Young viewers are key segment to target for OTT

April 23, 2014 21.38 Europe/London By Robert Briel

vintage_tv-setParks Associates reports pay-TV penetration remains fairly steady at around 85% of US broadband households but OTT video use is increasing on multiple devices, particularly with younger viewers.

Nearly 40% millenials consider online video the most important source for video content, according to Parks Associates’ new report Trends in Content Licensing.

“Pay-TV subscriptions remain high among Millennials, but at the same time, nearly 40% in this age group consider online video the most important source for video content,” said Glenn Hower, research analyst, Parks Associates.

“As consumers diversify their viewing resources, the licensing process becomes more complex. Additionally, the Supreme Court case in ABC v. Aereo could drastically reshape the licensing environment for retransmission. A win by Aereo may set legal precedent for a method to rebroadcast without compensation.”

Parks Associates analysts note the cord-cutting threat hasn’t materialised for pay-TV providers because consumers found the experience was too fragmented to get the content they want. This finding underscores the important role of content in retaining subscribers.

Trends in Content Licensing also examines the impact of “original content” as key players such as Yahoo, Amazon, and Netflix develop OTT strategies to reach out directly to viewers with content options exclusive to their respective services.

“From carriage fee battles between operators and networks to uncertainty in advertising dollars for multiscreen video, the market is experiencing growing pains,” Hower said. “The new report provides Parks Associates’ recommendations for entertainment companies, networks and broadcasters, pay-TV providers, and OTT providers.”

“Netflix is probably also realising that continuing to commission original content is really expensive, and contractual increases usually accompany season renewals of episodic content,” wrote Hower on his blog, commenting on Netflix’s recent price hike.

“Netflix has no advertising for which to charge a premium, nor can it renegotiate carriage agreements like a cable networks. The only thing they can really do to offset costs is raise subscription fees.”