What’s Driving the Growth of OTT Services?

Digitalsmiths-Drivers-of-OTT-Service-Use-Mar2016A majority of adults in the US and Canada use at least one monthly subscription service such as Netflix or Amazon Prime to watch movies or TV shows, per results from Digitalsmiths’ latest quarterly report [download page] on online video and pay-TV trends. With Nielsen data indicating that subscription video-on-demand (SVOD) services are nearing majority penetration of US households, the Digitalsmiths study offers some insights into the drivers of that growth.

It’s worth mentioning that growth isn’t limited to penetration. In comparing self-reported daily viewing time among pay-TV viewers and subscription service users, the Digitalsmiths study indicates that the two are near parity. Indeed, while daily consumption appears to be higher among live TV viewers, almost one-third of subscription service subscribers say they watch the services for at least 2 hours per day.

Digitalsmiths-Live-TV-vs-Subscription-Service-Viewing-Time-Mar2016

(An analysis of traditional TV viewing trends by age group can be found here.)

Asked why they use third party rental and/or monthly subscription services such as Amazon, iTunes, Netflix, Vudu and YouTube, respondents to the Digitalsmiths survey were most likely to cite their convenience (56.5%), with many also saying these services are cheaper (46.5%). Interestingly, the influence of mobile devices is becoming more pronounced over time: the ability to watch on an iPad or tablet (27.8%) and the ability to watch on a smartphone (20.5%) were both cited by a considerably larger share of respondents this year than in years prior.

A separate recently-released study [download page], from Nielsen, supports these results. In examining the drivers of video-on-demand (VOD) viewing (whether offered through an online-only service or through a pay-TV package), a leading 81% of respondents in North America said that the ability to view at a time convenient to them is a driver. Almost three-quarters (73%) said they like to catch up on multiple episodes at one time, while 64% pointed to the ability for each person in the household to watch different programming at the same time. The main deterrents, meanwhile, to VOD viewing among North American respondents were a desire for more VOD programming choices (68%) and a feeling that watching VOD programming on an online or mobile devices isn’t as good as watching on a bigger screen (67%). That’s a curious result in light of the growing trend towards mobile viewing noted in the Digitalsmiths study.

Returning to the Digitalsmiths research, with almost half of respondents reporting a Netflix subscription, the survey was able to delve further into the features of the service that subscribers find appealing. Interestingly, the cost of the service appeals to the widest group of subscribers (64.6%), though a majority also like that all members of their household can create their own profile.

Also of note, only 43% of subscribers said that personalized show recommendations are an appealing Netflix feature. Separately, almost two-thirds of consumers report being “always” or “sometimes” frustrated when trying to find something to watch on TV, suggesting that personalized recommendations would have some appeal. In fact, fewer than 1 in 5 respondents said that their cable/satellite provider makes personalized recommendations of TV shows and movies. And among those who said their provider doesn’t make such recommendations, almost 45% would like that feature, up from 35.3% a year earlier.

One potential OTT driver not covered in the Digitalsmiths research is the absence of advertising, potentially omitted as it isn’t relevant across all services. The Nielsen study does analyze VOD viewers’ attitudes to ads displayed before, during or after VOD programming, finding that on the favorable side:

  • About two-thirds (68%) in North America don’t mind getting ads if they can view free content;
  • Slightly more than half (52%) agree that ads give them good ideas for new products they want to try; and
  • Exactly half don’t mind ads that directly reflect purchases they’ve made in the past.

On the negative side of things:

  • 68% agree that most ads are for products they don’t want to buy;
  • 66% wish they could only see ads that are for products that interest them; and
  • 65% find that online ads are distracting.

About the Data: The Digitalsmiths data is based on a survey conducted in Q4 2015 among 3,120 US and Canadian adults. The Nielsen results are based on a survey conducted August 10-September 4, 2015 among more than 30,000 online consumers in 61 countries.