International Telecommunications Society Conference - Dr. Andy Banerjee

I N T E R N AT I O N A L T E L E C O M M U N I C AT I O N S S O C I E T Y 2 1 S T B I E N N I A L C O N F E R E N C E

T A I P E I , T A I W A N | J U N E 2 6 - 2 9 , 2 0 1 6

Aniruddha Banerjee, Ph.D. SVP- Advanced AnalyticsSSRS | Media, Pennsylvania, [email protected]

Transformation of Video & Television

Through Broadband & Changing

Consumer Preferences

@ssrs_solutions | 484-840-4300 | [email protected]

The Video Landscape

Drivers of Change

• Rise of multi-functional (smart and mobile)

devices that often come with viewing screens

• High-bandwidth Internet access (broadband)

that enables streaming (free or paid)

• Changing demographics and more tech-savvy

consumers of new smart devices

Face of this Change

• TV viewing is now more individual-centric and

less household-centric

• TV viewing can now occur at the time and location

of the viewer’s choosing

• TV is less of the “vast wasteland”; viewers can

choose exactly what they wish to watch and from

which source

The Video Landscape: Change Has Come in a Hurry

The “orderly” video landscape of yesteryear was dominated by the pay-TV model (cable, satellite, fiber)

which sold packaged services and bundles of channels, regardless of how many got viewed or how often

But, it is now history …

This monumental disruption of the video landscape needs a re-think and a new way to measure a landscape

that features multiple technologies, players, and consumer types.

© ssrs | all rights reserved

Consumer Segments Based on Video Preferences

Cord Loyalists

• Use pay-TV (cable, fiber, or satellite networks) only

Cord Couplers

• Use both pay-TV and online (Internet) access to content (often called “over-the top” or OTT)

Cord Cutters

• Once used pay-TV but now rely exclusively on OTT or free broadcast access (also called “over-the-air” or OTA)

Cord Nevers

• Never had pay-TV, rely exclusively on OTT and/or OTA

No Video Service

• Residual segment that views no TV at all


SSRS’ Total Video Landscape (TVL) is a unique and comprehensive approach to measuring the total video

market from the video consumer, rather than the service provider, standpoint.

TVL identifies and measures five mutually exclusive video consumer segments, based solely on their choices

regarding how they gain access to video content.


Two Key Developments

Then

“Live” TV evolved into “Time-shifted” TV thanks to the Digital Video Recorder (DVR) and Video on Demand (VOD)

Now

Paid OTT services offered by Subscription (Streaming) Video on Demand (SVOD) providers (Netflix, Hulu, Amazon, etc.) have taken Time-shifted TV to a new level and place

Then

Video and broadband were treated as complementary services that enabled pay-TV providers to offer them together in bundles

Now

They are legitimate substitutes, as broadband enables OTT or streaming of video content as alternative to conventional pay-TV video


Consumer Segments in Q4 2014 & Q4 2015

0

10

20

30

40

50

60

No TV atall

CordLoyalists

CordCouplers

CordCutters

CordNevers

Percent of US Households in Consumer Segments, Q4 2014 and Q4 2015

Q4 2014 Q4 2015

0

20

40

60

80

100

No Pay TV Pay TV

Percent of US Households in Pay-TV/No Pay-TV, Q4 2014 and Q4 2015

Q4 2014 Q4 2015

• Cord Couplers account for nearly half of US households in both Q4 2014 and Q4 2015

• Cord Loyalists are about a third of US households (slightly under a third in Q4 2015)

• Cord Cutters and Cord Nevers are segments of roughly equal size, with some growth between Q4 2014

and Q4 2015

• Together, Cord Cutters and Cord Nevers represent the 16% of households in Q4 2015 who use no pay-

TV at all (among those with video service in some form)

• Cord Couplers, together with Cord Cutters and Cord Nevers, represent the 65% of US households in Q4

