Video Trends for 2017

RCA_CT100-hdFollowing are the major trends in video going into 2017.

Skinny Bundles. Last year at this time the industry talk was all about cable companies offering skinny bundles to keep customers from bailing. But this never panned out. Dish Network has a true skinny bundle option but almost nobody else has done so. Comcast entered this market last month by adding Sling TV to their X1 settop box lineup. The big companies aren’t talking and it’s hard to know if this changed due to market research about customer desire for such products or if this was due to problems with programmers assembling the right packages. But for now skinny bundles offered over cable systems seems like a dying idea.

OTT Options Exploding. DirecTV Now joined Sling TV and Sony Vue as the three providers of online skinny bundles. Hulu, Amazon and YouTube are launching similar packages in 2017 and sources at programmers report there might be as many as a half dozen other companies getting ready to join the OTT fray. Additionally there are a number of programmers directly entering the market such as the CBS package that will feature the new Star Trek: Discovery starting in January and available only online. ESPN is rumored to soon be launching an a la carte offering. This is going to turn into a crazy year for online programming and it’s impossible to believe this many entrants can succeed.

Cord Cutting Continues. But nobody knows how fast. The best I can tell from the numbers is that there is a lot more cord trimming with households paring back to less costly packages than actual cord cutting. You can find estimates of annual US cord cutters between 1 million and 4 million and only the cable companies know the right answer. But even if the number is at the bottom of the range, traditional cable companies are facing real problems. Eyeball time watching cable networks is way down and is expected to continue to drop in 2017 as people watch OTT content.

Some Networks in Trouble. It looks like ESPN will lose over 4 million customers in 2016. The same is happening to a number of other channels, but analysts track ESPN closely since it is the costliest network. Some of the more popular channels are making up for us losses by overseas sales, but sports, weather and other US-specific content has no market outside the country. By the end of 2017 I expect to hear rumors of smaller networks folding.

Continuing Rate Increases. All the big cable companies recently announced their rate hikes for 2017. Rate increases seem to be as large as recent years. But more of the rate increases are being buried in ancillary fees and equipment charges rather than as direct increases to cable packages.

No Break in Programming Cost Increases. And those rate increases are being fueled, in part, by the continued increases in the cost of programming. Many of those increases are baked into 3-5 year contracts, but even new programming programming contracts being approved in 2016 continue to include significant future cost increases.

Flood of New Content for OTT. The market is being flooded by new content at an unprecedented rate. Netflix is the king of new content and is producing most of the highly-rated alternatives to traditional cable. But there are dozens of companies now making content with the hope of grabbing a piece of the giant revenues earned by the most popular content.

New Bells and Whistles. Comcast is the industry leader in introducing new features for the home video product. Probably the best new one is the ability to talk to the settop box and eschew the remote. It’s hard for smaller companies to keep up with the numerous improvements.

OTT is Not Easy on the Consumer

Fatty_watching_himself_on_TVThis article compares the channel line-ups for Sling TV, DirecTV Now and Playstation Vue.  I think it provides the best demonstration I’ve seen yet of how confusing it’s going to be for consumers to choose an OTT option.

The process of choosing an OTT provider is only going to get harder in the future as additional OTT providers enter the market. In the coming year we are going to be seeing Google / YouTube with a similar on-line option. Hulu has announced that they will soon be launching a live-streaming alternative. There is a strong rumor that Amazon is considering an OTT option and has already announced they are pursuing live sports. And various articles I’ve read hint at a few more new OTT providers in 2017.

Comparing OTT channel line-ups is a lot more work than comparing the line-ups of your cable company vs. one of the satellite providers. While satellite providers aren’t required to maintain the same rigidly-defined line-ups as the cable companies, the two sets of line-ups are still reasonably comparable.

