Over the last decade or so, consumers everywhere have settled into a Video on Demand mindset toward entertainment consumption. Whereas they used to wait for specific times to catch their favorite TV shows, viewers can now access those shows in mere seconds from their smart phones, tablets or PCs via services such as Hulu Plus and Netflix. Movies are also easier to queue up than ever before; instead of physical rentals, thousands of films are now available on the Web and in cable operators’ VOD packages.
It’s no surprise, in this context, that subscription VOD services have been picking up steam. Nielsen estimated that in the fourth quarter of 2014, more than 40 percent of U.S. homes subscribed to at least one of them. This is both good and bad news for the cable industry:
- It is “good” because cable companies often control the last-mile infrastructure for home broadband, which access to is strongly correlated with VOD consumption. Plus, many of them also offer their own VOD packages (e.g., Comcast’s Streampix).
- It is “bad” because, on the surface, many over-the-top (OTT) packages represent direct competition with traditional cable bundles. Cord-cutters have ditched regular pay-TV packages for occasional viewing through Netflix, iTunes, etc.
As cable operators formulate their strategies for 2016 and beyond, adapting to VOD trends will be crucial. Here are three of the top trends to bear in mind:
1) Mobile device usage and VOD consumption go hand-in-hand, especially for younger viewers
The 2015 edition of Ericsson’s “ConsumerLab TV and Media Report” revealed that consumers spent an average of six hours per week using VOD platforms. That number more than doubled from 2011 levels.
Younger individuals were more likely to consume VOD services through interfaces other than TVs. Two-thirds of teenagers watched all of their video through their phones, tablets and laptops. More than half of millennials use these devices to stream video.
Overall, the total number of people using smart phones to watch video increased 71 percent between 2012 and 2015. Almost 90 percent of OTT subscribers reported binge watching a show at least once a week, a habit that is enabled by consumers having access to video from nearly everywhere. Viewers on the go can even start on youra program in the home on their TV and then finish elsewhere on a mobile device.
2) Utilization of VOD depends heavily on income level and broadband access
An optimal VOD experience requires a strong Internet connection. A few Mbps downstream is usually enough for at least grainy picture quality, but a faster connection is definitely needed for HD or 4K quality video, or for supporting multiple concurrent users (e.g., with a family).
Getting one requires significant income. Almost half of the homes that used at least one VOD service had annual incomes of $50,000 or more, while two-thirds of the ones without broadband access made $40,000 or less annually. These numbers could point to some challenges for the cable industry, especially in light of the ongoing climb in cable Internet (including TV/broadband/phone bundles) prices.
Moreover, the Nielsen report found that only about 13 percent of households subscribed to more than one VOD platform. This stat suggests that there is an opening for an all-in-one TV package that includes IP-based VOD in addition to traditional channels. Hybrid set-top boxes such as solutions from Evolution Digital can encompass all of these content types.
3) Great user interfaces and experiences win the day
If properly designed, VOD offerings can provide a much better user interface and experience than linear TV offerings. They can make it easy for consumers to find the shows and movies they want, when they want them, on any device. Frustrating channel surfing can become a thing of the past.
“VOD should provide a much better experience than linear TV.”
A good VOD platform should greatly improve on the usability of traditional TV. Half of the subjects – including more than 60 percent of people ages 25-34 – of the Ericsson study reported that they had difficulty finding the programs they wanted to watch on linear TV.
Evolution Digital’s IP Hybrid Set-Top Box combats this difficulty by offering features such as universal search for content discovery across all platforms including live, OTT services, network DVR and VOD. The STB also features functions such as recommended programs based on previous viewing habits, allowing for easier search, as well as picking up where a viewer left off in a program.