Major UK TV companies face the growing threat of the millennial generation’s preference for new media channels, according to research by L.E.K. Consulting, the global strategy consultancy. One of the most important challenges comes from millennials’ planned reduction in spend on pay-TV and switch to OTT services such as Amazon Prime and Netflix. Forty-five per cent of millennials pre-family and 56 per cent of millennials with children currently have a pay-TV subscription, and 45 per cent of them either have or expect to have an OTT subscription in the next year, with two thirds of those planning to cancel or reduce their pay-TV spend.
L.E.K.’s analysis, The Perennial Millennial, is the first in-depth review of UK millennials’ media consumption, covering six life stages, from living at home with parents, to flat-sharing after being a student, through to starting a family. The research shows that media consumption trends are broadly consistent throughout the life stages of the millennial generation (people aged 16-34 in 2015). Their behaviour is also viral and spreading to non-millennial families and older generations.
Martin Pilkington, Head of L.E.K.’s European Media, Entertainment and Technology practice, said: “Our research has shattered the common assumption that once millennials are older and have their own children they revert to more traditional media consumption patterns. New media companies in the TV industry are rapidly building wallet and mindshare amongst millennials and this is spreading to other generations. Our research findings are a wake-up call to the traditional media players that the change in consumption habits is coming faster and is far more pervasive than they might have thought. Many organisations will need to adapt more rapidly to this fast-emerging new competitive environment.”
Further highlights of L.E.K.’s research:
New broadcasting brands are rated far more highly by millennials than traditional industry brands. Amongst the millennial generation, brands such as Google, YouTube, Amazon and Netflix have twice the affinity rating of even the strongest traditional TV brands. Amazon stands out as the only new media brand that maintains this high affinity across both millennial and non-millennial age cohorts.
Millennials spend far less time than non-millennials consuming traditional linear and recorded TV, including pay-TV (10 hours a week versus 20 hours), although overall video consumption is similar (24 versus 27 hours per week). The consumption of traditional TV does not increase significantly for millennials with families (12 hours vs. 10 on average for the millennial cohort).
Millennials spend twice as much time as non-millennials on new media, such as online video services (11 versus 5 hours per week) and social media (7 versus 3 hours per week), even though both groups spend about the same time consuming all media (54 versus 56 hours per week). Millennials across all life stages have much higher penetration of online video subscription services: 38 per cent for millennials pre-family and 32 per cent for millennials with kids versus 15 per cent for non-millennials.
Free online video, especially YouTube, is a vital channel for millennials; nearly half of them (46 per cent) use YouTube every day versus 12 per cent of non-millennials. Again, this is the same pattern across life stages with no significant reduction for the older millennials with families.
Less than half of millennials’ video viewing is on the TV as they prefer to watch on other devices (PC, laptops, tablets and mobile) and this continues for millennials with families. It drops to 28 per cent for students and flat sharers but is still only 47 per cent for millennial families versus 74 per cent for non-millennials.
It’s not just about digital. Millennials attend live events, from music festivals to the theatre and sports games, far more frequently than non-millennials. This behaviour continues for millennials with children. In a digital world, millennials want live experiences that they can post and share on social media.
Levels of trust in advertising are similar but millennials are more open to adverts than non-millennials, provided they are targeted to their interests and needs, and they are more willing to trade their personal information for discounts, better products or more targeted offers. However, they are also more likely to avoid adverts by not watching ‘linear’ TV or by using ad-blocking software.
While there are more similarities than differences between millennials across life stages, there are some behaviours that change significantly. For example, earlier life-stage millennials (At Home with Parents and Students) spend more time consuming free online video (5 hours per week versus 3 hours per week for millennials with children). Music streaming and social media are also more important for earlier life-stages (5 and 9 hours per week respectively versus 2 and 5 for millennials with children). The importance of alternative social media platforms also differs between life stages. While Facebook use is similar between younger and older millennials, uptake of newer platforms, e.g. Instagram and Snapchat, is significantly higher for earlier life-stage segments. 34 per cent of ‘at home’ and student millennials use Instagram at least daily versus 22 per cent for millennials with children. The difference is greater for Snapchat with 33 per cent for earlier life-stages and 13 per cent for millennial families.
Pilkington adds: “This new environment will be become tougher for traditional media companies to monetise as the internet brands muscle in more and more. One response by the pay TV players has been to launch cheaper ‘slim bundles’ to attract and hold on to subscribers. However, there needs to be far further and faster innovation to develop propositions that capture the interest and behaviour patterns of the millennial generation.
“In this increasingly ‘on demand’ world, the quality of content will be more important than ever before. The race is already on; a good illustration of the new dynamic being the very high level of investment in original content by Netflix and Amazon.
“We can expect to see further entrants into the OTT market, especially to serve specialist interests, such as individual sports, ethnic markets and specific demographics such as children. And it’s likely that some ‘filler’ free-to-air and pay TV channels will disappear as people are able to see what they really want, when they want it. There is also a large untapped market opportunity for media content owners to develop live events around their brands.”