Competition Intensifies as Economic Circumstances Challenge Entertainment

This is an excerpt from Parks Associates Video Services Dashboard, with insights from Sarah Lee, Ph.D. The Video Services Dashboard provides a visual representation of the most critical indicators used by organizations that provide video services to the home to make strategic decisions.

In the highly competitive entertainment sector, service providers and platform players battle for dollars through subscriptions, advertising, premium content, and bundles. Over the last ten years, the traditional TV/cable bundle has declined, and an increasing number of cable TV providers have determined that legacy/cable television does not provide sufficient profitability. Streaming, meanwhile, is the leading choice for video entertainment today; 88% of US internet households subscribe to at least one OTT service.

In the days of cable television, viewing was limited to linear programs intermixed with advertisements, but the advent and proliferation of streaming has significantly transformed the way in which content is consumed. Today, consumers have a plethora of options – some for a nominal fee, some for a substantial one, some accompanied by advertisements, some ad-free, and still others that are completely free and obtained via antenna, over-the-air (OTA).

Consumers are now empowered to not only seek out what content to watch and where, but also how to obtain it all. This freedom of choice inevitably affects how consumers make choices about their entertainment setup, especially in the face of external circumstances such as economic factors, industry changes, and/or technological advancements.

• Today, the average household spends about $63 per month on OTT SVOD services, down from $90 in 2021.
• 29% of households subscribed to more than 8 services in Q3 2023, but only 20% do so as of Q1 2024.
• 32% of households cite a need to cut household expenses as their reason for cancelling a streaming service.

The rising cost to stream video may be necessary to reach a sustainable level of profitability for businesses, but consumers must see the value for this spend to continue. Consumers are worn down from inflation affecting virtually every aspect of daily life and are pairing down accordingly. This only intensifies the competition among streaming vendors and will fuel more growth of free ad-based services.

The Video Services Dashboard provides a visual representation of the most critical indicators used by organizations that provide video services to the home to make strategic decisions.

Survey Fielding & Respondents

• The survey captured 8,004 heads-of-internet households in the United States.
• This sample was split to show special topic questions to smaller groups. Questions related to video services were asked to the full sample. Sample sizes are noted on each chart.
• The survey is demographically representative of internet households for the full 8,004 survey results as well as for each ~4,000-sample sub-group.
• Demographic quotas are set for age, gender, and household income.

This survey was fielded between 03/21/2024 and 4/4/2024.

Key Terms and Definitions

• Internet households = (Internet HHs) have internet service in their home, delivered to a fixed location or to mobile devices. Internet HHs may use multiple methods of accessing the internet at home.
• Pay-TV = defined as a paid subscription to a service including a bundle of live, linear TV channels. (see extended definition and categorization on next slide)
• OTT= Over The Top video, video service offering delivered online, also referred to as online video service
• vMVPD = virtual Multichannel Video Programming Distributor
• AVOD = Advertising-based video on demand
• SVOD = Subscription video on demand
• TVOD = Transactional video on demand
• FAST = Free ad-supported streaming TV

Video Services Consumer Insights Dashboard: Contents

Executive Summary (Slides 7-9)

Video Services Overview (Slide 10-14)

• Penetration of Traditional vs. OTT Video Services
• Pay-TV & OTT Service Subscription Trend
• Pay-TV Adoption by Service Type
• Overlap in Pay-TV & OTT Service Subscriptions

Pay-TV Services (Slide 15-21)

• Traditional Pay-TV Service Provider Market Share
• Overall vMVPD Service Adoption
• Streaming TV & vMVPD Provider Market Share
• Traditional Pay-TV Service Provider NPS
• vMVPD Service NPS
• Cord Cutter vs Cord Never

Streaming Service Adoption: Business Models & Market Leaders (Slide 22-31)

• OTT Service Use by Business Model
• OTT Video SVOD Service Stacking
• Average Number of OTT Service Subscriptions
• OTT Service Subscription: Big 3 OTT vs. Non Big 3 OTT
• Major Subscription OTT Service Adoption
• Major OTT Subscription Tier: Ad-Based vs. Ad-Free
• Use of Ad-Based OTT Services
• Use of Transactional OTT Services
• Platforms for Watching Social/User Generated Content

Streaming Services: Fees Churn, NPS? (Slide 33-38)

• Total Monthly Spending on OTT Services
• Spending on Video Services: Traditional Pay-TV vs. SVOD Services
• Major OTT Service NPS
• OTT Subscriber Churn
• Reasons for Cancelling Service
• Incentives to Prevent Churn

Appendix (Slide 39-45)

Interested in Parks Associates research? email [email protected] for more info on our services or visit www.parksassociates.com