A new study examines how traditional Pay-TV and vMVPD services can grow revenues following changing consumer preferences during the COVID-19 crisis.
New research from Parks Associates shows that 60% of pay-TV subscribers are interested in streaming movies and TV shows from an online video service as part of their pay-TV subscription. This accounts for nearly half of US broadband households. The study “Pay TV: Perception, Adoption, and Retention” observes service providers are responding to this demand. The number of pay-TV consumers who receive online video services has jumped nearly 50% in a year. This new research examines the consumer perceptions of pay-TV services and features and measures the efficacy of different options pay-TV providers can leverage to retain subscribers. It also contrasts traditional pay-TV services and vMVPD services.
“If there was ever a time when entertainment service providers believed that OTT was a phase, they are now convinced of its permanence,” said Kristen Hanich, Senior Analyst, Parks Associates.
“In late 2019, the market reached the crossover point where the same percentage of US broadband households subscribed to an OTT service as subscribed to a pay-TV service. And now OTT adoption outpaces pay-TV by double digits,” she continues.
“The good news for providers is consumers often have both pay-TV and OTT. 79% of pay-TV households have both pay-TV and OTT subscriptions. Providers are in a spot where they must redouble their efforts to engage these subscribers by executing new innovations and business models or risk accelerating customer losses.”
COVID-19 has dramatically accelerated the adoption of online video services, providing a small boost to online pay-TV services. The average number of over-the-top services among households with any OTT service is around 3.8 subscriptions per household. Whereas those households with a pay-TV service and an over-the-top service would subscribe to an average of 4.2 OTT services.
As online video grew, cancellation rates for traditional pay-TV have accelerated. Millions of more cancellations occurred in 2020 compared to 2019. The question now is how stable are the remaining pay-TV customers and how to ameliorate cancellations. Video streaming is the most popular value-added service among pay-TV households, but there is a growing interest in other advanced features:
- 43% of pay-TV households are interested in having video calls on their TV
- 40% are interested in controlling smart home devices and security systems from the TV
- 34% are interested in playing video games on the TV through a cloud gaming service
“Pay-TV providers must keep offering their most valuable content, which includes live sporting and cultural events,” Hanich said. “Additionally, they must offer access to streaming, target new service to their interested customers, and perhaps be willing to take a hit on pricing until this chaotic market stabilizes.”