10 per cent of respondents use voice search, TiVo believes this may be due to lack of education, as viewers may not know they can pose more complex queries. Only when pay-TV providers integrate personalisation and intent into their voice search offerings will true personalised searches become king.

5. Premium Channels – With all the competition available today, it’s important to track yet another revenue stream for pay-TV providers: premium channels. In Q2 2017, 42.1 per cent of respondents pay for premium channels. For the 17th quarter in a row, the top three premium channels are HBO, Showtime and The Movie Channel/Network. However, several channels experienced notable long-term growth including:

• HBO, which increased 3.8 percentage points over two years, 4.6 over three years and 4.7 over four years.
• Starz, which is up 3.1 percentage points over two years and 4.4 over three years.
• Sports packages, which increased slightly both y/y and over two years, and experienced a 3.2 percentage point increase over three years, and a 4.1 percentage point increase over four years.
• The Movie Channel/Network, which increased slightly both q/q and y/y, and experienced a 3.0 percentage point increase over two years, and a 3.1 percentage point increase over three years.

6. SVoD Engagement – In Q2 2017, the largest group of respondents (45.9 per cent) spends $6-11 per month on SVoD services. While only 11 per cent of respondents using SVoD spends $25-30 each month on these services, monthly spending appears to be on the rise. The three combined categories of $25-27, $28-30 and $30+ increased 3.3 percentage  points y/y, 5.1 over two years, 7.4 over three years and 7.9 percentage points  over four years.

Of the 64.2 per cent of respondents who use SV0D services, 94.6 per cent watch on a daily basis, and more than half of SVoD subscribers (50.8 per cent) watch 1 to 3 hours of SV0D services per day. Respondents are watching more content on SVoD services and seem to be more engaged with them, based on the following four survey results:
1. Respondents watching two hours or fewer of SVOD decreased 16.3 percentage points q/q and 18.3 y/y.
2. The two combined categories of 2 to 4 hours increased 10.6 percentage points q/q, and 12.7 y/y.
3. The two combined categories of 4 to 5 hours and 5+ hours increased 6.9 percentage points q/q and 7.4 y/y.
4. Respondents who rarely or never watch SVOD services experienced slight declines both q/q and y/y.

Because Netflix is the clear leader in the SVoD industry, it’s important to understand why the service appeals so strongly to respondents. The top three most attractive Netflix features are:
1. All members of your household can create their own profile – 58.9 per cent
2. Price (the cost of Netflix plays a key role in why I use the service) – 56 per cent
3. Auto-Play of the next episode (next show comes on automatically) – 46.4 per cent

While search fell out of the top three features with a decline of 4.5 percentage points y/y, profile creation continues to gain traction among respondents with a slight increase q/q and a 3.8 percentage point y/y increase. TiVo believes pay-TV providers should focus on this recent uptick. As viewers become dependent on  the ability to create profiles, they will gravitate toward pay-TV services that offer this functionality.

While Netflix is the clear leader in the SVoD space, will Disney’s recent announcement about pulling its content from Netflix to launch a proprietary OTT service disrupt this space?  While Disney’s OTT service won’t launch until 2019, and their content will remain on Netflix until 2018, will other major content owners begin their own plans to leave Netflix and create their own competitive SVoD offerings? TiVo believes it is too early to decide the level of disruption these changes may have on the SVoD industry, but it is a trend we will monitor closely, and potentially modify the survey to account for these notable industry changes. It will be interesting to see how consumers respond to the wealth of choices becoming available in the SVoD/OTT market.

7. TVoD market share and adoption – In Q2 2017, 36.2 per centof respondents rent or purchase from TVoD services. More specifically, 36.5 per cent of respondents are cordcheaters, have pay-TV service and also use a pay-per-rental service. The top three most used TVoD services are Amazon Video, Redbox Kiosks (at retail stores) and iTunes. Vudu and YouTube Movies may not have experienced huge growth over time, but the Q2 2017 survey results mark the highest rate of adoption for these two services, across all surveys dating back to Q2 2013. Flixster also experienced the highest rate of adoption since it was added as an answer choice in Q3 2015. Despite increased adoption among individual services, growth of TVoD services as a whole remains relatively flat q/q and y/y.

In Q2 2017, 81 per cent of respondents who use TVoD services spend money on rentals each month. Those who spend money monthly on TVoD rentals increased 6.7 percentage points q/q and 8.3 percentage points y/y. More specifically, the largest group of respondents (47.8 per cent) spends $1-8 each month on TVoD services. The combined spend categories of $6-14 increased 5.8 percentage points q/q.

 

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