Opportunities and Threats: Seven Q1 2017 Trends Changing Video

Seven Q1 2017 Trends Changing Video

The way in which people engage with visual content – film, TV and entertainment – has been changing for a while, with some trends becoming very pronounced.  If you’re in the Media and Telecoms sector, and not aware of these trends or taking advantage of them, not only will you be missing out on potential revenue, but could be losing existing revenue streams.

Seven 2016 Video Trends that Emerged in Q1 2017

1) Digital Overtook Physical for the First Time in the UK in 2016

The Entertainment Retailers Association (ERA) showed that digital video revenues overtook physical retail and rental for the first time in 2016 with a whopping 22.8% growth year-on-year over 2015. [1]

% Change 2016 (£m) 2015 (£m)
Physical Retail -16.9% ↓ £   893.6 £1,075.4
Physical Rental -21.2% ↓ £     49.3 £     62.5
Digital  22.8% ↑ £1,309.3 £1,065.9
TOTAL VIDEO    2.2% ↑ £2,252.2 £2,203.8

Table 1 UK Video Sales 2015 vs 2016 (Source: ERA)

2) Another UK First – Access Beat Ownership for the First Time in the UK in 2016

The ERA also showed that for the first time Britons spent more in 2016 accessing subscription video on demand (SVOD), like Netflix, Amazon and Sky, than they did to permanently own discs or downloads. [2]

Ownership Access
Games £1,282.5m (43.4%) £1,674.6m (56.6%)
Video £1,103.0m (49.0%) £1,149.3m (51.0%)
Music £690.0m (62.2%) £418.5m (37.8%)
TOTAL £3,075.5m (48.7%) £3,242.4m (51.3%)

Table 2 Video Access Overtakes Ownership in 2016 (Source: ERA)

3) UK TV Viewing Continued to Decline while Online Viewing Increased

Thinkbox’s 2016 video consumption analysis aggregates data from multiple sources, including BARB and Ofcom. Its report noted that total UK daily video consumption increased 2 minutes per day from 4 hours, 35 minutes in 2015 to 4 hours, 37 minutes in 2016.  However, TV viewing’s share of that declined from 76% in 2015 to 74.8% in 2016. [3]

2016 2015
UK daily video consumption 4 hours, 37 minutes ↑ 4 hours, 35 minutes
TV viewing share 74.8% ↓ 76.0%

Table 3 UK Daily Video Consumption Versus TV Viewing Share (Source: Thinkbox)

TV’s viewing share is still live followed by PVR, but only broadcaster VOD is increasing.

2016 2015
Live TV 60.0% ↓ 61.6%
PVR 10.8% ↓ 11.4%
Broadcaster VOD 3.9% ↑ 3.0%

Table 4 Breakdown of TV Viewing’s Share (Source: Thinkbox)

The remainder is left to other video sources, with YouTube viewing increasing the most, SVOD increasing only slightly, Facebook decreasing and Cinema remaining unchanged.  Surprisingly, DVD viewing share also increased.

2016 2015
YouTube 6.4% ↑ 4.4%
Online Porn 4.9% ↑ 4.4%
SVOD (incl. Netflix and Amazon Prime) 4.1% ↑ 4.0%
DVDs 3.8% ↑ 2.9%
Facebook 1.7% ↓ 2.2%
Cinema 0.4% ― 0.4%

Table 5 Other Video Sources Share (Source: Thinkbox)

4) Almost a Quarter of US Broadband Users Stopped or Never Subscribed to Pay-TV in 2016

The Diffusion Group (TDG)’s report “Life Without Legacy Pay-TV: A Profile of U.S. Cord Cutters and Cord Nevers” looks at long-term U.S. trends. They noted that in 2011, out of the 85 million US broadband homes, 9% (8 million) did not subscribe to traditional Pay-TV services. At the end of 2016, out of the 100 million US broadband homes, 22% (22 million) did not subscribe to Pay-TV. This is an 144% increase since 2011. [4]

Growth of Cord Cutters and Cord Nevers
Figure 1 Growth of Cord Nevers and Cord Cutters Among Adult Broadband Users, 2011-2016 (Source: TDG)

The 22% is composed of 17% “cord cutters” – those who once had Pay-TV – and 5% “cord nevers” – those who’ve never had Pay-TV.  They cite cost as the primary reason for not subscribing to Pay-TV.  Of that 22%, 83% do, however, subscribe to a streaming video service, with 69% subscribing to Netflix. By contrast, just 73% of Pay-TV subscribers also subscribe to a streaming service. [4]

Deloitte’s 11th “Digital Democracy Survey” states that 74% US households are Pay-TV subscribers.  It found two-thirds of those surveyed keep their Pay-TV subscription because it is bundled with their broadband subscription. [5]

451 Research’s US-focused “Voice of the Connected User Landscape” survey says 19% of streaming subscribers pay for three or more services, up 4% from 2015. 95% start with Netflix and 82% with Amazon Video. This is followed by a combination of other SVOD services. [6]

451 notes that top three reasons for subscribing to SVOD are:

  1. Access to movies (50%)
  2. TV box-sets (45%)
  3. Original content (33%), up 8% year-on-year. [6]

5) Future Generation’s Viewing Habits Got Even More Extreme

Millennials (born 1996-1983) and Gen Z (born 2002-1997) have their own viewing habits. Deloitte’s 11th “Digital Democracy Survey” noted that while 73% of US consumers binge, 90% of millennials binge. [5]

Traditional advertising is also less effective. 45% of millennials ad-block. For Gen Z, TV ads only highly influence buying decisions for 18%, while social media circle recommendations are 27% effective. [5]

6) The Industry Cracked Down More on Kodi Piracy

Providing legal viewing options needs to work hand-in-hand with fighting piracy.

