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Data doesn’t show SVOD augments pay TV, not replaces

SVOD ownership cable versus non-cable consumers

Limelight claims that its data shows SVOD is supplementing pay TV, not replacing it. However, the data doesn’t show this at all. Moreover, though SVOD may not be a direct cause of cord-cutting, it is almost certainly an enabler.

Limelight says SVOD supplements pay TV

Limelight’s 2018 Video Trends Report looked at SVOD usage among consumers who watch one hour or more of online video per week (from both free and paid video services.) It found in each of the ten countries studied that SVOD ownership among cable subscribers was higher than non-subscribers.* For example, in the U.S. Limelight says cable customers have 1.7 SVOD services while non-cable subscribers have 1.6. The difference is much greater in other countries. In the U.K., cable subscribers have 1.2 SVOD services and non-subscribers 0.7.

The data led Limelight to conclude that the growth in SVOD services is not coming at the expense of pay TV. The company went further, saying:

“This indicates people who are most interested in high-quality video content are supplementing their cable and satellite subscriptions with SVOD services, not replacing them.”

Limelight’s conclusion was picked up by Multichannel News in a piece entitled “Study: Streaming is a Supplement, Not a Replacement for Traditional TV.”

Other factors account for SVOD ownership differences

Unfortunately, other factors affect the difference between cable subscribers and non-subscribers and better explain the difference seen.

By subscribing to cable, a consumer is demonstrating that they accept that paying for TV is important to them. When another pay service comes along with quality television content not included in their pay TV subscription, they are more likely to subscribe to it. A consumer that has resisted paying for TV until now is less likely to pay for a new service.

Looking at the Limelight data, there is another reason to accept this explanation. Countries where pay TV penetration is much lower than the U.S. also have a much bigger difference between SVOD service ownership among cable and non-cable customers.

At the end of 2016, pay TV penetration in the U.S. was 81%. In the UK and Germany, it was 58% and 56%, and in Italy, it was only one third. In these European countries, many people are satisfied with the free-to-air channels and have never seen the need to pay for television. They are also likely to be similarly resistant to SVOD services.

Why is there almost no difference between cable and non-cable customers concerning SVOD ownership in the U.S.? Cord-cutters dominate the population of non-cable subscribers. In Q4 2017, only 28.4% had never had pay TV. In other words, most non-cable consumers in the U.S. accepted that paying for TV was ok at least once in the lives.

Evidence that SVOD is an enabler of cord-cutting

[Update: Hub Research provided me with data from their 2018 What’s TV Worth study. The data shows that consumers with both pay TV and SVOD are actually less loyal to their pay TV service than those with pay TV alone:

  • Among those with pay TV only, 40% say they’ll definitely have pay TV service a year from now, and 33% say probably: total 73%
  • Among those with pay TV + SVOD, 31% say they’ll definitely have their pay TV subscription in a year, and 32% say probably, 10 points lower at 63% in total.]

 

Since 2013, the number of people in the U.S. that say they use SVOD services has increasedTV versus OTT viewing from 45.3% to 68% in Q4 2017. Over the same period, the number of people that say they are planning to quit pay TV has increased from 2.6% to 7.3%.

Pay TV prices are rising in markets like the U.S. and could be to blame for the increase in interest in cutting the cord. Limelight says 46.4% of online video viewers across the ten countries studied say rising prices are most likely to make them quit pay TV. However, how many would follow through if there wasn’t a viable alternative? Many online video viewers are already watching almost as much online video as broadcast video according to Limelight. For them, SVOD is already a viable alternative to traditional TV.

Why it matters

Limelight claims that its data shows SVOD is supplementing pay TV, not replacing it.

The company basis this claim on the fact that SVOD ownership is higher among pay TV subscribers than non-subscribers.

A better explanation is that pay TV subscribers are prepared to pay for TV services, and non-subscribers are not.

Other data suggests SVOD is an enabler of cord-cutting rather than a direct cause.


*Limelight is using “cable” as a proxy for pay TV; satellite, cable, and telco TV.

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