We’re watching the death of linear TV right before our eyes.
Live TV ratings are at their lowest in years, as consumers have more options now than ever — to watch whatever content they want to, at any time they want to, and on any device they want to.
The old guard of broadcast and pay TV networks, who have been slow to adopt to new viewing behaviors, are suffering today, while new digital entrants are giving viewers more and more reasons to dump regular TV, its advertisements and fixed schedules in favor of on-demand, ad-free viewing experiences on any device.
The writing is on the wall for the old guard (apologies Rembrandt)
Online video streaming now accounts for 28% of total video consumption in the US, according to a report from GfK this week, just ten percentage points shy of “live when broadcast” viewing, which accounts for 39% of total video consumption.
Linear TV gasps for breath with each new streaming service that is released and the number of online and on-demand video options is growing at a break-neck pace in the US and elsewhere. GfK described 41% of US consumers as “digital enthusiasts” who have subscriptions to at least three online video services, plus a pay TV subscription. 2015 has seen a slew of pay TV networks release direct-to-consumer on-demand services.
Consumers aren’t watching linear TV nearly as much as they were even three years ago; but television – serial shows, big tent-pole events, live breaking news and sports matches – it’s all experiencing a boom, thanks to consumers’ video everywhere, anytime mentality. The difference is that linear TV, ie appointment viewing on the TV set, is very much an endangered habit.
Pay TV subscribers aren’t cutting their pay TV cords in droves, but it’s clear those viewers are watching less and less live linear TV, and subsequently fewer and fewer commercials. Nielsen estimates 41% of homes in the US now subscribe to at least one SVoD service. Netflix usage among pay TV subscribers has increased 33% over last year, according to a study out this week from The Diffusion Group.
Netflix is by far the most popular OTT service. Netflix viewing, in traditional TV measurement metrics, ranks third among the most popular networks, and will become the top-ranked “broadcaster” in two years. Consumers have spoken loud and clear: on-demand access is the rule now, and personalized online distribution is the new norm.
Linear TV Sees Biggest Drop in Audience in Its History
Linear TV audiences in the US are down 15% over last year, according to research firm Alphonso, using its own data. That’s the biggest drop in TV audiences in a single year in the history of broadcast and pay TV, it said.
Viacom, in particular, is experiencing a steady decline in ratings. Its target demographic is Millennials and Generation Z viewers, the very demographic that have flocked to mobile devices and online video platforms for entertainment. For the pay TV network MTV, ratings have dropped 21.7% over last season, and have dropped 25% in the 18-34 demographic. Viacom’s slump isn’t considered a temporary position; it’s a new reality for pay TV networks.
“Given our view that the audience abandonment of ad-supported TV is structural, and worst among kids and young-adult demographics, we believe the future is more likely negative than positive,” said analyst Todd Juenger of Sanford C Bernstein, in a note earlier this year.
Children’s networks aren’t faring much better. Most of the kiddie networks that appear on pay TV have seen significant ratings declines. Nickelodeon (owned by Viacom) has had it the worst, with a 30% drop in ratings over last year’s numbers in the 2-11 demographic.
Networks that target older demos are losing viewers, too. A&E Networks’ total day viewership in May decreased 17% over last year, with its History Channel losing 74,000 viewers, according to MoffetNathanson; Time Warner’s total-day viewership is 5% over last year; and NBCUniversal’s dropped 9%.
For the over-the-air broadcasters, Fox saw a 24% decline in audience, while NBC’s audience dropped 20%; CBS dropped 18% and ABC dropped 8%.
“It’s clear the downward spiral in TV ratings continues with no end in sight,” said analyst Michael Nathanson earlier this year.
Those viewers who still watch linear TV are more and more using other connected devices while they watch TV. According to Yahoo’s Flurry analytics firm, multi-tasking between watching TV and using another device is highest during primetime hours, and according to research from Alphonso, this multi-tasking peaks during commercials.
Networks Head for Internet TV
It’s not the product that is trouble; on the contrary, demand has never been higher for premium, original and exclusive content. It’s the distribution that has become outdated. Amid ratings declines and advertiser worries, many pay TV networks are dipping their toes into the OTT waters, while some (think HBO) are cannon-balling into the new world of Internet TV.
