February 9, 2012 – 12:08 pm
We've all heard that people are watching more TV these days, not less, as a result of the deeper penetration of digital video recorders and online distribution. Nielsen's latest Cross Platform Report (sign-in required for download) confirms that and shows some interesting shifts in how people are consuming video.
For the most part, despite some subscriber declines at the cable operators over the past year -- much of those declines have gone to satellite -- Nielsen's figures note that pay TV is still dominant, as 90.4 percent of U.S. TV households subscription to a cable, telco or satellite company. Roughly three-quarters (75.3%) also have broadband internet access. The bundling of internet and TV subscriptions have kept the cable operators reasonably healthy, especially since the number of homes paying for both a TV subscription and broadband has increased 5.5 percent last year.
Still, separated out, the picture does look a little darker for the MSOs, Nielsen's numbers suggest. The number of homes subscribing to wired cable fell 4.1 percent in the past year. At the same time, telcos and satellite TV have seen increases of 21.1 percent and 2.1 percent, respectively.
That last figure could be important to advertisers and networks looking to do more interactive TV advertising, as the cable operators remain hamstrung by the literal tangle of wires in local areas that cannot be connected to broader national networks for addressable ads. Because the satellite and telco providers' systems have not been stitched together by disparate local systems, they have a greater advantage in being able to offer seamless connections between advertisers and homes with set-top boxes.
That will allow satellites and telcos to gain higher rates for their interactive advertising. And that will only put more pressure on cable operators and their bottom lines.
That shift to satellite and telcos has highlighted the "cord-swapping" that consumers are increasingly doing, as opposed to the much-hyped "cord-cutting," where a tiny fraction of cable subscribers have abandoned the wire and rely on over-the-top devices and formats to watch TV.
Those broadnband-only households represent less than 5 percent of the television households. Naturally, U.S. consumers in homes with broadband internet and free, broadcast TV stream video twice as much as the general cross-platform population . They also watch half as much TV, Nielsen says.
Still, if you just think of it as "watching video," as opposed to specifying TV or streaming, the activity among consumers are much more alike, suggesting that advertisers who do invest more in cross platform marketing are likely to get more bang for the buck. Nielsen says:Whether they’re cord-cutters or former broadcast-only homes that upgraded to Internet service, these homes represent a very small but growing group of U.S. consumers.
Interestingly, roughly the same percentage of consumers in broadcast-only/broadband homes watch traditional TV, stream or use the Internet as in all cross-platform homes; the difference between these groups falls to time spent on these activities. Even broadcast-only/broadband homes spend the majority of their video time watching traditional TV: 122.6 minutes, compared to 11.2 for streaming on average each day.
Comparing the growth of this kind of digital video activity since Q3 2008 to Q3 2011, the numbers are, unsurprisingly, pretty big:
-- Watching video on the internet: +21.7 percent in users, +79.5 percent in time spent
-- Watching time-shifted TV: +65.9 percent in users, +66.1 percent in time spent among those same viewers
-- Watching video on a mobile phone: +205.7 percent in users, +19.8 percent in time spent
Updated: BTIG's Rich Greenfield went a little deeper into the Nielsen report with his own analysis (sub. req.)and came to some additional conclusions: particularly, that streaming video doesn't actually increase the amount of TV viewing.
His point is that the heaviest video streamers tend to watch less TV, not more. The usual argument in media circles, which may be wishful thinking at the end of the day, is that online video is primarily consumed by people catching up on TV programming that they missed.
That may still be true for a large part of the population. But the trends in video streaming use are a moving target. We really don't know how viewing patterns will emerge. Hence, Greenfield frames his analysis in the form of a question: As streaming activity grows and becomes more commonplace, will it cannibalize traditional TV viewing?
The answer, from the Nielsen numbers at least, is... probably.
That doesn't mean that traditional TV is "dead" or even "dying." But viewership is being sorely dented, especially by younger consumers. It has long been said that for those in high school up to recent college graduates, TV viewing really means watching Netflix, Hulu or, in most cases, seeing pirated shows and movies via channels like BitTorrent.
That sounds pretty ominous if you're in the traditional TV business. But here comes the asterisk: streaming activity is very, very small in the aggregate. The average consumer in a home with both TV and internet access is streaming just 3 minutes of video a day.
Also on average: people are watching TV four hours a day.
So the traditional TV business isn't close to collapsing under the threat of broadband video. But the shifts are perceptible.
Greenfield advises TV programmers to embrace the TV Everywhere model right now and get ahead of the changing viewing patterns before it is too late. And don't just throw and app up on the iPad or iPhone. Nor should it just be clips or past seasons' episodes. Greenfield suggests making sure the content on these apps are robust and across all available platforms.
Still, being ready for tomorrow is one thing. Making money today (or at least through the next quarter or two) is another. Broadcasters natural argument to this is that doing so will devalue their TV advertising rates and potentially come up against licensing distribution agreements.
Ultimately, these broadcasters ask, "Where is the business model for a robust TV Everywhere?" It's tricky balance between being cautious and forward-thinking. Not everyone will be successful in making the transition, though some are more vulnerable than others. To be sure, it's the companies -- think Viacom's MTV Networks -- that need to appeal to the youth market that is more quickly abandoning TV that will serve as the canary in the coalmine when it comes to really testing the value of the TV Everywhere model before the more general entertainment channels do.
At this point, the traditional broadcast business still has time to figure it all out. But the digital clock is ticking louder and louder.
February 9, 2012 – 12:08 pm