Changewave Research: Alternative TV Trends

ChangeWave Research: Alternative TV Trends

Alternative TV Trends Report

Alternative TV Options Transforming Traditional TV;

Amazon Takes on Netflix

Andy Golub and Mike Wrobel

Overview: The widespread availability of high-speed Internet and online video content has helped fuel an explosion of alternative TV options. A September 13-23 ChangeWave survey of 1,115 North American consumers focused on the transforming alternative TV market, including free and paid Internet video services and the latest in 'cord cutting' trends.

ChangeWave Research is a service of 451 Research.

Internet Video & TV Content: Free and Paid Providers

Currently, which alternative TV content providers are capturing the most eyeballs?

Free Content. YouTube (78%) remains the clear leader among respondents currently watching free Internet Video/TV, well in front of TV Network Websites (40%) and Hulu (30%).

Paid Content. Netflix (82%; down 2-pts) still holds its big lead among respondents who pay for online video, despite declining for a third consecutive survey. However, Amazon Instant Video (22%) has surged 5-pts since the previous survey and has increased its lead over iTunes (16%) and Hulu Plus (8%).

Here's a comparison of Netflix users vs. Amazon Instant Video users for the past four ChangeWave surveys:

EPIX, the online movie distribution channel for studios like Lionsgate, MGM and Paramount, used to be available exclusively to Netflix subscribers, but is now also available on Amazon Instant Video. Importantly, 17% of Netflix subscribers say this development makes them More Likely to cancel their Netflix subscription.

Does this development make you more likely to cancel your Netflix subscription, less likely, or does it have no effect?

Current Netflix Subscribers / Current Survey Sep ‘12
More Likely to Cancel Netflix Subscription / 17%
No Effect / 65%
Less Likely to Cancel Netflix Subscription / 0%
Don't Know/NA / 16%

Compounding matters for Netflix, 18% of their subscribers also pay for Amazon Instant Video – up 4-pts since the previous survey.

Current Survey Sep ‘12 / Previous Survey Feb ‘12
Netflix Subscribers Also Paying for
Amazon Instant Video / 18% / 14%

And while two-thirds (66%) of current Amazon Instant Video subscribers still pay for Netflix – that's 7-pts lower than the previous survey.

Current Survey Sep ‘12 / Previous Survey Feb ‘12
Amazon Instant Video Subscribers
Also Paying for Netflix / 66% / 73%

These trends show some Amazon Instant Video subscribers no longer have a need for a Netflix subscription – something we will be watching closely going forward.

Satisfaction With Paid Providers. iTunes still has the highest Very Satisfied rating among consumers (35%), with Netflix (23%), Amazon (22%) and Hulu Plus (20%) bunched closely together in the second tier.

Bottom Line. Netflix remains the 800 lb. gorilla of the alternative TV market – yet these survey results not only point out their vulnerability, but show that Amazon is making market share gains at their expense.

Adding fuel to the fire is the growing popularity of Amazon's Prime service, which includes free shipping and access to Amazon Instant Video and Kindle books for $79/year. Moreover, with the new Kindle Fire HD tablets hitting the market – Amazon shows no signs of slowing.

‘Cord Cutting’ Among Consumers

The ChangeWave survey also looked at cord cutting trends (e.g., canceling traditional paid TV in favor of other options).

A total of 3.1% of respondents report they cancelled their traditional Cable, Satellite or Fiber-Optic TV service within the past 6 months – up 0.6-pts since February.

Over the past 6 months, have you cancelled your cable, satellite or fiber-optic TV service altogether?

Current Survey Sep ‘12 / Previous Survey Feb ‘12 / Previous Survey Jun ‘11
Yes - Within Past 6 Months / 3.1% / 2.5% / 2.2%

What reasons were given for cutting the cord among this group? More than half said the Content Provided Wasn’t Worth the Price (51%). Another 32% said they Didn’t Watch TV Enough and 19% said they Can Get Same Content Elsewhere for Less Money.