Cable company line-ups are defined by the FCC cable rules that require a basic and expanded basic line-up. Contracts between cable companies and programmers has led to uniformity and there are not major difference between cable companies. Cable companies are free to offer additional premium tiers and packages, but even those are largely the same between cable companies. The satellite providers know that their basic package is competing against the expanded basic line-up, so they include roughly the same channels in their 50 – 75 channel packages as the cable companies.

The OTT companies have a different set of challenges. The programmers are not required to sell them any content, and so the OTT companies must negotiate with each programmer individually. These have to be interesting negotiations because the OTT providers want to put together the skinniest bundles they can get while still offering what consumers want. They are then free to bundle channels in any way that the programmer contracts will allow. Since each OTT providers negotiates a unique arrangement with programmers there are going to be major differences between the line-ups from different OTT providers.

The programmers, however, either want to sell multiple channels or else they want a revenue stream that insures them of some decent profits. Programmers understand the math, which is that they are losing money for every customer that moves from traditional TV to a smaller OTT offering. This puts them into an awkward position. It’s obvious that the cord cutting phenomenon is gaining momentum. But if the programmers help to create really attractive OTT packages they are then helping to accelerate cord cutting for consumers.

As I’ve written before, many of the programmers are able to tolerate the growth of OTT since they are selling a lot more new content overseas than they are losing to cord cutting. Many of them acknowledge that there are cable channels that only exist because of the monopoly the handful of programmers have over the industry. They know that the cord cutting phenomenon is going to mean the death of less popular cable networks.

But back to consumers. You can see in the comparison in the link I posted above that between the first three major OTT providers it’s not easy to even visualize what you get in the various packages. The options between the three providers are significantly different, and all of these options have some glaring holes from programmers that have not yet allowed their content into these OTT bundles. It’s hard to imagine how complex this comparison is going to be with 3 – 6 more options by the end of 2017. I think a lot of consumers are going to come to web sites like this and be intimidated by the choices and will delay cutting the cord.

It’s likely that over time the various OTT providers will find niches in the market. Certainly if they all end up with the identical sets of channels there won’t be a lot of difference between them. But I would expect the ones that will be successful in the long-run will find a demographic niche that will give them an advantage. But for now their line-ups are a messy hodgepodge since they are cobbling together line-ups from the channels that they are able to acquire. This is going to make for a number of confusing products for the first few years of this new industry until they all figure it out.

Some OTT Statistics

sling-tvAs usual the quarterly Digitalsmiths and TiVo recent Video Trends Report contains a ton of interesting statistics about the industry. The following table shows the number of households that subscribed to the various OTT services during the third quarter of each of the last four years.

 

‘                                              Q3 2013          Q3 2014          Q3 2015          Q3 2016

Netflix                                     41.7%              46.4%              49.9%              51.8%

Amazon Prime                        12.9%              17.9%              19.9%              24.8%

Hulu                                          9.4%                9.6%              12.1%                9.9%

HBO Now                                                                                  4.3%                5.2%

YouTube Red                                                                                                      3.1%

Shomi                                                                                                                2.7%

CBS All Access                                                                           2.1%                2.1%

Sling TV                                                                                      1.0%                1.7%

Play Station Vue                                                                         1.3%                1.6%

Blockbuster                               1.8%                1.2%                 1.0%                1.0%

Other                                         1.5%                1.4%                 1.7%                1.8%

Nothing                                    51.8%              47.3%               43.7%              38.1%

Netflix has continued to dominate the industry and has grown to cover an additional 10% of all homes nationwide since 2013. Hulu increased market share in 2015 but is back down again. But expect Hulu to grow again since they are picking up a lot of new content from its owner programmers. In four years Amazon Prime has doubled, although there is a lot of debate about how many people actually watch the video service since it comes free with the Prime shipping program.

What springs out most from the chart is how the industry is diversifying. In just the last year YouTube Red and Shomi sprang to fifth and sixth place in the industry. And 2014 saw the introduction of Play Station Vue, SlingTV, CBS All Access, and HBO Now. It’s also striking to see the number of homes that don’t watch OTT content drop from 52% in 2013 to only 38% today.

