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Nielsen Report Highlights Pay-TV Dilemma

Aditya Kishore
7/13/2017
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Research company The Nielsen Co. just released its Total Audience Report for the first quarter of 2017. According to the report, live TV viewing continues to decline among US viewers while all other forms of video consumption are growing.

Daily time spent viewing live TV dropped ten minutes from four hours and 31 minutes in Q1 2016 to four hours and 21 minutes in Q1 2017, more than double the decline in the previous year. Live TV viewing data isn't available by generation, but Nielsen does provide live plus DVR/time-shifted viewing data split out that way. And, as you would imagine, time spent viewing live and time-shifted TV is down six minutes year-over-year for Gen Z, and 12 minutes for millennials. But what is perhaps more interesting is that the same declines are seen even among older segments: Live plus time-shifted viewing is down seven minutes for Gen X and five minutes for Baby Boomers.

Similarly, weekly time spent viewing live TV and DVR dropped an hour and nine minutes compared with Q1 2016. Here we can strip out the time-shifted viewing, and the difference is even greater. Live TV viewing per week dropped from 28 hours and 25 minutes in Q1 2016 to 27 hours and eight minutes this year.

Weekly video viewing on all other platforms increased, up eight minutes on DVRs, 24 minutes on PCs and the same on smartphones. Even usage of multimedia devices (not necessarily for video only) grew 44 minutes.

Pay-TV subscriber numbers also declined, down to 97.8 million from 99.2 million in Q1 2016, while homes subscribing to a VoD service rose from 50% to 57%.

Clearly OTT, on-demand consumption is growing among US viewers. So why is this a dilemma for pay-TV providers? Because, despite these declines, live TV continues to account for close to 80% of time spent consuming video per week (based on our calculations using Nielsen's data). If we include DVR and network DVR-based viewing, that goes up to 90%.

Add to that the number of users per medium (monthly reach), and you start to see why live TV has an even greater advantage, particularly for big budget advertisers. Live TV reaches 292.5 million users per month, or 94% of the US population. Other technologies are also well established, but trail live TV substantially: According to Nielsen analysis, 204.7 million use DVRs; 168.8 million view video on smartphones; and 116.8 million view video on PCs every month. That is why a company like Comcast Corp. (Nasdaq: CMCSA, CMCSK) has been wary of moving too quickly into the OTT space. (See Is Comcast Right to Reject OTT? and Are Reports of Pay-TV's Death Greatly Exaggerated?)

Even though the growth is all coming from new distribution platforms and technologies, the vast majority of viewing time is tied to more "traditional" TV viewing behaviors. In addition, those are also the behaviors that have the best-defined business models, revenue streams and established ecosystems and industry structures with regard to advertising and licensing.

You could argue that live TV is dying, but it's doing so slowly. And a lot of subscriber revenue is going to flow to providers before it dies. That is the challenge for pay-TV providers: move too fast and you lose out on the existing revenue, but move too slowly, and, as viewership shifts, you get squeezed out of the future video value-chain. As with any established business, pay-TV providers have far more to lose than young OTT startups, which can cheerfully bet on revolutionary changes because they have nothing to lose. For those large pay-TV providers, finding that perfect balance between innovation and caution is going to be the key to their success.

— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation

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Phil_Britt
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Phil_Britt,
User Rank: Light Sabre
7/17/2017 | 9:22:14 AM
Re: Why Pay?
As a former sportswriter, I would say that live sports can be an issue. But long before the very early stages of the Internet, my wife and I started taping home town NFL games to spend time with our then young kids, then we would watch games later. Still do that to this day even though kids are grown and gone. Taping (DVRing) enables us to cut out an hour of commercials. Of course, that only works if one doesn't have (or turns off) Twitter, etc., alerts of sports team results -- and if "friends" don't mention scores if one is out.
242ak
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242ak,
User Rank: Moderator
7/14/2017 | 11:31:06 AM
Re: Decline
danielcawrey - it's difficult to see live sports being time-shifted for sure. There have been experiments with local news bulletins being offered on-demand, and that feature did do well. Basically, it was used by people coming in from their evening commute and then settling down to watch the news on their own schedule. The actual time-shift was maybe 15-20 minutes, that kind of thing. 

First run TV shows is another one .I think the excitement created around premieres of even SVoD shows -- there can be a bit of a run on the servers when the shows first get uploaded. The new season of GoT is coming, that's going to engineer a spike. We can call that "VoD", but as you say, it's more like a faux-broadcast experience, because everyone is watching it as soon as its on. And given the impact on networks and servers, there's a decent chance it will be multicast in the future anyway.
DCulver
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DCulver,
User Rank: Blogger
7/14/2017 | 10:56:40 AM
Why Pay?
The question in my mind is this: Who is paying Nielsen to under-report the pay-TV numbers? I can't think of a single person who watches live TV, other than folks who are sports fanatics. Otherwise, why would anyone sit through 25 minutes of ads for 35 minutes of programming per hour, when you can speed through all of that with a DVR? Or ad-free streaming? Better yet, why not skip all of it with ... let's just call it alternative methods ... that cut out advertisements and the cost of paying for TV altogether? 

Remember the days when people used to talk about a catchy ad they saw while watching their favorite programs (think people talking about Grey's Anatomy 10 years ago)? When's the last time you had/heard a conversation like that? Let me guess ... the Super Bowl. And before then? Last year's Super Bowl. And so on. 

Not only are people not watching TV in the same old way (regardless of what Nielson is trying very hard to suggest), advertisers have no choice but to recognize this new reality. Where will they go now for all of those eyeballs that once had no choice but to mindlessly watch their vacous offerings?
danielcawrey
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danielcawrey,
User Rank: Light Sabre
7/13/2017 | 7:37:53 PM
Decline
Live TV may be in decline, but I still think people will pay for it. 

There's a lot more live TV than people think: News, sports and first-run television shows. All of those will have a premium if you ask me. 
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