Advanced Television

SVoD services not eroding Pay-TV

October 17, 2013

Breaking-BadMediaBug – Decipher’s bi-annual media consumption tracker – have tracked a sharp rise in subscriptions to SVoD services such as Netflix and Lovefilm this year, but reveal that this is not having a significant effect on ‘cord cutting and cord shaving’ amongst Pay-TV homes, with many consumers opting for both.

Mediabug Wave 3 shows that while subscriptions to SVoD services are on the rise, only 5 per cent of homes have cancelled or reduced their Pay-TV subscription as a result of an SVoD subscription – well below the average CHURN rate – and only 6 per cent of SVoD subscribers are thinking of doing so in the future.

Netflix has courted subscribers aggressively this year with original content releases such as House of Cards, Arrested Development Season 4, and most recently the second half of Breaking Bad Season 5. Mediabug reports that they are currently the dominant SVoD service in the UK by subscriber base, however their attractive, free 30 day trial makes up a substantial proportion of their base at 39 per cent, higher than their main competitor Lovefilm at 29 per cent. With TV operators rolling out their own bundled Online VOD service to their customers – such as Sky’s ‘Sky Go’ service – the evidence is not there of an impending exodus from Pay-TV.

Director of Decipher Media Research Hamish McPharlin said: ‘These findings indicate that UK audiences don’t necessarily opt for the ‘either or’ approach to accessing their favourite content, and many choose to invest in a range of services and devices to get what they want. The recent announcement from Virgin Media that they intend to support Netflix on their TV service is a great example of the industry acknowledging this symbiotic dynamic’.

Key Findings include
– Usage of the Sky’s set top box service Sky On Demand continues to rise, driven by Catch Up: 43 per cent of Sky homes used Sky On Demand in September, up from 35 per cent in Feb 2013. At the current rate of growth it could be regularly used by 2 thirds of its base within 2 years; putting in on par with Virgin Media.

– Netflix is now the ‘biggest’ SVoD service online in UK: Now 1 in 10 internet users have a Netflix subscription, which makes Netflix the biggest SVoD service by subscriber base. However, only 60 per cent are paid subscribers, compared to Lovefilm’s 71 per cent. Netflix has aggressively released original content this year – with House of Cards, Arrested Development Season 4, and Breaking Bad Season 5 – but their free trial offer means not every viewer attracted by original content remains as a paid subscriber.

– mOnline SVoD services are not eroding Pay TV subscriptions significantly : Only 5 per cent of broadband enabled homes have reduced or cancelled their Pay TV subscription in favour of an SVoD subscription – well below the standard CHURN rate – and only 6 per cent of SVoD subscribers are thinking of doing so in the future.

– Online Catch Up did not grow its audience this year: Online VoD services such as BBC iPlayer and ITV Player have enjoyed a relentless increase in penetration for many years, however Mediabug data shows that the overall audience size for Online VoD did not grow this year, with audience size staying steady since February 2013.

– Digital download services are struggling to grow regular purchase behaviour:
Around 13 per cent of buyers of TV shows and films on iTunes purchased in the last month; a slow growth from 10.6 per cent year on year. Smaller services such a Blinkbox, Playstation Store, and Google Play show a similar growth pattern, with evidence that growth in regular consumption is not keeping pace with ownership of enabled devices, such as smartphones and tablets.

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