Consumer Attitudes – Digital Media Conference SF
October 27, 2010, Digital Media Conference, San Francisco– the conference opened with an analysis of the digital media industry. Colin Dixon, senior analyst at the diffusion group talked about “Consumer Attitudes and the Future Of Over-The-Top”. Moving pictures have been around for over 115 years and until recently have always been viewed in a group setting. The motion camera gave us the ability to capture action and became a much more immersive medium than static pictures could ever be.
For the longest time, people would gather to find and watch moving pictures and viewing movies came at a common time and as a shared experience. Now this is all changing, as finding content becomes harder due to the increasing volume of content available. In addition, people have found that it’s not convenient to watch moving pictures at a predetermined time and place, where the providers are the center of the world.
This change in viewing patterns is moving to make viewers the central focal point and now providers have to find the viewers. A lot of the impetus for change is due to broadband Internet which has changed our definitions and requirements of all our screens. About two years ago, TV became a disconnected device. Netflix has about 17 million subscribers and about 66 percent of them watch streaming videos rather than DVDs. Netflix is likely to grow to 20 million subscribers this year and in doing so will become the third-largest paid video provider.
The router is now in the living room. By ’14, 30 million homes are projected to watch Internet TV on a regular basis. By ‘20, video on the Internet will have as many viewers as broadcast television. Therefore, the incumbents are being challenged; pay TV, cable, and broadcast are still efficient at delivery, but people are considering other services. As television content moves from broadcast to broadband, people are starting to downgrade their delivery services from premium to lower levels. A recent survey shows about 18 percent of cable subscribers are likely to downgrade services, but only about 8 percent are planning to completely cut cable services.
Most users will keep the cable and view the other Internet services as supplementary to their cable subscriptions. At the same time, more people watch streaming Netflix videos than order and watch video on demand services. Even with this viewer population, less than 10 percent say they will cut the cable cord. Even more surprising, slightly more of these viewers are willing to pay up to $100 per month for cable services.
Over-the-top augments pay-TV while eroding pay-TV’s value proposition, that of quantity and exclusiveness. Over the top provides advantages in having built in three screen delivery, integration with Internet services, and integration with Internet devices. In light of these changes, TV platforms are also changing. The combination of video plus data plus apps means viewers have a completely new set of viewing experiences.
It’s unlikely that pay-TV can keep up in this environment. In the future, viewers will use broadcast TV, plus web, plus apps to let the content find them. The operators have to change to give users this set of choices. In terms of demographics, young people will continue to use cable services if they already have them, but will not sign up for them if they don’t. The operators have to look at TV everywhere like Sky TV over broadband.
Because television is moving towards a web-based experience, the social functions are becoming more important. 23 percent of viewers use recommendations from their peers through social media to find interesting content. The social media also act as curators to help your sword through the volumes of content available. Operators can ignore these changes at the risk of failing in their business.