You may be surprised to see Blockbuster still active on the list. While all their stores have closed, the Blockbuster brand is still being used to market OTT movies and is now integrated into SlingTV.

The ‘Other’ category is interesting. On last count there were over 100 different video pay services on the web, yet outside the major OTT players these services together are only seen in 1.8% of households.

This next chart shows what people pay for OTT content, comparing 2014 and today

Monthly Expense                  Q3 2014                      Q3 2016

$1 – $2                                     2.0%                            3.6%

$3 – $5                                     2.3%                            3.2%

$6 – $8                                    33.4%                          16.5%

$9 – $11                                  21.7%                          30.1%

$12 – $14                                  8.1%                           10.0%

$15 – $20                                 14.0%                          15.8%

$21+                                           6.8%                          10.7%

Use But Don’t Pay                    11.1%                          10.1%

In just two years the average bills have crept significantly upward. Currently over 2/3 of homes report paying more than $9 per month for OTT service, while in 2014 that was only 51%. Probably more interesting is that 26% of homes pay more than $15 per month for OTT content. My household is in this category and we have subscriptions to Netflix, Hulu, Amazon Prime (including Starz), and SlingTV.

The percentage of households who told an interviewer that they watch but don’t pay for OTT content dropped slightly, but represents about the same number of people from 2014 to 2016.

 

OTT Latest – August 2016

tubitv_squareThe only way for cord cutting to become a true problem for the cable companies is for there to be so much content online that people feel comfortable walking away from the cable packages. If the last few months are any indication of where the OTT industry is heading, we soon ought to be seeing more people cut the cord. So far this year there has been an average of almost one new OTT roll-out every week and there are now over 130 subscription video services on the web. Here are just a few of the more interesting recent announcements in what is becoming a busy new industry:

Acorn TV. Priced at $4.99 per month (first month free) this service bundles the best shows from the UK, Ireland, Canada, Australia and New Zealand. The service is starting with 60 exclusive titles that include a lot of drama, police who-dunnits and dry British comedy.

Sling TV. The service has grown from very simple to having a wide range of options. They have added a ton of new programming such as Fox Sports and other Fox Shows, They brought in the NBC suite including the live NBC feed, USA, Bravo, SyFy and BBC America. They beefed up the sports offering with some regional sports networks. The NBC live feed will be the first place that local NFL games will be broadcast on the web. They have added E! and Oxygen to their Lifestyle package. And they’ve added BBC World News, CNBC and MSNBC to their World News Package. Overall this is starting to become as large and confusing as looking at cable packages!

Hulu. The company has confirmed it will soon be launching a skinny bundle. Much of the content is going to come from the owners of Hulu including a suite of packages from ABC / Disney including ESPN, a package from NBC Universal, and a package from 21st Century Fox. Plus Hulu is making a deal with CBS. This would make Hulu the first to offer all of the major networks’ feeds live online, with ABC, NBC, CBS, and Fox. The company has said that their base package will be around $35, and this makes it a true skinny bundle since it includes the networks plus other most-watched channels. As I was writing this blog Hulu announced they are ceasing all free / ad-based program and are now all-subscription.

Tubi TV. Tubi TV is taking a different approach from the other services and is free to customers and is ad-supported. The service carries a lot of content aimed at millennials, who supposedly are most interested in free content. The service includes Japanese anime 2-days after being aired in Japan as well as a lot of movies and various series of interest to millennials. The service has made deals with over 200 content provides including MGM, Lionsgate, Paramount Pictures and Starz!

Comcast brings in Netflix. In an attempt to keep viewers on their platform and under their channel guide Comcast has made a deal to bring Netflix into the fold. Netflix will appear in the lineup like any other network and customers can navigate using their remote control.

Speaking of remote controls, Comcast distributed a lot of new voice-controlled remotes in time for the Olympics in the hopes of keeping customers from cutting the cord. We’ll have to watch to see how customers like the new devices.