How are current cord cutters watching TV since they cancelled their traditional TV service?

Better than two-in-five (43%) are using Free Internet Video Content and 32% are using Paid Internet Video Content. Another 39% are opting for Over-the-Air Local Broadcasts.

How Satisfied are Cord Cutters With Alternative Methods of Watching TV? Customer satisfaction is highest among cord cutters who pay for Internet video content – with 45% saying they’re Very Satisfied with this method of watching TV – up 4-pts from February.

Over-the-Air Local Broadcasts ranks second with 31%, while only 11% say they’re Very Satisfied with watching Free Internet Video Content. We note that both have dropped significantly since the previous survey.

Likelihood of Switching Back. Less than one-in-five (18%) current cord cutters say they’re likely to switch back to a traditional TV provider in the next six months (9% Very Likely; 9% Somewhat Likely).

Planned ‘Cord Cutters’ – Next 6 Months

What about planned cord cutters (i.e., consumers who plan to cut the cord within the next six months)?

The survey found 2.8% of respondents say they’re Very Likely and 8.6% Somewhat Likely to cancel their TV service altogether – similar to our previous survey results.

Over the next 6 months, how likely are you to cancel your cable, satellite or fiber-optic TV service altogether - rather than simply switch to another cable, satellite or fiber-optic TV service provider?

Current Survey Sep ‘12 / Previous Survey Feb ‘12 / Previous Survey Jun ‘11
Very Likely / 2.8% / 2.6% / 2.6%
Somewhat Likely / 8.6% / 9.2% / 6.6%

The number one reason why planned cord cutters say they’ll cancel their traditional TV service is the Content Provided Isn’t Worth the Price (72%). Another 33% say they Can Get the Same Content Elsewhere for Less Money.

Which alternative methods do future cord cutters plan on using to watch TV?

Not surprisingly, one-in-two (48%) plan to watch Free Internet Video Content after canceling. A near equal amount say they’ll watch Paid Internet Video Content (46%) – but that has surged 12 full points since the previous survey.

How do you plan to watch TV after canceling your cable, satellite or fiber-optic TV service? (Check All That Apply)

Current Survey Sep ‘12 / Previous Survey Feb ‘12
Free Internet Video Content (e.g., TV Network Websites, YouTube, Hulu, etc.) / 48% / 45%
Paid Internet Video Content (e.g., Netflix, Hulu Plus, iTunes, Amazon, etc.) / 46% / 34%
Over-the-Air Local Broadcasts / 38% / 32%
On My Mobile Devices / 12% / 12%

There are ways for traditional TV service providers to fight back in order to keep planned cord cutters from leaving. For example, one-in-three planned cord cutters (32%) said a traditional subscription that included anytime, anywhere access to TV programming on mobile devices would make them less likely to cancel.

Some traditional TV service providers are giving their subscribers access to TV programming anytime, anywhere on a variety of mobile devices (e.g., smart phones, tablets) - as long as they continue to subscribe. If your TV Service provider offered this type of service, would it make you less likely to cancel your TV subscription, more likely to cancel, or would it have no effect on your likelihood of canceling?

Current Survey Sep ‘12
Less Likely to Cancel / 32%
No Effect / 48%
More Likely to Cancel / 2%
Don't Know/NA / 18%

Importantly, some traditional TV service providers are already offering similar services via mobile apps – although there are often hurdles to overcome. For example, some providers are restricting viewing access only to inside the home, while others are limiting it to specific networks and/or require the use of special hardware.

Mobile Apps. We asked respondents to tell us the most important features in their TV service providers mobile app. The clear number one feature: Ability to Watch Live TV (29%).

When we asked respondents where they prefer to watch video on mobile devices, nearly half (47%) said they prefer to watch Inside the home. Another 21% prefer to watch Outside the home, while 32% prefer both.