Malcolm Mayes, who advertised and sold modified “Kodi” set-top boxes to pubs and clubs for £1,000 each, breached the Copyright, Designs & Patents Act. He was fined £250K. [7]

The Premiere League can now block the servers powering the streams to devices like Kodi, not just the individual streams. [8]

7) AR and VR Are Projected to be Worth Billions

The International Data Corporation (IDC) “Worldwide Quarterly Augmented and Virtual Reality Tracker” noted that in Western Europe, Augmented Reality (AR) and Virtual Reality (VR) spend on hardware, software and services will reach $2.5 billion in 2017 (up 131% from $1.1 billion in 2016). [10]

Worldwide, Augmented Reality (AR) headset revenue alone is expected to grow from $209 million (2016) to $48.7 billion (2021). Virtual Reality (VR) headsets will grow from $2.1 billion (2016) to $18.6 billion (2021). [9]

While games will experience a compound annual growth (CAGR) above 220%, [10] there is uptake in other areas. Turner Networks will stream select games in 360-degree VR from the final rounds of the NCAA Men’s Basketball Tournament [11] and Apple is apparently getting serious about AR. [12]

Opportunities and Threats

1) Don’t Make this Mistake

I’ve seen companies fail to act because of firefighting, lack of understanding and inability to build the service at a cost and quality level needed for success. To maintain their shareholder dividend commitments, they’re cutting costs, which means significantly reducing staff. That will help them for a few years, but doesn’t provide the opportunities they need for sustainable growth.

2) Keep Up-To-Date with the Latest Trends

Everything in this article (and more) I’ve posted as it happened this year as it happened. If you want to keep up-to-date, but don’t have time and want someone to curate the relevant trends for you, then connect on Linked In (https://www.linkedin.com/in/mariaingold/) and follow me on Twitter (@mariaingold) and I’ll save you time and keep you in-the-know.

3) Get Expert Support

Want to evaluate opportunities and threats, predict the future and deliver solutions around video technology and emerging tech? I bring a 25-year strategic and technical executive track-record (15 as a CTO) delivering profitable, cost-conscious and quality video and emerging tech products and services as well as comprehensive audits and strategic innovation and positioning.

Contact Maria Ingold for Interim CTO and advisory services.

Bibliography

[1] Entertainment Retailers Association, “Entertainment sales reached £6.3bn in 2016,” 2017. [Online]. Available: http://www.eraltd.org/news-events/press-releases/2017/entertainment-sales-reached-63bn-in-2016/ .
[2] Entertainment Retailers Association, “Entertainment goes pay monthly for the first time as access trumps ownership,” 2017. [Online]. Available: http://www.eraltd.org/news-events/press-releases/2017/entertainment-goes-pay-monthly-for-the-first-time-as-access-trumps-ownership/.
[3] Thinkbox, “TV accounts for 94% of video advertising,” 2017. [Online]. Available: https://www.thinkbox.tv/News-and-opinion/Newsroom/TV-accounts-for-94-percent-of-video-advertising.
[4] The Diffusion Group (TDG), “Life Without Legacy Pay TV: A Profile of US Cord Cutters and Cord Nevers,” 2017. [Online]. Available: http://tdgresearch.com/report/life-without-legacy-pay-tv-profile-u-s-cord-cutters-cord-nevers/.
[5] Deloitte, “Digital Democracy Survey, 11th Edition,” 2017. [Online]. Available: https://www2.deloitte.com/us/en/pages/technology-media-and-telecommunications/articles/digital-democracy-survey-generational-media-consumption-trends.html.
[6] 451 Research, “Voice of the Connected User Landscape,” 2017. [Online]. Available: https://451research.com/voice-of-the-connected-user-landscape-vocul-overview.
[7] BBC, “Set-top box seller Malcolm Mayes ordered to pay £250,000,” 2017. [Online]. Available: http://www.bbc.co.uk/news/uk-england-tees-39184505 .
[8] TVBEurope, “Premier League secures Kodi court order,” 2017. [Online]. Available: http://www.tvbeurope.com/premier-league-secures-kodi-court-order.
[9] International Data Corporation (IDC), “AR, VR Spend Expected to Double in Western Europe,” 2017. [Online]. Available: https://www.emarketer.com/Article/AR-VR-Spend-Expected-Double-Western-Europe/1015406 .
[10] Business Wire, “Worldwide Augmented and Virtual Reality Headset Market Expected to Grow at a Compound Annual Rate of 58%, Reaching 99.4 Million Units in 2021, According to IDC,” 2017. [Online]. Available: http://www.businesswire.com/news/home/20170316005366/en/Worldwide-Augmented-Virtual-Reality-Headset-Market-Expected.
[11] Fierce Cable, “Turner to deliver Sweet 16 in 360 VR in multiyear deal with Intel, CBS, NCAA,” 2017. [Online]. Available: http://www.fiercecable.com/online-video/turner-to-delivery-sweet-16-360-vr-gear-vr .
[12] Bloomberg, “Apple’s Next Big Thing: Augmented Reality,” 2017. [Online]. Available: https://www.bloomberg.com/news/articles/2017-03-20/apple-s-next-big-thing.
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