[itvt] Column: The iTV Doctor Is In! Who Are the New TV Consumers?

Dear Readers:  

In 1974 I was working as a rookie marketing manager in one of Monty Rifkin's ATC systems--All American Cablevision in Columbus, Ohio. I had the brainstorm of matching rudimentary census tract information to subscriber accounts by using the unused "check digit" at the end of the account number. Cable Data (remember them?) added that number randomly, but ATC wasn't using it. So, with only a half-dozen census tracts in our portion of Columbus, we could use it.

Turns out it was an interesting experiment that told us little. And at the time we didn't have the marketing sophistication to do anything with it anyway.

That's certainly not the case now. We have a wealth of direct marketing tools that can be personalized down to the individual consumer level. Turns out that's the easy part.

The hard part is figuring out who these consumers are, what motivates them, and how to anticipate and meet their entertainment needs.

So for answers I turned to my friend Howard Horowitz, a Cable Pioneer (Class of 2012) and President of Horowitz Associates. Howard has been at the forefront of identifying and anticipating cable consumer tastes, habits, needs, wants, expectations and usage patterns, especially with regard to media, new media and technology. Howard consults with clients at virtually every major network/programmer and multichannel/telecommunications provider (MVPD), as well as countless other industry-related clients and start-ups. He is considered an expert researcher of record.

iTV Doctor: Howard, thanks for joining us today. We've got a problem. The already fragmented subscription television audience is, to be blunt, going to hell in a handbasket. The old rules simply don't apply, and I'm not sure we have a new paradigm that can handle the marketplace as it is evolving. How did we get here?

Howard: Rick, it's interesting that you go back 40 years to the time when a not-yet-fragmented viewing audience was predicted to be going to hell in a handbasket with the advent of a new, disruptive technology called cable television. The media world is changing and I know we are going to prognosticate together about the future, but to start, here is the reality of where we are and how we got here.

Our most recent Multiplatform Content & Services report shows that 40% of Internet users have multichannel and an OTT SVOD service, 42% have multichannel only, 11% have an OTT SVOD service only, and 7% have neither. Among OTT SVOD users, 78% are also multichannel subscribers. Bottom-line is that, in line with the history of media, new technology that provides better, more convenient access to the media we all love is cumulative and expansive, a type of disruption that does not diminish, that actually grows the business.  

Don't get me wrong, this optimistic view is intended to turn challenge into opportunity, not to encourage complacency. Let's get to the source of our fear and the new opportunity--Millennials, the new version of "barbarians at the gate," raised in the freedom, anarchy and unleashed creativity of the digital and Internet worlds. They know no other. Back 40 years ago, we asked the question, who will pay for television when television is free?--both the challenge and the opportunity. What's old is new again and we now ask any number of variations on this question, "Who will pay for television, when the Internet is fill-in-the-blank. We are working hard with our clients to figure out who these consumers are, what motivates them, and how to anticipate and meet their current and future entertainment needs.


Caption for the graphic: Among Millennials, 75% have access to an OTT SVOD service. Millennials are three times as likely to have an OTT SVOD service and no multichannel (21% among Millennials, vs. just 7% among 35+) and nearly half (48%) report spending more than 50% of their viewing time streaming.

iTV Doctor: That study is very timely. What else can you share?

Howard: Here are some key findings:

  • The latest research from Horowitz Research's Multiplatform Content & Services report shows that over-the-top streaming video-on-demand (OTT SVOD) services remain a complement to, not a replacement for, traditional pay TV: 40% of Internet users have multichannel and an OTT SVOD service, 42% have multichannel only, 11% have an OTT SVOD service only, and 7% have neither.
  • Among Internet users overall, 51% have access to an OTT SVOD service (i.e. Netflix, Hulu paid, or Amazon Prime Instant Video), rising to 75% among Millennials. In fact, Millennials are three times as likely to have an OTT SVOD service and no multichannel (21% among Millennials, vs. just 7% among 35+) and nearly half (48%) report spending more than 50% of their viewing time streaming.
  • 86% of Millennial Internet users are OTT viewers (spend at least some of their TV viewing time with OTT), compared to 64% of 35-49 and 41% of 50+.
  • Fifty-two percent (52%) of Millennials who are multichannel subscribers say that watching TV and video content over the Internet is as easy as watching TV from a cable or satellite service, compared to 44% of 35+.
  • Fifty-five percent (55%) of Millennials who are multichanne subscriberssay that if the price were right, they would subscribe to an Internet TV service instead of their current cable or satellite service, compared to 43% of 35+.
  • [Doctor's Note: For more information about, or to purchase, Multiplatform Content & Services, please visit http://www.horowitzresearch.com/services/studies/multiplatform-content-s... or contact Sue Panzer at suep@horowitzresearch.com]

iTV Doctor: OK--I sorta get that. You told us how we got here. Can you tell us where "here" is? How do we categorize the consumers into useful bits? With dozens of (soon to be over a hundred) OTT subscription services available, the consumers will be switching services like crazy. For example, I don't think we can assume all Netflix subscribers are the same. And the other services they subscribe to along with Netflix probably won't define them any better. Help us Obi Wan: You're our only hope.