2015 who use OTT and OTA

• Cord Loyalists and Cord Couplers together represent the 79% of US households in Q4 2015 who use

pay-TV

72 64 63 57

11 11 13 133 6 5 1011 17 17 18

3 2 1 2

Cord Loyalists Cord Couplers Cord Cutters Cord Nevers

Percent of Households in Consumer Segments, by Race/Ethnicity, Q4 2015

White

African-American

Asian-American

Hispanic

Other Races

8770 71 80

1330 29 20

Cord Loyalists Cord Couplers Cord Cutters Cord Nevers

Percent of Households in Consumer Segments, by Presence of Children, Q4 2015

No Children Under 18

Children 0-17

Consumer Segments in Q4 2015, By Race/Ethnicity & Presence of Children

• White households account for over 70% of Cord Loyalists

• In contrast, Hispanics and Asian-Americans are over-represented (relative to their population proportions)

among Cord Couplers, Cord Cutters, and Cord Nevers, reflecting their relatively stronger preference for

OTT

• Cord Loyalists (who tend to be older) and Cord Nevers (who tend to be the youngest among all

segments) have 80% or higher of households with no children under 18

• Conversely, households with children under 18 are over-represented (relative to their population

proportions) among Cord Couplers and Cord Cutters


14.3Q4 2015

Percent of US Households Downgrading Pay-TV Service in Past Six Months, Q4

2015

10.5

12.5

Q4 2015

Q4 2014

Percent of US Households Likely to Downgrade Pay-TV Service in Next Three

Months, Q4 2014 and Q4 2015

• About one in seven US households claimed in Q4 2015 to

have downgraded their pay-TV service over the past six

months

• About one in 10 US households anticipated in Q4 2015

downgrading their pay-TV service over the next three months

• Pay-TV service downgrade includes subscribing to fewer

channels, cancelling/reducing premium channels (HBO,

Showtime, etc.), dropping HD service, dropping VOD, etc.

• About one in seven US households anticipated in Q4 2015

reducing or cancelling their premium channels over the next

three months --- premium channels are now frequently

available via streaming from SVODs

14.1

19.7

Q4 2015

Q4 2014

Percent of US Households Likely to Cut/Drop Premium Pay-TV Channels in Next Three Months, Q4 2014 and Q4

2015

Cord Shaving (Service Downgrading) Has Become a Major Threat


1.1

0.9

4.5

4.4

6.1

6.7

Q4 2015

Q4 2014

Percent of US Households Likely to Cancel Pay-TV in Next Three Months with Primary Reasons, Q4 2014 and Q4 2015

Likely to cancel Pay-TV Pay-TV is too expensive Watch TV over Internet instead

• Over 6% of US households anticipated in Q4 2015 cancelling their pay-TV service altogether over the

next three months

• The leading reason given was that pay-TV service had become “too expensive” which, in the era of free

or low-cost subscription-based streaming, suggests that there may be an inclination to seek out cheaper

OTT/SVOD alternatives

• About 1% of US households explicitly indicated a switch from pay-TV to streaming of video content

Cord-Cutting Threat is Not Far Behind Cord Shaving


Building the Ideal SVOD

Building the Ideal SVOD: Content & Features

Desired SVOD Content Tested

TV shows - episodes

TV shows – full seasons

Very recent TV episodes

Full series: all episodes, all seasons

Pre-telecast TV episodes

Simple games

Low complexity games

High complexity games

Movies

Movies played in last 2 months






SVOD Features on Offer

New content added every two weeks

New content added every month

New content added every 3-4 months

E-mail alerts about new content

Educational programs for children

Content in languages besides English

Gaming/games

Social media connectivity through service

Share favorites list with family/friends

Tag content for viewing later

Construction:

• Importance of desired content measured on a 5-point scale

(1=Not at all important to 5=Extremely important)

• Willingness-to-pay for offered feature measured as a binary

(1=Willing to pay more, 0=Not willing to pay more)

• Ordered Logit Regressions of desired content on all offered

features conducted

Desirability of SVOD content measured by willingness to pay more for various features


Are Households Willing to Pay More for Recent Material?

