The growth of subscription video-on-demand (SVOD) services, such as Netflix and Amazon Prime, has reshaped the way TV content is consumed. These platforms have created a generation of consumers who expect to watch what they want, when they want, on any device. This poses a challenge for traditional TV channels and content makers that have seen their market share dented by the rise of SVOD.
The viewers at the heart of this shift in TV consumption are defined as ‘content connoisseurs’ in a new report by Ampere Analysis. The survey of 10,500 consumers across 10 western markets segments viewers into five groups based on the types of channels and content they watch. The groups are around the same size, each accounting for approximately 20% of the population across all markets. Content connoisseurs are defined as young people in their 20s or early 30s who are wealthy, tech-savvy trendsetters, highly engaged with content. In contrast, the segment at the other end of the spectrum, the ‘digitally detached’, are defined as “old, not very sociable and with almost no interest in TV, movies or devices”.
The report finds that 42% of SVOD viewers in the UK are content connoisseurs, so this segment significantly over-indexes on these platforms compared to the rest of the population. It also reveals that 8.2% of UK households are SVOD-only, meaning they do not subscribe to any paid-for satellite or cable TV services and only supplement free-to-air TV viewing with streaming products such as Netflix, Amazon Prime or Sky’s Now TV. That figure rises to 9.3% in the US.
Guy Bisson, research director at Ampere Analysis, explains: “There’s a stark polarisation of age groups between people who only have SVOD and people who only have pay TV – the latter skews much older and SVOD-only skews much younger.”
He says as the younger pool ages, they will not move towards pay TV, which is significant for brands in this market such as BT, Sky and Virgin Media. “Pay TV operators need to give these people what they want, which is an [internet-] delivered, broad content service that is multiscreen.”
Despite these predictions, the report notes the continuing importance of traditional, linear TV. Across all the markets surveyed, linear TV viewing still accounts for 58% of total TV viewing time. Even within the content connoisseurs segment, linear TV watching accounts for a third of viewing time.
Ampere’s argument, however, is that content connoisseurs represent an increasingly influential segment of consumers – or a “behavioural inflection point” – and that traditional TV operators need to adapt their offer accordingly. The rapid expansion of SVOD players over the past year supports this argument, the report suggests.
Last month, Netflix simultaneously launched in 130 additional countries, thus becoming a global TV network. Amazon, meanwhile, signalled its intent to take on the established broadcasters last summer by paying $250m (£173m) to sign the departing presenters of BBC’s Top Gear for a car show that is set to premiere this year. There are rumours too that Apple is developing its own TV streaming service.
The research shows that Netflix is now the second most popular video app among content connoisseurs, used by 29% of households within this segment. This puts it second only to YouTube (60%) but ahead of Facebook video (23%), Amazon Prime (21%) and Google Play (11%). In addition, the report finds that online services delivered by pay TV brands such as Sky Go and HBO Go are more than twice as likely to be used in content connoisseur households than the average home.
Content connoisseurs are also much more likely to watch films than sports content, with 90% of this segment in the UK stating they love films, compared to 54% for sport. “They’re not particularly driven by sport, which the likes of Sky has always focused on,” notes Bisson.
Young viewers want TV bundles
These new content preferences perhaps explain why content connoisseurs are more likely to switch providers than any other segment. For example, the study shows that 44% of content connoisseurs with a pay TV subscription are considering cancelling it in the next six months. This compares to only 18% of the digitally-detached segment and 27% of ‘TV traditionalists’, classified as middle-aged, middle-income consumers who tend to mostly watch linear TV.
These results suggest that all TV operators face a challenge in keeping hold of younger viewers who want greater flexibility and content choice. This is partly down to the quality of TV shows and films on offer, hence the growth in shows commissioned by Netflix and Amazon over the past 12 months. But it also compels media groups to create bundled packages that offer consumers a range of TV options.
BT and Virgin Media already offer TV bundles that include Netflix and other pay TV channels from the likes of Sky. However, Bisson believes there is significant scope to develop this and provide packages that are more likely to appeal to content connoisseurs and future generations of TV viewers.
“This segment [of viewers] doesn’t just want Netflix, Amazon or Now TV – they want all of it,” Bisson says. “The data shows that they subscribe to all of these [platforms] and they would probably also take a BT Sport channel and a Sky Movie channel on top of it. It’s about putting together that wide range of content and delivering it in the way they want. Traditional TV hasn’t quite got there yet.”