March 2, 2017
Many Americans are cutting the cord, and plugging it back into other devices. The number of U.S. households that stream over-the-top video using a subscription video on demand service has risen to 57%, according to a new report from Leichtman Research Group.
Networks are fending off fierce competition from digital outlets, especially as the major broadcast networks make their programming available for streaming. The number of streaming alternatives is continually growing. More and more content is available online, with new streaming services, better access to major networks, and easier access to sports.
According to Forbes, Streaming services continue to grow their customer bases, with Netflix (80 million subscribers), Hulu (12 million), CBS All Access (2 million), Showtime Anytime (2 million) and HBO Now (800,000) all ramping up their efforts recently. While these streaming services continue to grow, a high number of people have decided to “cut their cord” altogether. During the second quarter of 2016, roughly 812,000 U.S. customers canceled their pay TV subscriptions, according to an estimate from SNL Kagan.
To combat this, stations have started reducing commercial time on their channels. The new strategy is an attempt to appeal to younger viewers, who are more accustomed to watching shows ad-free on online streaming services. While reducing commercial loads is good for consumers, for advertisers it means further shrinking the supply of gross ratings points, which are already being squeezed due to ratings declines, only driving prices up further.
More than five million U.S. homes, according to a recent Nielsen study, have “zero TV.” That’s up from just over 2 million in 2007. Zero TV doesn’t mean they don’t have televisions or watch videos. More than 75% of these homes still have at least one TV being used for DVD’s, video games, and streaming content. They are just utilizing their TV in a different manner.
As you’d expect, the Nielsen study found that younger adults were much more likely to live in zero TV households than people over 44. Nearly a fifth of younger people in the US don’t subscribe to cable at all and are happy to rely on internet streaming. When you’re able to stream shows and movies on your phone, tablet, laptop, and even your game consoles, why would you pay for cable? You don’t even need a television to watch television anymore.
Faster internet, more content, and more devices capable of streaming high-quality video have created a larger and still-growing audience for streaming video. These streaming alternatives give their viewers greater flexibility. They offer the ability to sign up and cancel without termination fees. For between $5.99 and $20, you can sign up for each of these services, browse them, and if you decide you don’t like them, you can cancel. It completely takes away the inconvenience of spending 30+ minutes on hold when you have an issue with your cable subscription and service, as well as any cancellation fees.
Streaming allows viewers to stream older TV shows and movies with the ability to watch them at their own pace. Overall, streaming is more convenient. As long as you have your phone, tablet, laptop, or one of the many devices that allows you to stream content, you’ll be able to watch shows and videos.
The rapid growth of the online audiences will fundamentally change not only the way viewers approach video content, but the way that advertisers do. With the rapid shift from TV and traditional advertising to digital advertising, ad spending is flowing away from traditional networks and into the digital realm on platforms like the web, social media, and Hulu.
This is actually a positive for digital advertisers for multiple reasons. Digital gives you the ability to track your campaigns in real time. Unlike traditional marketing methods, you can see in real time what is or is not working and you can alter your campaign, mid-stream, to improve your results. In traditional marketing, results are not easily measured, and in many cases, cannot be measured at all. There’s no way to tell how many people are watching the TV during a sitting. And with the use of DVR, viewers are able to record shows and fast forward through the commercials entirely.
With more and more viewership migrating online, real-time data from streaming content offers advertisers a much more accurate picture of how the audience is interacting with ads. Rather than simply relying on overall viewership numbers as a “proxy number” for how many people watched an Online viewing is much more individual so advertisers can cookie who is watching versus guessing which memember of the family, if any, is watching TV.
Because of this massive trend from TV to digital, advertising spend is following suit. The Interactive Advertising Bureau’s third annual Video Ad Spend study (2016), found that advertisers and media buyers have increased their investments in original digital video programming by 114% over the past two years. Accordingly, advertisers have increased their spend 85% from two years ago. Technology and its unprecedented accessibility have reshaped the way audiences consume media, and advertisers are bound to miss out on a huge demographic if they focus on the Television format. Clearly, strong potential exists for digital content providers to grow their revenues by capturing dollars that are currently being spent for television advertising. A rising tide, of course, lifts all boats.