Streaming Video and Internet-Connected Devices

The iPad (32%; up 7-pts) is now the number one Internet-connected device respondents say they are using to stream video content. Importantly, it’s showing the greatest growth of any Internet-connected device. Blu-ray Players (31%; down 2-pts) are the second most used device, followed by iPhones (25%; up 5-pts) and Video Game Consoles (24%; down 1-pt).

Which of the following Internet-connected devices do you use to stream Internet video content? (Check All That Apply)

We note that Apple TV (13%; up 4-pts) and Roku (13%; up 4-pts) have both seen increases since the previous survey.

In terms of overall momentum, Apple now manufacturers three of the top seven Internet-connected devices – iPad, iPhone and Apple TV – providing the company major penetration into this market. And the just announced iPad mini and new iPad with Retina display are likely to strengthen Apple's position even further.

Apple Set-Top Box. Some analysts think Apple may release a set-top box for viewing and recording live television as an alternative to the traditional set-top box rented from a TV service provider. When we queried respondents on their interest in such a device, 8% said they’d be Very Likely to buy it and another 26% said Somewhat Likely.

While plans for an Apple set-top box may not be on the immediate horizon, the survey results suggest an extraordinary level of consumer interest in such a device should it come to market.

Summary. The alternative TV market continues to pose a threat to traditional TV providers as consumers seek out more innovative and cost efficient viewing options.

While a relatively small percentage of consumers have so far chosen to cut the cord completely, far more are experimenting with an exploding number of alternative TV options –thereby supplementing their traditional TV subscriptions.

In response,traditionalproviders are offering their own alternative viewing options, including anytime, anywhere access to TV programming on mobile devices – one of the most powerful current toolsin their fight to retain their customers.

Summary of Key Findings

The ChangeWave Research Network is a group of 25,000 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.

Table of Contents

Summary of Key Findings 9

The Findings 11

Internet Video & TV Content: Free and Paid Providers 11

‘Cord Cutting’ Among Consumers 15

Planned ‘Cord Cutters’ – Next 6 Months 18

Streaming Video and Internet-Connected Devices 23

ChangeWave Research Methodology 25

About ChangeWave Research 25

About 451 Research 25

The Findings

Introduction: The widespread availability of high-speed Internet and online video content has helped fuel an explosion of alternative TV options. A September 13-23 ChangeWave survey of 1,115 North American consumers focused on the transforming alternative TV market, including free and paid Internet video services and the latest in 'cord cutting' trends.

ChangeWave Research is a service of 451 Research.

Internet Video & TV Content: Free and Paid Providers

Currently, which alternative TV content providers are capturing the most eyeballs?

Free Content. YouTube (78%) remains the clear leader among respondents currently watching free Internet Video/TV, well in front of TV Network Websites (40%) and Hulu (30%).

There is a variety of free TV and video content offerings available through the internet. Which of the following free TV and video content providers - if any - do you currently use? (Check All That Apply)

Current Survey Sep ‘12 / Previous Survey Feb ‘12
YouTube / 78% / 78%
TV Network's Website (e.g., CBS, NBC, etc.) / 40% / 44%
Hulu / 30% / 31%
Individual TV Show's Website / 22% / 24%
iTunes / 20% / 23%
TV.com / 3% / 4%
Other / 3% / 4%

Here's a comparison of Netflix users vs. Amazon Instant Video users for the past four ChangeWave surveys:

From which of these services do you currently pay for online video content? (Check All That Apply)

Current Survey Sep ‘12 / Previous Survey Feb ‘12 / Previous Survey Jun ‘11 / Previous Survey Dec ‘10
Netflix / 82% / 84% / 90% / 91%
Amazon Instant Video / 22% / 17% / 8% / 7%
iTunes / 16% / 15% / 14% / 16%
Hulu Plus / 8% / 6% / 3% / 3%
Vudu / 4% / 5% / NA / NA
Other / 2% / 4% / 4% / 3%