Networks go Directly Online. All of the major (and many not-so-major) networks are taking their content online, but with different business models. It will be interesting to see which of these approaches is the most popular.

Fox has announced that it is now online for customers using the Fox.com website or the Fox Now app. This is an authenticated service and customers have to be verified as a customer of a cable provider and already paying for the Fox programming.

ABC is re-launching its unauthenticated streaming service (free for anybody) and showing older series for free, supported with ads.

CBS has taken the premium subscription approach and is a monthly subscriptions for $5.99 it’s calling CBS All Access. The company is producing original content just for this platform including the next Star Trek Series.

NBC has chosen to produce OTT content through its Seeso platform. This is going to consist of a number of different types of programming, with the comedy platform launched late last year. The comedy channel costs $3.99 per month. It includes older NBC comedy series as well as twenty new comedy series produced only for the Seeso platform.

Even smaller networks like CW now have an unauthenticated ad-supported platform called CW Seed that is showing older shows such as MadTV, Constantine and the O.C.

OTT Update May 2016

TelevisionThere is so much activity in the OTT space that I might need one of these updates every few months. It seems as soon as I publish one a new set of changes gets announced in the industry.

Hulu Announcement. The biggest OTT news is that Hulu just announced that they are putting together an OTT skinny bundle package. It’s not expected to launch until next year, but Hulu has already struck deals with Disney and Fox, which happen to be two of its corporate parents. The Hulu package is interesting because this really represents the major programmers taking a shot at stealing customers away from their cable company customers.

Hulu’s history is pretty interesting in that their owners – Disney, Fox and NBC Universal (Comcast) – were very careful in the early days to not give Hulu great content that would upset the cable companies. But that seems to have changed. Hulu is now getting access to many more movies and other content and is making a major run at Netflix. Since it’s owned by programmers who themselves have a lot of content, Hulu certainly has a chance to eventually become the dominant OTT player. I’m seeing a lot of web articles talking about how Netflix is losing their sheen as their content choices dwindle.

YouTube Unplugged. After having this on the shelf for the last four years it looks like Google and YouTube are finally getting serious about launching a skinny bundle of their own. They are in talks with the major programmers and are talking about launching early next year.

YouTube already launched the YouTube Red subscription service last fall that bundles together the premium content found only on YouTube. It’s aimed at younger viewers who seem to prefer YouTube as a source of video content. The cable companies are going to have to start sweating with Hulu and YouTube both making a major play to attract people away from traditional cable packages.

CBS and Star Trek. CBS has announced that after it airs the first episode of its new Star Trek series on TV that all future episodes will be available only on the online CBS All Access Platform. This is a major play to sell more subscriptions to that service. Considering the strong draw of Star Trek it might work. But CBS is not going to dump the whole series on line at once for binge viewing but will feed a new episode each week.

FilmStruck. Criterion and Turner have announced the creation of a new online movie service they are calling FilmStruck. The service will have the largest catalog of older movies online and includes the whole MGM and RKO movie catalogs which Ted Turner bought in the 80s. This gives the service a significant share of the movies on most of the lists of all-time greatest movies. The catalogs also contain mountains of movies that have not been available for years. As part of this deal Criterion will be pulling about 500 old movies from Hulu.

Netflix Survey. A survey of Netflix customers showed that 76% of them believe that Netflix and other online content is going to eventually completely displace traditional cable TV. Of the 24% who didn’t think this was so, the primary reason they thought cable would survive is news programming. Interestingly, 68% of those surveyed did not think that Netflix would replace movie theaters.

OTT Update – April 2016

television-sony-en-casa-de-mis-padresIt continues to be a very busy year in terms of companies launching or modifying online packages of programming.

DirecTV. Probably the biggest new announcement is that AT&T and DirecTV have announced a suite of online packages. This is not surprising after they have seen the success of Sling TV launched by Dish Networks. The two satellite companies have an edge over everybody else trying to launch OTT packages due to the apparent ability to use the content they buy for satellites onto the internet.

