Technology | Media | Telecommunications

Monday, December 06, 2010

Demand Grows for Low-Cost Pay-TV Option in U.S.

In a recent market study, Ipsos looked at usage scenarios with the most common Over-the-Top (OTT) video offerings -- assuming free ad-supported content wasn't available -- in an attempt to predict the growing demand for low-cost pay-TV service models in the U.S. market.

To make the scenarios as realistic as possible for study participants, the Netflix subscription was priced at $9 per month, Apple iTunes downloads were priced at $1 with no advertising support, and Hulu streams were priced at $1 with advertising support.

When analyzing differences by age, it was clear that young adults (18-34 years old) were driving growth in paid viewership through OTT video platforms -- with over half (51 percent) interested in viewing their regularly watched programs through a low-cost pay-TV option.

"While Hulu has set a precedent for free post-airing streams with ad support, growth continues to be driven by the 18-34 year old audience as more post-broadcast content is moved into payment models such as monthly subscriptions and pay-per download or stream fees" said Brian Cruikshank, Executive VP at Ipsos.

According to the Ipsos assessment, for both Apple and Hulu, the per stream payment model will fuel the strongest growth in OTT video viewing. Not surprisingly, Apple's pay per download/stream follows the model it established with music. Meanwhile, Netflix has a rapidly growing customer base who prefer to receive OTT video bundled via a monthly subscription.

The strength of a per download/stream model is particularly acute for the 18-34 year old audience who are coveted by advertisers. Among this age group, a Hulu TV show streamed for $1 with ad support rivals the Netflix monthly subscription and iTunes per stream options.

Ipsos found the share of preference results were consistent across Hulu, Netflix and iTunes among those who selected a fee-based digital viewing option for their regularly watched TV shows.

Study participants were asked to classify 20 popular TV shows ranging across genres, into different involvement categories. It appeared that consumers are more likely to regularly re-watch comedies online than the other genres, and that reality TV show viewing is more of an occasional activity.

Furthermore, while genre had very little impact on share-of-preference for Hulu, U.S. consumers are more likely to choose the Netflix monthly subscription model for dramas than comedies -- particularly to catch up on the entire missed season.

TV show preferences can impact whether someone chooses to watch online. Most shows had 40-50 percent of regular viewers willing to select one of the post-broadcast OTT video options. In contrast, approximately 60 percent of those who regularly watch documentaries and niche shows will choose one of the OTT options.