(0.4) (0.2) 0.0 0.2 0.4 0.6 0.8 1.0



Movies played in last 2 years




Simple games



TV shows - episodes

TV shows - full seasons

Movies

Willingness-to-Pay Contribution of Recency (New Content Every 2 Weeks) to Various

Types of SVOD Content

SVOD Homes Non-SVOD Homes Broadband Homes


• Recency matters!

Households are likely to

most favor (i.e., be willing to

pay more for) SVODs that

offer very recent material (no

more than two weeks old),

whether for movies or full

seasons/series of TV shows

• While demand for SVOD-

provided games/gaming

content is strong, there is no

comparable desire to spend

more on very recent material

• Households that do not

presently subscribe to

SVODs are even more likely

to favor recent material than

households that presently

subscribe to SVODs

Test alternative

hypotheses and

counterfactuals

Conduct model

validation:

goodness-of-fit,

replicability,

robustness

• Subscribing to leading SVODs like Netflix and Hulu enhances the importance and desirability of specific

content like movies and TV shows

• Netflix subscribers attach higher importance to movies, while Hulu subscribers do so to TV shows

• SVOD subscribers that desire both movies and TV shows often subscribe to both Netflix and Hulu (use

of multiple SVODs contrasts with the usual choice of single pay-TV provider)

Does Simply Subscribing to SVODs Increase Desirability of SVOD Content?


0.0 0.1 0.2 0.3 0.4 0.5 0.6



Movies played in last 2 years




TV shows - episodes

TV shows - full seasons

Movies

Contribution of Subscription to Leading SVODsto Various Types of SVOD Content, SVOD Homes Only

Hulu

Netflix

Test alternative

hypotheses and

counterfactuals

Are Households Willing to Pay More for Certain SVOD Features?


• Strong willingness to pay more for features like educational content designed for children and games/

gaming content

• Households without experience of SVOD content are inclined to pay even more for SVOD features than

households actually subscribing to SVODs

6

11

10

11

18

22

32

21

24

26

26

31

41

48

Programming in other languages

Direct connection to social media sites

Sharing favorites list with family/friends

Email alerts about new programs

Tag a show as "Wait and Watch"

Games/gaming

Educational programming for kids

Percent Willing to Pay More for Some SVOD Features, By SVOD and Non-SVOD Homes

Non-SVOD Homes SVOD Homes

14

25

29

26

43

53

New content every 3-4 months

New content every month

New content every 2 weeks

Percent Willing to Pay More for Some SVOD Features, By SVOD and Non-SVOD Homes


Are Households Willing to Pay More for Certain SVOD Features?


• Strong willingness to pay more for the most recent new content

• Households without experience of SVOD content are inclined to pay even more for SVOD features than

households actually subscribing to SVODs


Do Non-SVOD Households Attach More Importance to SVOD Features?

• Non-SVOD households uniformly attach greater importance than SVOD subscribers to various types of

SVOD content

• This indicates general readiness or willingness of non-SVOD households to supplement, or substitute

for, pay-TV service with SVOD content

25

51

49

12

13

13

54

52

58

48

68

78

28

30

33

74

78

80

Episodes shown pre-TV…

Recent TV episodes

Full series (all…

Simple games



TV Shows - episodes

TV Shows - full seasons

Movies

Percent Responding Highly Important to Have Specific Types of SVOD Content,

By SVOD and Non-SVOD Homes


33

35

38

42

43

45

58

61

65

65

66

66

Movies shown in theaters,past 24 months






Percent Responding Highly Important to Have Specific Types of SVOD Content,

By SVOD and Non-SVOD Homes


Building the Ideal SVOD: Findings & Implications

1Recency matters: availability of new content every two weeks or every month increases the

desirability of most types of SVOD content tested (exception is gaming-related content)