Pricing hasn’t been announced yet, but there are three packages being mentioned:

  • DirecTV Now is promising to replace online what you buy today from the satellite. So expect this to be packages with prices similar to the satellite packages. The biggest question will be how much local programming they are going to able to include in the package. This package is interesting in that there has always been a lot of homes that could not buy satellite due to the inability to see a satellite well or due to restrictions of some kind on using a dish.
  • DirecTV Mobile is a smaller set of programming to be aimed at smartphones, although anybody can watch it. DirecTV is promising this will be affordable.
  • DirecTV Preview will be a free service that is ad-sponsored. It will contain content from AT&T’s Audience Network and Otter Media. This seems similar to Verizon’s Go90 app.

Sling TV. Sling TV has continued to add packages of options to its base offering. But their big news is that they have made a deal with ABC to add ABC local content to the web. This is the first case I know of where a local network will be made available to anybody on line. This is being included by Sling TV as part of a Broadcast Extra package that adds additional channels for $5 per month.

One of the main draws for people on network TV is local programming – news, weather and sports. It will be interesting to see how Sling handles this. I know when I lived in the Virgin Islands that the only network TV available on the island carried news from New York City and I don’t think anybody there watched it.

Sony Vue TV. Sony has reconfigured their Vue TV from a $50 per month package down to a skinny bundle for $30. Sony didn’t have much luck with the $50 price tag and recently lowered it to $40.

The Sony offering is interesting in that it uses the Playstation 4 game console and the service comes with a built-in DVR. Rather than carry live network programming the new Vue offering provides next day access to a number of network TV series.

The biggest drawback of the offering is that there are not nearly as many homes with a Playstation 4 compared to other OTT packages that can be viewed on any device. Furthermore, the offering only supports one TV with one box.

Facebook. It was announced a month ago that both Facebook and Twitter were trying to obtain the rights to show Thursday night NFL football. But Facebook withdrew and the football is going to Twitter.

But this doesn’t mean that Facebook doesn’t have big aspirations as a video platform. They are putting a lot of effort into Facebook Live which they think can be a viable competitor to YouTube. It’s easy for my generation to forget that sites like YouTube has become a video powerhouse and Facebook wants to do something similar. Surveys have suggested that the platform that people adopt when young will influence how they watch video for life.

Facebook is also considering creating a skinny bundle that combines Facebook Live with some of their own content. With over a billion members on the platform they certainly have a good starting point.

TV a Decade from Now

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I recently heard another consultant say that traditional cable TV as we know it will still be a very strong product a decade from now and that it’s far too soon for small cable providers to worry about the future of cable TV. That got me to thinking about everything that is going on in the industry and I come to a very different conclusion. I think TV a decade from now is going to be very different than today. There are so many major changes changes happening today, and while it’s hard to see through it all, I can’t imagine TV still be anything like what we have today a decade from now.

Skinny Bundles. While talking about cord cutting is interesting, last year new cord cutters were at most something like 2% of all cable viewers – that is not yet a revolution. The really big change in the industry is going to come from skinny bundles. These are the small packages that cable TV providers are assembling as an alternative to the 200-channel bundles. The cable companies are assembling packages of the most popular channels and are pricing them at $30 and $40.

I think skinny bundles are going to be wildly successful. Assuming that the skinny bundles contain a lot of what people want to watch, they will be a better option for most people than going to a pure OTT product like Sling TV. It’s easy to forget that people pay a huge penalty from breaking the cable company bundles and becoming a cord cutter can cost a family a $10 to $20 increase in their broadband price.

Skinny bundles are going to be significant because they mean that there are going to be a whole lot less viewers paying for the less-popular cable channels like the Tennis Channel or Discovery Health. I don’t think we should underestimate how much Wall Street is going to punish programmers if they start losing customers and revenues. We saw a little bit of this recently when it was reported that ESPN had lost 7 million viewers and Disney stock took a beating. I predict that as skinny bundles take off that we are going to see a number of lesser-viewed networks disappear.

