TV Everywhere: How To Assess Success?

With widespread availability of TV Everywhere in North America as of this summer according to a Parks Associates study and with a consumer awareness campaign recently launched by Turner Broadcasting it is interesting to think about what success would look like…in terms of what distributors and their network partners are trying to achieve.

It seems to me there are three goals:  (1) stimulate cross-platform uptake and usage of programming and thereby extend the reach of the advertising, (2) reduce the likelihood of cord cutting behavior and (3) reduce cannibalization of cable or satellite time by on demand alternatives.  Though there’s some payout associated with the first goal the second two defensive goals are the key to why TV Everywhere platforms are being implemented…to subsume evolving consumer behavior into the existing business model and prevent the dynamics that disrupted the music business from affecting TV.

At this point I haven’t seen uptake or usage numbers surface in the public domain.   The NYT piece about the Turner campaign launch cites nothing more definitive than “millions”of users of HBO GO…since its launch earlier in 2011.   I’ve seen no numbers for Fancast Xfinity TV though its been available to Comcast subscribers since December 2009.

But, per my argument above, if we want to asess the success of this strategy, uptake is only part of the story.   We’d want to show that availability and usage of TV Everywhere makes customers less likely to cut the cord…because they can get a wide variety of on demand TV shows and movies along with their cable subscription they are less likely to cancel that subscription in favor of on demand options.   And we’d want to show that those who use TV Everywhere are less likely to dip into Netflix streaming or other on demand options…that one behavior effectively supplants the other.

It is possible, for example, that people likely to adopt TV Everywhere are a different set of people than those likely to cut the cord.   The former may be happy to expand cross platform options from their cable or satellite provider for no extra cost while the latter, under stronger financial pressures, feel a need to reduce their spending.   One group coming in the top may not forestall others falling out the bottom.

Of course there is serious question about how many people really are falling out the bottom.   As cited in a previous post,  a J.D. Power and Associates study released in June showed just 3% of cable or satellite customers had cut the cord, 6% among Generation Y…

Still, if one of the goals of TV Everywhere is to keep this behavior from expanding to more customers and to the industry’s core demographics, we need to explicitly monitor if A really does prevent B.    And if it does not, if cord cutting continues despite operators providing and touting TV Everywhere, we have to consider (as per recent comments by Bernstein Research’s Craig Moffett) that perhaps prices are simply too high; offering cross platform access for the same price just can’t match the allure of a la carte on demand services replacing the cable bill:

“Perhaps the most consistent theme in our research over the past two years has been the widening disconnect between flat-to-declining consumer disposable income, particularly in the bottom two quintiles of household income, and the rising price of media and telecommunications services”

The other defensive role that should be monitored is whether TV Everywhere customers are actually less likely to tap into on demand video services like Netflix or Hulu.   This is another case of whether A really does prevent B.   One question to keep an eye on is whether consumers tend to use TV Everywhere for a limited, specific purpose…catching show episodes that they’ve missed… while continuing to use competing on demand services for another function, mining a broad movie database for something, old or new, that fits their mood and preferences.   Just as Netflix, entering the streaming world, is struggling with their lack of new and original program content, cable and satellite operators expanding their presence in the on demand world may need to tweak the depth, organization and positioning of their offerings to keep on demand competitors at bay…for all the needs that people want from these services.

Implementing a defensive plan is an important first step for the industry.   The next step is making sure that it is, in fact, serving all the intended defensive functions.

 

How Will Networks Co-Exist With Over-The-Top?

I was busy poking fun at the Nielsen position on cord cutting the other day.   But it’s hard to deny that the trend seems relatively minor in the scheme of things.

A J.D Power and Associates study released yesterday shows that just 3% of residential TV customers have cancelled their multichannel subscriptions, 6% among Generation Y customers.   I’d argue that 6% among the younger audience is not insignificant; it’s a factor.   But those levels won’t be turning the TV world upside down.

This may sound odd, but I think the most important aspect of cord cutters not that they’re cutting the cord with their multichannel providers.   The most important thing is they’re likely to be driving online video over-the-top to their 10-foot screens.   The cord cutting aspect of the cord cutters…may be misdirection with regard to future trends.

To clarify terms, when I say “over-the-top” I mean streaming online video to a TV set rather than a computer or mobile screen and watching in lean-back mode, the way people traditionally watch TV.

Because over-the-top streaming is initially focused among the young, the tech-savvy, lower incomes, light TV viewers…it is more likely to replace traditional TV for these audiences.     But, as over-the-top becomes mainstream, only a minority of people will actually cut the cord.   Thus the key scenario, the one that will eventually play out for the majority of households, is that both traditional and over-the-top TV will compete for time in the 10-foot, traditional TV viewing experience.

I think some basic, human factors will drive to this scenario:

  • People will always prefer to watch long form programming on the 10-foot screen.   Watching full-length TV shows and movies on 4-foot and 2-foot screens will increase; the iPad will help drive its growth.    But the average length of an online video stream is still under 5 minutes.   I’d argue that the average length of online streams won’t really take off till the mainstream consumer is sending online video over-the-top to his TV.
  • Over-the-top will penetrate the home through the path of least resistance.   That path is the Internet-connected TV; the least number of extra boxes and wires entailed.   Blu-Ray players and Internet-connected game consoles will be secondary; boxes people already own for other purposes.   This path mitigates against cord-cutting; why buy a spanking new TV and then cut down your viewing options?    It also ties the rate of behavior change to TV replacement cyles and the briskness (or not) of new TV sales.
  • Network programming will continue to alleviate the burden of choice.    Lighter TV viewers may be able to subsist entirely on a diet of on-demand viewing.   But for heavier TV viewers it would be onerous to deliberately select everything they watch.  Channel surfing is a key part of their diet that can be supplemented but not entirely replaced with on-demand options.  And so…as over-the-top migrates to heavier TV viewers, a pattern of coexistence rather than replacement will be seen.

Here’s an interesting data point from the Leichtman Research Group.  30%  of all households report having at least one TV connected to the Internet via a video game system, a Blu-Ray player and/or the TV itself.   But only 10% of all adults watch video from the Internet via one of these devices at least weekly.    So a substantial number of households already have the capability; most don’t use it regularly.    Of course the numbers are much higher among Netflix subscribers…

When people have both forms of TV, traditional and over-the-top, available to them in lean-back mode, what do they do, what trade-offs do they make, what gets cannibalized?   If I were a network executive, this future scenario would concern me the most.

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