Nielsen Report Highlights Pay-TV Dilemma
Research company The Nielsen Co. just released its Total Audience Report for the first quarter of 2017. According to the report, live TV viewing continues to decline among US viewers while all other forms of video consumption are growing.
Daily time spent viewing live TV dropped ten minutes from four hours and 31 minutes in Q1 2016 to four hours and 21 minutes in Q1 2017, more than double the decline in the previous year. Live TV viewing data isn't available by generation, but Nielsen does provide live plus DVR/time-shifted viewing data split out that way. And, as you would imagine, time spent viewing live and time-shifted TV is down six minutes year-over-year for Gen Z, and 12 minutes for millennials. But what is perhaps more interesting is that the same declines are seen even among older segments: Live plus time-shifted viewing is down seven minutes for Gen X and five minutes for Baby Boomers.
Similarly, weekly time spent viewing live TV and DVR dropped an hour and nine minutes compared with Q1 2016. Here we can strip out the time-shifted viewing, and the difference is even greater. Live TV viewing per week dropped from 28 hours and 25 minutes in Q1 2016 to 27 hours and eight minutes this year.
Weekly video viewing on all other platforms increased, up eight minutes on DVRs, 24 minutes on PCs and the same on smartphones. Even usage of multimedia devices (not necessarily for video only) grew 44 minutes.
Pay-TV subscriber numbers also declined, down to 97.8 million from 99.2 million in Q1 2016, while homes subscribing to a VoD service rose from 50% to 57%.
Clearly OTT, on-demand consumption is growing among US viewers. So why is this a dilemma for pay-TV providers? Because, despite these declines, live TV continues to account for close to 80% of time spent consuming video per week (based on our calculations using Nielsen's data). If we include DVR and network DVR-based viewing, that goes up to 90%.
Add to that the number of users per medium (monthly reach), and you start to see why live TV has an even greater advantage, particularly for big budget advertisers. Live TV reaches 292.5 million users per month, or 94% of the US population. Other technologies are also well established, but trail live TV substantially: According to Nielsen analysis, 204.7 million use DVRs; 168.8 million view video on smartphones; and 116.8 million view video on PCs every month. That is why a company like Comcast Corp. (Nasdaq: CMCSA, CMCSK) has been wary of moving too quickly into the OTT space. (See Is Comcast Right to Reject OTT? and Are Reports of Pay-TV's Death Greatly Exaggerated?)
Even though the growth is all coming from new distribution platforms and technologies, the vast majority of viewing time is tied to more "traditional" TV viewing behaviors. In addition, those are also the behaviors that have the best-defined business models, revenue streams and established ecosystems and industry structures with regard to advertising and licensing.
You could argue that live TV is dying, but it's doing so slowly. And a lot of subscriber revenue is going to flow to providers before it dies. That is the challenge for pay-TV providers: move too fast and you lose out on the existing revenue, but move too slowly, and, as viewership shifts, you get squeezed out of the future video value-chain. As with any established business, pay-TV providers have far more to lose than young OTT startups, which can cheerfully bet on revolutionary changes because they have nothing to lose. For those large pay-TV providers, finding that perfect balance between innovation and caution is going to be the key to their success.
— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation