Netflix gnaws away at pay-TV, Premium Channel VOD revenues

Editor ©RapidTVNews | 21-06-2012

Research shows that there is no huge move to cord-cutting thanks to over-the-top services; however, lower costs and better availability of content from OTT leader is eating into pay-TV providers’ VOD revenues.
The increasing influences of OTT in the decision processes of pay-TV consumers, says the Choosing Content: Viewing Video report from Parks Associates, raises the possibility of Watch Instantly cannibalising pay-TV offerings. The analyst found that when watching films on VOD that 16% of US broadband consumers considered using an online subscription service as an alternative and 17% of those watching TV programs on a permium channel like HBO consider using Netflix instead.
According to Parks, Netflix Watch Instantly rates higher in customer satisfaction than premium broadcast TV because of such factors while Netflix also topped pay-TV VOD in terms of cost. This dynamics was spelled out clearly by Brett Sappington, Director, Research, Parks Associates: “Consumers can pay for a month of Netflix for about the same amount as for two pay-TV VOD movies…Parks Associates research shows consumers know the quality of the OTT service is not comparable to pay-TV quality, but the cost-benefit comparison is enough to affect their purchase decisions.”

As a defence strategy to combat independent services such as Netflix, notes Parks, pay-TV providers adopted their own OTT services, but adds that consumer awareness is low and few providers offer subscription OTT services. "Netflix is competitive against VOD and premium channels because it has a decisive edge in cost,” added John Barrett, Director, Consumer Analytics, Parks Associates, offering insight and direction for the pay-TV industry.
“Its greatest weakness is picture quality, but there are times when the consumer will sacrifice quality for other considerations. Pay-TV providers should emphasise their inherent advantages in content and picture quality but also need to develop alternative services that counter Netflix's advantages in cost and flexibility.”