There’s a lot of jargon used to describe what’s happening in the constantly evolving television services market. The latest research from Ampere Analysis, of 53,000 internet users across Europe and North America, shows that, far from deserting their Pay TV operators through cord-cutting, viewers are building their own TV bundles from all the options available. In this scenario, content is the deciding factor. But, warns Ampere Analysis, while “doubling-up” – i.e. the combining of services from Pay TV, VoD and SVoD – may be the current trend, now is not the time for operators – especially Pay TV players – to be complacent.
Build-your-own TV bundle
Ampere Analysis’s research suggests that consumers are increasingly bringing together services from different providers to build their own perfect TV offer. Our survey of 53,000 internet users across Europe and North America over the past 18 months also reveals a dramatic increase in the proportion of consumers combining traditional Pay TV services with subscription OTT options. At the end of Q1 2017, 40% of respondents had built a custom TV bundle, up from 24% in mid-2015.
At the same time, Ampere Analysis’s latest consumer research shows the proportion of consumers taking Pay TV alone across the surveyed markets has declined from 49% of internet users in Q3 2015 to just 30% at the start of 2017.
Mass cord-cutting is yet to materialize
The number of homes with on-demand services as their sole subscription television platform has increased in line with the growth in custom SVoD/Pay TV combinations. At the beginning of 2017 it stood at 13%, up from 5% of internet users in 2015. Many of these homes are supplementing a basic free terrestrial TV offer with SVoD. Some are replacing broadcast TV entirely.
Despite the explosion in television viewing options, the proportion of homes taking just Pay TV, or it in combination with an SVoD service, has remained roughly stable at approximately 70% of respondents during the same timeframe.
Richard Broughton, Research Director at Ampere Analysis, says: “The often-predicted mass cord-cutting from Pay TV, driven by the growth of SVoD, has yet to arrive. But let’s not get complacent. There are warning signs. Our research has found that consumers who are doubling-up on their TV services, combining their Pay TV service with one or more SVoD services, are twice as likely to be strongly considering leaving their main TV provider in the next six months. Pay TV operators must match the ‘watch everywhere’ features of SVoD, and continue to invest in exclusive content if they are to avoid being left behind by more flexible competitors.”
The rise in doubling-up – and consumer spend
The average consumer is spending more than ever before on television services, and the amount keeps growing. In North America, the average spend on subscription television for 12 months in 2016 was $311 (on SVoD services such as Netflix, Amazon and Hulu, and cable and satellite TV services such as Comcast and DirecTV). This represents an increase of $30 per person per year from five years ago. Similarly, in Western Europe (where subscription spend is a little lower due to the strength of public broadcasters like the BBC), the average consumer spends $95 per year on subscription television after sales tax – up from $78 five years ago. This trend for doubling-up is not simply restricted to Pay TV and subscription VoD combinations. Households with access to subscription on-demand in Europe and North America are now typically taking between two and three SVoD services each.
Netflix and Amazon have been the catalysts, accounting for more than half of SVoD contracts across the markets surveyed by Ampere Analysis. In the core Amazon Prime territories of the US, Germany and the UK, two thirds of Amazon Prime Video users subscribe to Netflix. However, market-specific services are also crucial to this trend. In the UK, for instance, nearly three quarters of Now TV subscribers take Netflix. Four in five Hulu subscribers in the US take Netflix, and two thirds have Amazon Prime Video.
The reasons for consumers doubling-up their television services are clear. Exclusivity means that SVoD catalogues rarely overlap. In the US and Germany, just 6% of the titles available on SVoD services are shared across services. 94% of titles are exclusive to a single service. Richard Broughton, Research Director at Ampere Analysis, explains: “We estimate that subscription TV services have generated $18bn of entirely new revenue over the last two years across the globe. Almost half (45%) of this new revenue was driven by SVoD services, the remainder by traditional cable and satellite companies. While a degree of cannibalisation of subscription TV services is undoubtedly occurring as some consumers decide to cut the Pay TV cord, the general trend is for more, not less, access to television services. That suggests broadly positive outcomes for content owners and distributors, who can expect greater levels of spending on good quality television content.”
About Ampere Analysis
Founded in January 2015, Ampere Analysis is a new breed of media analyst firm. The company’s experienced team of sector-leading industry analysts specialises in pay and multiscreen TV, communications and next generation content distribution. Our founders have more than 40 years’ combined experience of providing data, forecasts and consulting to the major film studios, telecoms and pay TV operators, technology companies, TV channel groups and investment banks. www.ampereanalysis.com