2Gaming is the second-most important factor associated with higher desirability of most types of

content

3 Desirability of games rises as complexity goes from simple to high

4 Ability to tag content to watch at a later time drives up the desirability of TV shows and movies

5For Parents with SVOD, the ability to “share favorites” increases the desirability of gaming-related

content

6For Parents with SVOD, the ability to connect to social media directly increases the desirability of

gaming-related content

7Program alerts via e-mail, children’s educational programming, or programming in other

languages do not appear to significantly influence the desirability of various types of SVOD

content


Demand for “Kids & Family”

SVOD


Value and Content are Main Drivers of SVOD Demand

• SVOD is seen as viable alternative to pay-TV if it is

− Affordable and good value

− Source of desired content (without excessive choice)

• A “Kids and Family” SVOD has broad-based appeal for both SVOD subscribers and non-subscribers among parents

− SVOD non-subscribing parents (green bars) care most about value and children’s well-being as viewers

− SVOD subscribing parents (pink bars) care most about content (type, quality, variety, ease of access)

8.6

7.4

7.4

6.9

6.6

5.8

5.3

5.0

4.8

3.8

Used and liked friend's account

Children wanted me to subscribe

New type of service

Content for mobile devices

Complements current streaming

Unique new features

All content in one place

Easy to find content

Best price among services

Good value for the money

Top Reasons for Subscribing to Any SVOD (Mean Weighted Rank)

4.0

4.3

4.3

4.3

4.3

4.4

4.5

4.5

Complements current streaming

Lots of content

Content kids prefer

Easy to find content

Good variety of content

High quality content

Kid-friendly and safe content

Good value for money

Top Reasons for Subscribing to “Kids and Family” SVOD (Mean

Weighted Score)

38

36

26

Broadband Homes

28

43

29

Parents w/o SVOD


Likelihood of Subscribing to a “Kids and Family” SVOD

11

3158

Non-Parents w/o SVOD

Leaning Yes

On the Fence

Leaning No

17

34

50

Non-Parents w/ SVOD

48

35

18

Parents w/ SVOD

• More than one-third of broadband homes

are likely to subscribe to an SVOD with

“Kids and Family” content

• Parents with SVOD service already are

most likely to subscribe, while non-

parents without SVOD are least likely


Likelihood of Cord Shaving/Cutting Among Likely Subscribers to a “Kids and Family” SVOD

No Change

Cord Shaving

Cord Cutting

• Almost half of broadband homes are

likely to cut/shave pay-TV in order to

subscribe to “Kids and Family” SVOD

• Parents without SVOD service are most

likely to cut/shave pay-TV in order to

subscribe to “Kids and Family” SVOD

48

42

10

Broadband Home

39

42

19

Non-Parents w/o SVOD

43

57

Non-Parents w/SVOD

32

56

12

Parents w/o SVOD

5238

10

Parents w/SVOD

Conclusions

Video Landscape Transformation: From Pay-TV to SVOD

1Broadband and smart/mobile devices, and changing demographics, have permanently disrupted

the video landscape which persisted for several decades

2In the new video landscape, TV viewing is increasingly personal (what, how, when, and where to

view)

3While pay-TV is not in danger of disappearing, it is suffering from a “thousand cuts” (openly from

cord cutting and more subtly from cord shaving)

4OTT (and SVOD, in particular) enables more targeted viewing of content and supports a more

interactive experience than pay-TV (games, social media, user-generated content)

5Pay-TV providers are taking defensive action by co-opting video streaming (TV Everywhere

programs in US) or launching their own niche SVODs

6The move to “skinny bundles” by pay-TV providers may be appropriate response to viewers

unhappy with traditional pay-TV bundles, but it is disrupting their business models

7The evolving video landscape will be governed by (1) easy connectivity, (2) mobility, (3)

personalization, (4) choice, and (5) lower costs to view


@ssrs_solutions | 484-840-4300 | [email protected]

Aniruddha Banerjee, Ph.D. SVP- Advanced AnalyticsSSRS | Media, Pennsylvania, [email protected]

Data & Analytics

International Telecommunications Society Conference - Dr. Andy Banerjee