In Broadcast - September 2015 - 78

www.inbroadcast.com | Vol: 5 - Issue 9 | September 2015

InUSA

Despite OTT Hype,
Most U.S. Viewers Still
Enjoy Pay-TV Bundles
Michael Grotticelli, Contributing Editor, discusses viewing habits in a highly competitive
and ever changing market...

ith all of the hype in the trade
press over the past year about
over-the-top (OTT) services replacing
traditional linear TV channels, it's
sometimes revealing to look around
at your friends and colleagues and see
what they are watching. My unscientific
research shows that although many
(not all) are aware of OTT services and
take advantage of the various "cord
cutting" options now available to
consumers with the Internet connected
to their television, they none the less
are still mainly glued to their bundled
TV-Internet-phone service from the
local cable, satellite or Telco provider.
A recent study conducted in the US
by market research firm Horowitz
Research would appear to back this up.
The company's latest "Multiplatform
Content & Services" report shows
that OTT-based streaming video on
demand (or SVOD) services remain a
complement to, not a replacement for,
traditional pay TV: 40% of Internet
users have multichannel and an OTT
SVOD service, 42% have multichannel
only, 11% have an OTT SVOD service
only, and 7% have neither. Among
OTT SVOD users, 78% are also
multichannel subscribers.
The "Multiplatform Content &
Services" report is a syndicated
consumer survey that was conducted
online by Horowitz Research in May
2015 among 1,568 broadband Internet
users aged 18+.
"For many, streaming video has
become an integral part of the viewing
lifestyle," said Adriana Waterston,
Horowitz's Senior Vice President of
Insights and Strategy. "The idea of an
Internet TV service, at a lower price
point and with more customisable
options, is an attractive prospect."
However, Horowitz says new OTT
developments from traditional pay
TV distributors - DISH's Sling TV and
DirecTV's Yaveo are two examples could start changing the game.

The study also finds that
among Internet users
overall, 51% have access
to an OTT SVOD service
(i.e., Netflix, Hulu paid,
or Amazon Prime Instant
Video), rising to 75%
among "millennials," that
is, those born from the
early 1980s to the early
2000s.
In fact, Horowitz said
millennials
are
three
times as likely to have an
OTT SVOD service and no
multichannel (21% among
millennials, vs. just 7%
among 35+), and nearly
half (48%) report spending more than
50% of their viewing time streaming.
In addition, 55% of millennials who
are multichannel subscribers say that
if the price were right, they would
subscribe to an Internet TV service
instead of their current cable or
satellite service, compared to 43%
of older broadband users. This might
not be much of a surprise to the older
generation.
"For millennials, streaming is as
natural as turning on the TV set, so an
OTT service direct from a distributor
could be a natural fit," said Waterston.
"No longer tied to their physical
infrastructure, OTT offerings have the
potential to offer huge opportunity
for distributors to reach beyond their
footprint, shaking up the entire pay TV
model."
It's retaining this younger generation
that has traditional pay-TV providers
so nervous. That's why companies
like DirecTV and AT&T and Comcast
have all announced some type of OTT
service as an augment to their bundled
service. They all stand to become
solely Internet providers in the future,
but for now viewing habits dictate
that streaming is still in its infancy.
The majority of consumers still watch

Horowitz Research OTT Chart

whatever the major networks and
cable channels give them.
Comcast Cable is another example.
Despite the unveiling of their new
"Stream" OTT service in July, Comcast
officials don't expect subscribers to
be streaming lots of content for the
foreseeable future.
Speaking on the company's secondquarter earnings call, Comcast Corp.
executives said they view Stream
as mainly an "upsell" product to
lure broadband-only customers and
millennials to their broader video
offerings. They also see it as an
extension of their growing Xfinity On
Campus service, a streaming video
product targeted at college students
who increasingly are not subscribing to
the MSO's traditional pay-TV packages.
Brian Roberts, Comcast Corp.
Chairman & CEO said the cable TV
giant company is using "Stream" to
drive consumers to its broader video
experiences. He described Stream as
"part of the panoply" of new products
that the company is developing and
deploying to attract subscribers.
Resembling such other "skinny
bundle" OTT offerings as Dish
Networks' Sling TV package, Stream
offer subscribers all the major US

broadcast networks, PBS
and HBO for $15 a month
without a contract. Comcast
will bundle the service with
its broadband packages,
offering it only within
the MSO's existing cable
footprint.
Plans call for rolling it out
market by market, starting
with Boston by this fall,
followed by Chicago and
Seattle later this year and
other markets in 2016. (See
Comcast 'Stream' Joins OTT
Flood.)
As other companies with
similar offerings have stated,
Comcast executives are emphasising
that Stream will not technically be
an OTT service because it will run
over their own managed IP network,
not via public Internet connections.
But, as I mentioned at the opening,
these pay-TV providers don't expect
their respective OTT or similar
streaming services to be a major
revenue contributor any time soon.
Even Comcast's Roberts said, "It's
not something you're going to see
meaningful results from in the near
future."
So, it is with a clear eye that I
can firmly say that OTT has not yet
replaced bundled TV service and won't
any time soon. This does not imply that
broadcasters should hesitate before
considering some type of OTT offering.
Quite the contrary.
Consumers have shown their
willingness to cut the cord and have
expressed their desire to pay for
only what they watch. The highly
competitive environment we now live
in is slowly causing that to become
a reality, so sitting on the sidelines
and doing nothing is not an option to
success. But that reality is a bit off into
the future.
Ask your friends.

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