Howard: We are doing a lot of research in this area and here is where I think we are at. Netflix: its development and impact is emblematic of the current market dynamics. Digital and mobile technology enabled short-form video creation and access. Fast-forward (not to be punny) to Netflix making the bold move to deliver the library of big name movie and TV content, opening another, monetized content window for the best of branded TV and movie content of old. The space is now open for Hulu and the latest skinny bundle channel packages of live, sports and event television, leaving the major content providers to ponder their loyalty to and revenue from the major multichannel providers and at the same time to ponder their compulsion to keep pace with their audience, wherever their eyes may be wandering.

In fact, with the advent of Sling, Vue, Yaveo and the like bringing live TV to world of Netflix, we are finding substantial interest on the part of young people in gaining legitimate access to the most current premier and live-event sports content in a convenient affordable--repeat affordable--way. While we do need to be concerned about the attractiveness of these services to the older, traditional, full-boat multichannel subscriber, we may find these services and this type of access brings stability (in terms of audience and revenue) to the currently fragmented, chaotic unmeasured and un-monetized world of OTT viewing.

iTV Doctor: As fast as the industry is moving, in terms of new subscription products launching every day, by the time our readers see this, that information will have changed again. Can you give us a picture of what the landscape will look like in 12 months? 24 months?

Howard: Wow! 12 months and 24 months are short time frames to be making predictions, even in a world of rapid change. I think start-up, Internet-delivered, live television services will continue to proliferate. Difficult licensing arrangements will be overcome in the interest of audience and revenue. The major distributors will re-negotiate their content contracts and licensing to deliver cloud-based services. Aside from licensing issues, the bandwidth and reliability of Internet looms as a giant issue in the ability to deliver user-friendly, consumer-ready alternative services. So there are lots of structural, industry issues, aside from consumer ones, that make short-time frame predictions difficult.  

iTV Doctor: Thanks to you we know where we are, and we know where we're going. Now what do we do about it? Can marketers effectively and inexpensively target consumers with their subscription video offerings?

Howard: Here again, I think the answer is a resounding yes. Developments in the "data sphere," coming a long way from your own pioneering--and even then mysterious, and magical--work with digits and census data, make segmentation, narrowcasting and the means to deliver it both possible and promising. The fragmented needs, nuances and characteristics of our audiences and viewers will actually be the tools deployed to keep people in tune to the best, branded, high-quality content, while at the same time enabling more narrowcast content to thrive alongside. To everyone the best of content that large audiences (aka everyone) enjoys, and to everyone special, personalized content for them.

iTV Doctor: Over the years we created a promotional marketing monster that has encouraged the premium television (HBO, Showtime and Starz) churn model, where about half of any service's subscribers disconnect every year in order to take a competitor's promotional offer. And then they come back later. Is that the prognosis for all the subscription video services now?

Howard: As I said, I think there will be more stability than that. And I would characterize things differently. Back then, the advent of addressability enabled what you call churn-inducing marketing. I say bring it on. Addressability enabled the cable and satellite business as we know it by allowing everyone more affordable and convenient ways to access and sample what we are selling. I think history does repeat itself, with IP, the new addressability that opens up new and yes different ways to grow the business, increase audiences and generate new revenue. We can even see in all these developments more equitable access to people of any means to be able to enjoy our information, communication and entertainment services.

iTV Doctor: We surmised about a year ago that HBO's apparent "permissive" approach to credential-sharing for their TVE service, "HBO Go," was a pretty terrific way to pre-market their new (and very successful) OTT service "HBO Now." Available research suggests that 20% of OTT users either use somebody else's credentials, and/or allow theirs to be shared. (Personally I think that number is VERY low--I would estimate that over 50% of OTT users fall into that pattern). Forgetting for a moment the lost revenue from this activity, can we turn that behavior into a positive marketing force? Can we convert "free samples" into subscriptions?

Howard: First, I have to say that both HBO Go and HBO Now are popular among the OTT crowd, including Millennials. The behavior you mention is already a very positive marketing force. The issue I think you are really after is whether such largess, enabling shared accounts, should be reined in to increase sales and revenue. At this point, competition favors the consumer over increased sales. Shared accounts is probably a secret sauce to Netflix's success and I think they encourage it. Competitors like HBO and others probably need to match the strategy for now. I think it is a really good place holder for HBO among Millennials as they stay with the brand and carry it into their next life stages.

iTV Doctor: Tracy Swedlow has just announced that TVOT NYC is coming back to the SVA Theatre (333 W. 23rd St.) on December 3. Will we see you there?

Howard: You just put it on my calendar. See you there! Great work!!

The iTV Doctor is Rick Howe, who provides interactive video consulting services to programmers, advertisers and technology providers. He is the recipient of a CTAM Tami Award for retention marketing and this year was inducted into The Cable Pioneers. He is also the co-author of a patent for the use of multiscreen mosaics in EPG's. Endorsed by top cable and satellite distributors, "Dr" Howe still makes house calls, and the first visit is always free. His services include product development, distribution strategy and the development of low-cost interactive applications for rapid deployment across all platforms.


Have a question for the iTV Doctor? Email him at TheiTVDoctor@gmail.com

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