Mega-Bundles. I think the OTT industry is going to have to consolidate in some way to be long-term successful. Already today it can cost more to buy the individual OTT offerings you want rather than just stick to a traditional cable package. In the long run, if each OTT package stands alone then many of them will fail from lack of viewers.

But I already see talk about the creation of the OTT bundle – a service that brings various OTT offerings together under one umbrella package. There are an incredible number of companies now making or planning to make original content. As somebody who only watches OTT content, it is already confusing and hard to find what I want to watch. So I expect that there will be bundlers that will bring original content from many sources together under one search engine – sort of like a TIVO for OTT content. I don’t really care if content is created by Netflix, Apple, YouTube or somebody else. If I could buy a service that would bridge the current OTT content into one package I’d buy it today.

Drop in Live Viewing. The continuing trend people watching less live television is going to feed into the above two trends. People are getting retrained to be less loyal to networks and are instead become fans of specific series or types of programming. Binge watching (or even just delayed watching) is becoming more the norm and there will be less and less programming that people insist on watching live.

The Trend. All of these trends together means that people are going to become less loyal to a given network and more loyal to specific content. And that is the change that will transform the industry. The programmers today have all of the power because they can force the cable providers to buy all of their networks. But if people elect options that avoid much of that content then the driving power in the industry will change from the programmers to the viewers.

Programmers are not going to able to sell things that people won’t pay to watch. The amount of new original content available today already provides an amazing alternative to traditional programming. And when you just look at the original content planned for the next year or two you can see that quality content might become the new driver in the industry.

The cable companies are not going to resist these changes, which might be a shock to the programmers. There is a decent chance that cable companies can make as much margin from skinny bundles as they make today from the huge bundles. And no cable company is going to be sorry to see the power of the big programmers get diluted by the change in people’s viewing preferences.

Three Years and Counting

2014_Rolling_Sculpture_Car_Show_67_(1969_Porsche_911_S)Today is the three year anniversary of this blog. I started writing this blog as a way to force myself to keep up with industry news. During the first month of writing the blog I worried that I would quickly run out of topics. But I underestimated then how dynamic our industry has become. The changes from just three years ago are amazing. Instead of running out of topics I often have to toss away topics because I can’t get to them fast enough.

I mostly write about the topics in the industry that I find most interesting, but I must be striking a chord because I pick up new readers to the blog daily. I now know that I am the only one writing daily about broadband and related topics and it makes me happy to see that others find these topics to also be of interest. Just since I’ve started this blog we’ve seen the following changes in the industry (and this is a short list):

An Activist FCC. The current FCC has waded into more new topics than any other FCC in my memory. The most significant one is the net neutrality decision that reclassifies broadband as a regulated service. But there have been many other rulings from this FCC. There was a time a few years ago when industry pundits predicted that regulation was dying, but it has done just the opposite.

Exploding Demand for Broadband. The penetration rates for broadband have continued to grow and in urban areas it seems like we are getting close to the time when everybody that can afford broadband has it. But there are still huge numbers of rural homes and businesses without broadband and they are starting to stridently demand it.

Growth of the OTT Industry. While Netflix has been streaming content a little longer than I have been writing this blog, the whole OTT phenomenon has really taken off in the last few years. Netflix now claims over 75 million customers and there is now a growing host of other OTT providers. Online video has completely transformed the Internet and video is by far the majority of online traffic.

New Products from the IoT. There are new products available to carriers for the first time in many years. I have a number of clients who are now successfully selling security and a number of them are getting into home automation and the many other related services associated with the Internet of Things.

Use of WiFi instead of Wires. It’s become recently obvious that the large ISPs have abandoned home wiring for delivering data. They now bring bandwidth into the home to a central WiFi router and don’t install wires to anything else. But a single WiFi router is already not sufficient for high-bandwidth homes and the next trend in this area is going to be the networking of multiple WiFi routers.

