US consumers supplementing, not replacing, pay-TV with OTT

Michelle Clancy ©RapidTVNews | 10-11-2011

US consumers may not be completely cutting the cord, but they are certainly supplementing their pay-TV offerings with Netflix and other video streaming services like Hulu and YouTube, new research has revealed.
The NPD Group has found that among all U.S. subscribers to traditional television services (i.e., cable TV, satellite TV, or IPTV), 27% also subscribe to Netflix. However, three out of four (73%) consumers who either use Netflix, stream video for free, or who pay for Internet-video downloads and rentals also have a cable, satellite, or IPTV subscription.
“Most movie and TV viewers who use OTT options also subscribe to cable TV, satellite TV, or IPTV services, where VOD and premium channels represent high margin add-ons,” said Russ Crupnick, senior vice president and entertainment analyst for The NPD Group. “These services provide operators with an opportunity to bond with their customers and gain more revenue per user. If the programming and user experience aren’t on par with digital alternatives, operators could find themselves increasingly sharing their customers with Netflix or other OTT services, like Apple TV and Roku.”
Overall, 10% of TV subscribers streamed movies for free, and the same percentage streamed TV programs for free; the television networks themselves are the most popular sources for free online TV viewing. With a mean age of 37, OTT video viewers are five years younger than the average cable TV viewer; this group also includes more students who may be viewing on small screens in their bedrooms and dorm rooms.
“With all the various methods consumers now have to download video, TV-service providers would be in a better competitive position if they could expand their content offerings and improve on-screen search functionality,” Crupnick suggested.
Consumers are supplementing basic linear broadcast with other things. Almost half (46%) also pay for a premium movie channel or sports channel, and VOD is proving popular. Nearly a quarter of TV subscribers (24%) watch movies via both paid and free VOD from their providers. Comcast led other companies in the percentage of their subscribers who use VOD (41%), followed by Verizon (38%), and Time-Warner Cable (20%).
“Even though many consumers are paying for more content from their TV-service providers in the form of premium channels and video-on-demand, there's still quite a lot of alternative video downloading and streaming activity going on,” said Crupnick. “There may also be too much emphasis on so-called ‘cord cutters’ who represent a small group, as opposed to potential ‘cord throttlers,’ who are a massive segment of the subscribing population.”