It’s been well-documented that Nielsen has decided to expand its definition of a TV household for its rating system, in a move both welcomed and criticized for being overdue. As The Hollywood Reporter noted, Nielsen’s plan is to “capture all video viewing including broadband and Xbox and iPads,” though for now the new definition of a TV household has expanded only to include “those households who are receiving broadband internet and putting it onto a television set.” This article looks at some of the underlying trends behind Nielsen’s decision.
Broadcast TV-Only Broadband Homes
The current expansion only adds about 160 homes to Nielsen’s current size of 23,000. According to the New York Times, the new description only applies to 0.6% of households in the US, although it’s unclear how that statistic was reached.
A look at Nielsen’s data reveals that there are indeed only a small number of US households foregoing cable or satellite TV in favor of a pairing of broadcast TV-only plus broadband internet connection. But that number is growing. In Q3, 2012, per Nielsen’s cross-platform report, there were 5.3 million broadcast-only and broadband homes, up from around 5.1 million in Q3 2011 and 4.2 million in Q3 2010.
Of course, viewers watch TV shows online even when they do have cable subscriptions. But the number of “cable plus and broadband” homes has dipped, down from 80.8 million in Q3 2011 to 78.6 million in Q3 2012.
Cord-Cutting: Estimates Vary
Nielsen’s broadcast TV-only broadband homes aren’t necessarily a reflection of cord-cutting behavior, as they may be former broadcast-only homes that upgraded to broadband service. And estimates of the extent to which cord-cutting (foregoing pay TV in favor of watching on the internet) has been occurring vary significantly.
For example, online survey results from Ericsson ConsumerLab released in August 2012 found 7% of US pay TV subscribers claiming to have eliminated their subscriptions in the past 12 months. A Deloitte study from January 2012 suggested that 11% of survey respondents were considering cutting the cord to focus on watching their favorite content online. But a later report from Convergence Consulting indicated that only 2.6% of US pay TV subscribers had cut the cord between 2008 and 2011 to rely solely on online, Netflix, and other sources.
Explanations for cutting the cord seem to revolve around cost rather than availability of content online. Cost was cited as the motivating factor in the Ericsson study, and also in GfK Media research. Cost has also led internet users to downgrade their pay TV services (shave or fray the cord), according to a study by Market Strategies, reported by eMarketer.
Of note, research from TVGuide.com, as reported by AdAge, found that among those streaming more TV content, most said they were doing so to catch up on missed episodes (73%) rather than due to shaving (8%) or cutting (10%) the cord.
And the extent to which online content viewing affects overall consumption also is difficult to gauge. A Nielsen report found that in Q2 2012, Netflix users consumed the same amount of content as non-Netflix users, but spent half an hour less per day watching on TV, making that time up spending 15 minutes more with video game consoles, 8 minutes more with DVD/Blu-ray playback, and 8 minutes more streaming. And the Market Strategies study suggest that “cord-frayers” are more likely than non-frayers to be watching less regular TV due to streaming options.
But earlier research from GfK found Netflix users saying their regular TV content consumption was unaffected. And a study from Altman Vilandrie, reported by eMarketer, found that cable subscribers spend more time watching traditional TV, over-the-top internet TV, mobile video, and internet video on a PC than non-subscribers.
While the research results obviously vary, and putting aside motivations and effects, it appears as though an increasing number of Americans are considering or have already cut back on their pay TV services to focus on online sources or services. Counting such viewers in TV ratings will no doubt provide a more accurate and holistic measurement of how content is consumed.
Use of Devices to Watch TV
Another way to look at Nielsen’s plans is to examine the various devices used to watch TV. While Nielsen’s immediate changes include broadband views on traditional TV sets, the company plans to eventually measure viewing on other screens, such as iPads.
Research from NPD DisplaySearch indicates that more than 70% of consumers across 14 markets report viewing video content on devices other than TV sets, with laptops, desktops, and mobile phones most prevalent, but tablets growing most quickly. And a study by Discovery Communications, as reported by eMarketer, found that while most internet users watch TV content through a cable or satellite box, 56% stream through a computer, 48% stream through an internet-connected device, and 29% stream through a mobile device.
Nielsen’s own data shows that during Q3 2012, 161.1 million Americans watched video on the internet (about 57% of the traditional TV audience size), and 38.4 million watched video on a mobile phone (roughly 14% of the traditional TV audience size).
Figures from other researchers also show a healthy amount of online viewing. According to comScore, online Americans watched 36.2 billion online content videos in January 2013. The rise in online viewership has also led to a steadily increasing volume of online video ad views – as this chart demonstrates.
Data from FreeWheel also shows a rise in online video viewership – up 23% during 2012, with video ad views up 49%. The same study from FreeWheel also demonstrates that online video viewership is becoming more fractured, with more viewers using devices such as smartphones, tablets, and game consoles to view professionally-produced rights-managed video, as opposed to using computers.
For now, Nielsen’s ability to examine this broad spectrum of behavior remains relatively limited. For example, as AdAge reported, Nielsen requires “commercial ad loads in new digital streams to mirror those that accompanied the programs on TV.”
But while Nielsen won’t immediately be capturing the full landscape (which would be quite the feat), there’s no doubt that this latest step will provide a more balanced view of the video consumption landscape.