TNS: OTT brings pressures and profits to traditional pay-TV

fee-based streaming sources are thriving

fee-based streaming sources are thriving

The proliferation of streaming video alternatives, while still posing a long-term competitive challenge for traditional pay-TV providers, may also be producing beneficial results across the service category.

According to ReQuest, TNS’s survey of the telecommunications usage habits of nearly 25,000 US households each quarter, about one in six (16%) pay-TV subscribers recently adjusted their level of video service – either upgrading to a higher tier or downgrading to a lower tier sometime during the past year. Pay-TV households that also stream video are more than twice as likely as non-streaming households to have made a change to their service level with their pay-TV provider (25% vs. 12%), as might be expected given their penchant for acclimatizing new viewing habits.

What might be less expected, however, is that while streamers are more likely than non-streamers to downgrade their level of traditional pay-TV service (9% vs. 6%), they are also more likely to upgrade their level of service (16% vs. 6%). Moreover, service upgrades are considerably more common than downgrades among these streaming households. (Click here for further explanation).

“These findings suggest that streaming is contributing to an overall rise in consumer appetite – and demand – for video content, instead of simply stealing a finite share of Pay TV programming,” notes TNS Vice President Frank Perazzini. “Growth in the frequency of service upgrades is being driven almost entirely by households that also consume streaming video, leading to stronger ARPU performance by cable, satellite, and fiber television providers.”

TNS’s research also reveals that streamers who adjust their pay-TV tier tend to be younger – particularly the ones who upgrade their service level. Though adults under age 30 comprise less than 20% of all pay-TV subscribers with streaming technology, they represent one-third (33%) of households that recently purchased more channels and/or features from their traditional video provider.

The spread of streaming video, through both paid and unpaid providers, has so far had minimal impact on the incidence of traditional pay-TV subscriptions. This implies coexistence – rather than a competition – of video alternatives within many U.S. households.

But as Perazzini cautions, “Although this symbiotic relationship between traditional and emerging subscription video providers has mutually benefited both groups, there are portents of change that could further transform the customary business model for video delivery.” In particular, the expansion of higher-speed broadband Internet access has opened doors for streaming video to reach more homes than ever before, and programming providers may move to engage these viewers directly. “For example, HBO’s recent announcement of the launch of ‘a la carte’ OTT distribution for their content in 2015 could signal a shakeup among top cable, satellite, and fiber carriers,” says Perazzini, “as this strategic shift by a leading programming supplier would dilute one of pay-TV’s primary differentiators, weakening their competitive advantage.”

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