Services in the Cloud. More and more services are moving to the cloud. Carriers can buy voice and cable TV programming from the cloud today, something that was unimaginable just a few years ago. It was always assumed that expansive bandwidth made cloud cable TV impractical, but as bandwidth prices continue to tumble it makes more sense to buy programming from the cloud instead of building or maintaining a cable headend.

Public Private Partnerships. There were very few Public Private Partnerships a few years ago and now it’s something that everybody talks about. This is particularly relevant in rural America where communities are willing to kick in money to find a broadband solution. But we are even seeing this in urban areas, such as the deal just announced between Google Fiber and Huntsville.

Erosion of Landline and Cable Customers. Landline penetration rates are now under 50% nationwide and we are starting to see the erosion of traditional cable customers. The challenge for the next few years will be for triple play providers to find ways to replace these shrinking revenues and margins.

Massive Realignment of Rural Subsidies. We’ve seen subsidies shrink for small telcos. Access charges are being phased lower and the Universal Service Fund is being redirected from telephone to broadband. This has put a lot of pressure on some small carriers, but anybody who survives the end of this shift will probably be ready to succeed in the long run.

Video and Cable TV Trends

television-sony-en-casa-de-mis-padresFrom time to time I make a list of the current trends in the various industry segments. It’s really interesting to read the old ones from time to time, and in the cable world trends from a decade ago seem almost quaint in today’s topsy-turvy cable market. There are few industries anywhere that are seeing as much disruption as cable TV. Here are what I see as the current trends:

Live Viewing is Fading. The amount of time watching live TV as it is broadcast is dropping dramatically. Nielsen reported that in the fourth quarter of last year that the percentage of people watching TV live had dropped nearly 12% over earlier last year. People are watching other content like Netflix, or are watching television on a delayed basis using TV Anywhere, DVRs or a service like Hulu. This is playing havoc with figuring out ratings, but is of even more concern to TV advertisers who are losing viewers in droves.

Migration to Skinny Packages. A very recent trend is skinny bundles – a much smaller lineup of the most popular channels that people want to watch. This got started last year by Sling TV, but every major television provider is jumping on the bandwagon. Verizon FiOS reported that a majority of the customers they signed up in the fourth quarter of 2015 chose the skinny bundle over the larger traditional bundles. Comcast is also trialing a skinny bundle and everybody is scrambling to get one. These bundles are of huge concern to the programmers because it means that cable companies and customers only want to watch and pay for the most popular channels and not for the other hundreds of channels in the typical big cable bundle.

Original Content is Exploding. It seems that almost anybody even marginally related to the content industry is now producing original content. It’s almost getting easier to list who isn’t making content than it is to list the many that are. Original content is being created for several reasons. First are the obvious financial gains and it’s easy to see how original content benefited Netflix and AMC. But secondly, this is part of the race to survive and be relevant in the future. The general wisdom is that original content is what will attract viewers and keep people coming to a given platform.

Popularity of OTT Content. We were all amazed a decade ago to watch the wild popularity of the iPod and how Apple had captured the music market. But OTT providers like Netflix, Hulu, Amazon Prime have done even better and it’s been reported that over 60% of households now buy a monthly subscription to at least one of these OTT services. I can’t remember this being on anybody’s list of predictions ten years ago. If OTT grows much more there will be more OTT subscribers than cable subscribers.

Continuing Programming Rate Increases. Programmers keep increasing rates at a torrid pace, even as it’s becoming obvious that price is one of the primary drivers of cord cutting and cord shaving. Many of my clients report annual cost increases of 12% or more, and in recent years this has averaged over 9% per year. Interestingly, a lot of the programmers don’t seem to care how this affects the US market because many of them are selling massive amounts of new content overseas. But any network that is US-centric (like ESPN) has to be worried since they are now losing customers.