Two more pay TV networks launched direct-to-consumer services this week. A&E launched its first foray into the world of OTT with the Lifetime Movie Club, a niche streaming movie product that costs $4 per month.
Showtime’s OTT service, just called “Showtime,” also appeared this week, a few days ahead of its scheduled July 12 debut. “We need to grow our business,” Showtime CEO Matthew Blank candidly told an audience of cableco executives at Internet and Television Expo (INTX) earlier this year. “The traditional distribution business is very mature right now.”
Blank pointed to the fact that the US’ largest pay TV provider, Comcast, now has more broadband subscribers than pay TV subscribers. “There’s a very clear message there,” he said. “We intend to grow households and we need new ways to do that.”
Showtime’s parent company, CBS, has gone all-in on Internet TV. It launched late last year a subscription service that lets viewers stream past and current seasons of its shows, and even offers live streaming of local station broadcasts in select markets.
Viacom has responded to its own ratings troubles with an OTT product: a mobile-centric subscription service for children called Noggin. It has also made some of its popular Comedy Central series free to stream to viewers without a pay TV subscription, via the Comedy Central Roku app.
HBO’s direct-to-consumer service, HBO Now, is a full embrace of Internet TV. The service offers all HBO content, new and old, live and on-demand, for a no-contract $15 per month fee.
AMC, home of the popular series “Breaking Bad” and “The Walking Dead,” has dipped a toe in the OTT water with Shudder, a niche horror film streaming service. See “AMC’s OTT Strategy: Niche by Niche,” in TOR935.
NBC is reportedly working on a niche comedy streaming service, and has already launched a fitness-focused subscription OTT service called Radius.
Many pay TV networks have also begun licensing their content to live streaming Internet TV services, such as Sony’s PlayStation Vue and Dish Network’s Sling TV, in order to reach more viewers. While these services are more like traditional linear TV than Netflix or YouTube, they do offer access to viewers on more devices than the traditional TV or the difficult-to-use TV Everywhere services.
Web Video Broadens Definition of “Television Content”
Traditional television is being challenged on all sides from online firms that are now investing heavily in premium video. Netflix, Amazon and Hulu now offer original TV-like, Web series to their subscribers and the quality of those programs rival or surpass that of broadcast and pay TV network content. This fact led Scott Feinberg, in the latest Emmy issue of The Hollywood Reporter, to call for the Emmy academy to begin considering original OTT series for awards. “Streaming TV isn’t going away anytime soon,” he wrote. “It’s time for members of the TV Academy to get with the program. If the TV Academy doesn’t shift with the times, it won’t be long before Emmy viewers decide to change the channel.”
Short-form online video platforms are now developing premium content too, which gives viewers another personalized, on-demand alternative to linear TV. YouTube has entirely changed what “premium content” means, thanks to its extremely successful original content experiments; it has become the best and most effective way to reach specific demographics, and marketers and traditional content creators know it.
YouTube’s multi-channel networks (MCNs) are now reaching audiences that are larger and more engaged than the top broadcast TV networks, and YouTube celebrities have supplanted traditional TV and movie stars in the lives of Millennials and Generation Z viewers. The top 100 YouTube MCNs are worth nearly $10 billion, according to data released this week from Ampere Analysis.
“[MCNs] are an extremely effective way for traditional media players to reach a younger audience which is leaving traditional media in droves,” said Richard Broughton research director at Ampere Analysis.
Pay TV Providers Begin Incorporating Web Video into Pay TV Services
Reading the tea leaves, pay TV providers in the US and Europe have begun to tailor their offerings to reflect new consumption habits. Service providers have launched TV Everywhere services across mobile and connected devices; they’ve expanded their on-demand libraries and are now marketing VoD alongside linear TV, such as Comcast’s X1 platform. In fact, Verizon this week filed a patent for a new programming guide lay-out that places on-demand titles alongside linear TV channels.
Some pay TV providers who are also…
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