As an industry we talk a lot about how subscribers simply enjoy watching the content they love, and that it doesn’t matter to them where they get it from. People just want to watch their favourite shows, in the way that they most enjoy.
For an operator, of course, it does matter how people watch their content. The mix of viewing between live, PVR, VoD and OTT, and how that evolves, is illuminating. It provides them with insight around:
At Deductive, we work with operators all over the world, in different market positions and with very different service propositions. This gives us a unique vantage point to better understand how viewing might evolve from a live to a multi-modal model, and how those dynamics might differ around the world. It goes without saying that there are big differences in different markets. As the below chart shows, across four of our customers, the mix is very different. The one commonality is that live viewing still dominates, but the extent to which it does, and the nuances behind why, vary.
So what else have we learned?
There is a definite PVR ceiling
Data we have seen across our customers supports a theory that there is a ceiling for PVR usage of around 20% of total viewing across most operators. This is a very different outcome from some of the more outlandish predictions made about DVRs when they began to gain traction fifteen years ago. A future of subscribers recording everything – and skipping all the ads – has not come to pass.
Why do we think this is the case?
The PVR is a piece of durable technology that simply works. Within some of our customers, there is a much greater preference for viewing on PVR than there is to use VoD, despite considerable effort marketing the latter, and despite the fact it is in some ways more convenient than VoD But it hasn’t broken beyond the 20% barrier. We think this is down to a combination of new viewing methods and the on-going durability of live TV. TV is a passive medium, and in many cases, viewers simply don’t want to have to chose what to watch.
VoD is Title Driven, OTT is Context-Driven
As a rule of thumb, VoD tends to be title-driven. Even though overall VoD viewing may not take up much of the mix, some big titles – series, aimed at younger viewers, take a much bigger share, as the below data from Comcast shows We see a different story with OTT. Take the data below from one of our customers, Astro. It shows that viewing of its AOTG OTT service is split widely between genres. Genres like news and live events feature heavily and there is much less of a bias towards movies and big shows. Big series and movies take up only around a third of consumption.
The evidence to date indicates that viewers are using VoD to find shows that they know they want to watch, but that OTT is being used to replace “core” viewing – albeit in low numbers, for now. And there’s lots of live viewing on OTT, too – the consumer appeal of being able to never miss a key moment – sports, breaking news, reality show, is clear. For this reason, we think the way questions of the future of live TV is posed – “will new forms of viewing destroy live TV”, and so on, are the wrong.
The more interesting question is not whether live TV will be replaced, but rather where, how and from whom viewers will get their live fix.
OTT in emerging markets will be very different
There’s an established narrative about how multiscreen services that are tethered to Pay TV services (think Sky Go, Comcast X1, and so on) will benefit operators. They tend to be pitched at higher APRU customers, particularly sports viewers, as loyalty plays. This isn’t really playing out in emerging markets. We see it very clearly in the first figure in this piece for Customer 2, where OTT viewing is much higher than VoD viewing.
We’ve seen operators like Sky, again, try and target the “cord cutting” market with services like Now TV, with the assumption that top-tier customers will continue to use premium set-top box-features like Sky Q.
But we’re starting to see premium customers in emerging markets embracing OTT, often instead of using set-top box-based services. Why? It’s a combination of lower broadband penetration, the cost of providing set-top boxes in lower markets, and the fact that many of the markets the provider works in really are “mobile first” markets in a way that Western markets are not. The debate about when operators move towards a set-top box-less future continues to rage, but we may see this happen in emerging markets first.
Limited Netflix Impact…Yet
For better or worse, lots of what the TV industry does is driven by what OTT providers, principally Netflix, have done. Across our customer base, we’ve seen, perhaps surprisingly, limited evidence of a correlation between the popularity of OTT services in their markets, and a shift in consumption.The global launch of Netflix has not dramatically shifted the consumption mix for most of our customers.
It’s early days, of course. But it’s worth pointing out that there is divergence in what different customers want even in advanced OTT markets. Not all segments are interested in either the content Netflix et al offers – or even OTT in general. So it is perfectly feasible that a market where Netflix is particularly popular may not impact viewing on a competitor platform, if the two are targeting different audience segments with different offers.
There’s also the issue that in many of our markets, the OTT market is being driven by our customers’ markets, and not stand-alone OTT providers. There is a misconception that operators are simply jumping into OTT because of Netflix that does not always apply, particularly in developing markets.
What this all means
Understanding how subscribers are moving between viewing methods, and how that split evolves over time, is one thing – understanding how to profit from it is another. Operators need to have a holistic view of how their subscribers consume content across different viewing methods, how to maximise consumption and engagement across them, and understand how competitive pressures will impact the viewing mix.