Video Going Mobile. There is a huge amount of content being shown on smartphones, including a lot of content created just for the medium. This is causing all sorts of disruptions. Cell companies are having a hard time keeping up with broadband demands at busy cell sites. Cellular providers have devised zero-ratings plans to excuse some video content from rate caps, which is sure to be challenged as a violation of net neutrality. And while customer data use is increasing, AT&T and Verizon don’t seem to have any plans to loosen the existing tight data caps.

Viewer Age Really Matters. There is a growing and significant disparity between the viewing habits of the various generations. The younger a viewer the more likely it is that they have eschewed traditional cable packages and conventional ways of viewing content. This is of major concern for advertisers, but also for content providers. For example, the average age of a viewer of various network TV programs keeps climbing and it appears that the age of the average viewer of network TV is sixty years old, or older.

Cord Cutting Not as Bad as Advertised. Last year it was impossible to read about the industry without seeing a mention of cord cutters. But the best estimates are that this is about 6% of viewers, and – while growing – it is not nearly the threat that was advertised. It seems more likely that cord shaving (downsizing the size of cable packages or migrating to skinny bundles) is much more of a trend, but big cable companies are remaining mute about the changing nature of their customer base.

Some Interesting Cable Statistics

television-sony-en-casa-de-mis-padresDigitalsmiths recently released their Q3 2015 Video Trend Report and there are some really interesting statistics to be gleaned from the report. This is a large survey given to 3,153 consumers in the US and Canada. I’d love to hear from any small service providers who thinks that the statistics for your own customers are much different than these.

Satisfaction with Current Provider: Only 53% of customers said they were happy with their current cable provider. 4.8% said they were going to cut cable service within the next six months, 7.2% said they were going to change providers, and 32% said they might change providers. We know from past surveys that many of the people who say they are going to drop cable don’t end up doing so, but these statistics show the general lack of satisfaction with whoever provides cable.

Size of Monthly Bill: This asked how much people spend on TV, Internet, and phone. 61% are spending more than $100 per month. 41% are spending more than $125 per month and 24% are spending more than $150. In 2013 56% of people spend more than $100.

Premium Programming: 24% of respondents buy HBO, 15% Showtime, 14% The Movie Channel, 10% Cinemax, and 10% Starz!. 12% of households buy a premium sports package.

Growing Awareness of Skinny Bundles: The survey defined skinny bundles as Hulu, HBO Now, Sling TV, CBS all Access, and the online Showtime. 63% are aware of these services, up from 56% in the first quarter of 2015.

Most Wanted for a la Carte: People were asked what channels they would most want to buy on an a la carte basis. Over 50% of the people would buy ABC, the Discovery Channel, CBS, NBC, the History Channel, and A&E. Over 40% would buy Fox, HBO, National Geographic, PBS, Comedy Central, and AMC. When asked how much people would be willing to spend in total for a la carte programming, the average was $40.50 with 22% not willing to pay more than $20 and only 4% willing to pay more than $81.

Feelings about Large Cable Packages: 34% of people are overwhelmed by the number of channels available to them. 83% of respondents watch 10 or fewer channels over and over again. That is down from 86% in 2013. Only 58% say that it’s easy to find something they ‘want’ to watch.

Pay-per-View Events: Only 10% of households have watched at least one PPV event, things like boxing or UFC fights (not movies), during the last year.

OTT Usage: 56% of households buy at least one OTT service like Netflix. 33% of households that buy OTT watch it more than 2 hours per day. 36% of households have used OTT per-rental services like Redbox or movies on Amazon Prime. 70% of those who use rental services watch content on a weekly basis. 80% of people using OTT report that it’s easy to find things they ‘want’ to watch.

TV Everywhere: Only 43% of respondents were aware that their cable provider offers TV Everywhere programming. Only 23% of respondents use TV Everywhere.

Social Media: 22% of respondents have posted on social media while watching TV. 34% have watched new programming based upon a recommendation from somebody they know on social media.