Contending with Another Challenger When you’re “King of the Hill,” challengers, pretenders and wannabes come at you from all sides. For “traditional” TV, it started with videocassettes and videodiscs, then cable and satellite, DVD/Blu-Ray, game consoles, the DVR, PCs, smartphones and tablets. The latest challengers are streaming media services, or SVODs: Netflix, Amazon, Hulu, YouTube and an ever growing list of even newer players.

Live TV Has the Leverage No doubt, these disrupters have eroded some of TV’s dominance; however, the average time spent per adult per day with live TV is still more than twice as much as any of the 8 other media measured by Nielsen during Q1 2016. Nielsen doesn’t measure SVODs in great detail in its Total Audience Reports, but they reached 50% penetration of TV households during Q1 2016 – according to Nielsen; however, HD TV penetration was 94%. With most of the major SVOD services promoting themselves and being perceived by viewers as “TV networks,” it’s important to understand their effect on total media consumption – and that’s the purpose of this Special Report from THE MEDIACENTER.

Inside the SVOD Numbers According to May 2016 data from Strategy Analytics, a research and consulting firm, Americans will increase their spending by 22% for SVOD services during 2016. All video acquisition categories will decrease, except for the purchase of downloads. Of all SVOD viewing, 80% occurs on a TV, 58% on a mobile device and 42% on a desktop or laptop. Only 10% of YouTube and other video-sharing sites’ content are viewed on a TV. Despite such low numbers for YouTube viewing on TV, it will have the most over-the-top (OTT) video services users during 2016, at 176.1 million, compared to Netflix’s 126.9 million, and will remain first through 2019.

Streaming Media Is Youth-Driven A 2016 survey of broadband users who had access to both traditional TV and subscription-based streaming video services found that 66.3% of adults, 18–24, and 61.8% of adults, 25–34, would choose SVOD over traditional TV, given a choice. Among older adults it was just the opposite, as 68.1% of those 45–54, 76.6% of those 55–64 and 77.3% of those 65+ would choose traditional TV first. Another survey, of 1,354 participants age 13–54, who had watched a full-length streamed program during the past 6 months, found that Netflix, at 33%, was their first choice to watch a TV program.

TV’s Halo Effect on Ad Spending ROI ABC/Accenture Strategy conducted a study of the advertising spending of 20 leading national brands during a three-year period. The study found that multi-platform TV, which includes linear TV as well as premium long-form video content viewed online, creates a halo effect on search, display and short-form advertising within integrated campaigns. Remove the halo effect, and the average ROI of the digital channels would decrease by 18%.

SVODemographics, Part 1 According to data from The Media Audit, 49.0% of adults, 18+ in the Milwaukee-Racine market said they used streaming media services to watch video or TV shows during March 2016 while 30.5% did in Atlanta during October 2015. Men and women in both markets used streaming media services at relatively the same rate – Atlanta: men, 49.4%, and women, 50.6%; Milwaukee-Racine: men, 52.1%, and women, 47.9% Despite the strong numbers for Netflix, Amazon and Hulu for male SVOD users in both markets, YouTube garnered the highest percentage of men: 61.3% in Atlanta and 87.3% in Milwaukee-Racine.

SVODemographics, Part 2 The Media Audit survey data by age group confirmed that adults, 18–24 were the primary SVOD viewers; however, the largest group of YouTube viewers in both markets was adults, 35–49. Ethnically, European Americans had more than 50% of the viewer audiences for the four major SVOD services; however, African American viewers of YouTube scored higher than all other ethnic groups in both markets. SVOD users tend to have higher incomes and more education, although, once again, YouTube had the largest percentage in the more moderate $35,000–$50,000 income bracket in Atlanta and Milwaukee-Racine.

Tracking Progress Netflix added just 1.7 million new subscribers during Q2 2016, compared to 3.3 million during Q2 2015 and 6.74 million for Q1 2016. It had forecast an increase of 2.5 million new subscribers. Although Netflix is forecast to have 126.9 million users to Amazon’s 73.2 million for 2016, Amazon had more US subscribers than Netflix as of the end of 2015, or 54 million versus 44.74 million. In addition, Amazon’s $99 Prime membership provides its subscribers with an advantage not available from Netflix: free shipping for all their Amazon.com purchases.

The Curious Case of Amazon Prime According to a spring 2016 random survey of 380 current Amazon Prime members, 91% said free two-day shopping was the primary reason they purchased a membership, compared to just 22% for Prime Instant Video access. The survey also found that 19.2% of Amazon Prime members never use its video streaming service, with just 9.7% using it daily; 34.8%, weekly; and 36.3%, monthly. These results shouldn’t scare Netflix, however, since 38% of Amazon Prime members use Netflix daily, and even 12% use Hulu daily. In addition, more than 80% of Amazon Prime members also have Netflix subscriptions.

Upping the Ante During April 2016, Amazon raised the competitive stakes by offering a separate monthly video-streaming plan for $8.99, which is one dollar less than Netflix’s $9.99/month. Then, during May 2016, Amazon trained its sights on YouTube by offering everyone the opportunity to post video content on the Amazon Website and generate revenue from advertising and royalties. YouTube accepted the challenge and is planning a separate monthly video-streaming bundle of cable TV channels, called Unplugged, to be accessible on the Internet during 2017.

Sweetening the Pot To date, Amazon and Netflix have been uninterested in streaming live programming, but Hulu is launching just such a service during 2017, providing subscriber access to ABC, Fox, ESPN, Disney and likely NBC’s many cable channels. Hulu is also initiating a first-of-its-kind interactive advertising system. People with either smart TVs or a streaming media player will be able to click an on-screen ad to gain access to discounts and new product or other brand information. Turner, the parent company of Turner Classic Movies (TCM) will launch FilmStruck, a “new subscription video on-demand service for film aficionados,” during fall 2016, which will “steal” the Criterion Collection from Hulu.

Live TV Ad Sales Are Still the Gold Standard At the current time, many of the streaming media services, Amazon and Netflix, for example, promote their commercial-free programming as a benefit of becoming a subscriber. Other SVODs, such as Hulu and Crackle, sell and run advertising spots. Unlike the targeting of specific demographics with ads on live TV, SVOD advertisers tend to want a specific number of impressions, which has resulted in a much higher rate of repetition, much to the displeasure of Hulu subscribers, specifically. Local advertisers will have to continue to rely on linear TV as the only advertising medium of its kind to reach local audiences – and that should be an advantage and selling point for you and your station.