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40% of UK Pay TV customers look somewhere else for content first – but it may be apps on the operator STB

The IHS Markit research shows a rise in social media viewing time
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In the UK, six out of ten Pay TV customers turn to Pay TV first when looking for content, regardless of which device they are accessing it on, or where. Some 20% of Pay TV customers say they do not have a first choice video service, with a similar rate seen among customers at all Pay TV services, according to IHS Markit, which is drawing on research in its ‘Consumer Research: Devices, Media & Usage’ survey (conducted from interviews in markets including the U.S., Germany and UK in November 2018, and released this month).

So, among the four-in-ten Pay TV customers who first look somewhere other than their Pay TV offer for content, where are they going? This depends s on which Pay TV service they have at home. TalkTalk customers are most likely to turn to iPlayer and Netflix, along with other apps available on their set-top box. Virgin Media customers are turning to Netflix, while BT customers go to Netflix or Sky.

Although Sky and Netflix have the highest overlap in subscribers, Sky customers are least likely to select Netflix as their first choice. “It would be interesting to see how this changes, with Netflix now on the [Sky set-top] box,” remarks Fateha Begum, Principal Research Analyst at IHS Markit.

This wide-ranging survey threw up a number of interesting trends. In the U.S., time spent on social video viewing has overtaken online long-form video for the first time since 2011, with Facebook’s video-centric strategy credited with driving the rise. According to the IHS Markit survey, time spent on social video registered the highest level of increase, adding more than eight minutes per-person per-day.

Time spent on social video doubled between 2016 and 2018 to reach nearly 39 minutes per person per day. Facebook alone counts for more than half of the increase seen over the two years following the launch of Facebook Watch in 2016. Instagram saw similar levels of increase in 2018, taking time spent to levels seen at Snap, with 7.4 minutes.

While mobile devices have become a key area of growth in terms of video consumption, particularly out of the home, connected living room devices “present new opportunities for social platforms to reach wider audiences, particularly as consumer appetite for short-form viewing improves,” says Begum.

Other findings for the U.S. market indicate that ‘video stacking’, the practice of juggling multiple OTT subscriptions, is most prominent in Pay TV households that have recently downgraded their package or cut the cord. Cord-shavers (who downgraded) had an average of 2.94 OTT subscriptions. In comparison, those that cancelled a Pay TV service had an average of 2.3 OTT subscriptions, indicating that this second group is more likely to be cost-conscious..

The IHS Markit report shows that in France, linear TV viewing held an 84% share of total viewing in 2018 compared to a 99% share in 2008, and good weather could even have suppressed the linear total.

“Although the World Cup was the most popular TV programme of 2018, the data from Mediametrie [France’s audience measurement body] does not indicate live viewing has increased for the year as a consequence,” says Rob Moyser, Research Analyst at IHS Markit.

“An increase in linear viewing over one month would not necessarily skew linear viewing to increase over the year, especially if live TV viewing has been in decline for much of the year. It is also worth mentioning that 2018 was one of France’s warmest years since records began, and would in turn have affected total viewership.”

Meanwhile, in Germany the time spent on Pay TV VOD increased by 23% as the roll-out of PVRs continues. These next-generation boxes also give access to more on-demand services. The study counts Pay TV VOD as any on-demand content viewed via a Pay TV set-top box, excluding third-party OTT services like Netflix or YouTube. It does include broadcaster catch-up TV, content included with a linear subscription, boxsets and transactional content.

“Germany is unique in Western Europe as digitisation was slow and it only completed digital switchover in March 2019,” says Begum. “The transition to digital TV along with advanced set-top boxes is driving the number of homes capable of receiving on-demand services and thus users and usage.”

Online video services in Germany added more than 3 million paid subscriptions in 2018, taking total subscriptions to more than 15 million, while Pay TV subscriptions remained relatively flat at 29 million, adding 450,000 net in the year.

The study found that one-in-five German Pay TV homes use the service less than once a week. So, what keeps these apparently super-light users paying for the service each month? Sports keeps some of them onboard even if they do not make the most of the platform when there are no live games to watch.

“Cord-cutting has largely been confined to the U.S.,” says Begum. “It takes consumers some time to churn from the old TV box even when their consumption habits have shifted. According to our consumer surveys, exclusive content is the biggest driver of subscriptions for Sky Deutschland uptake, whereas Deutsche Telekom over-indexes on wider benefits such as bundling with broadband – although that is not the biggest driver.

“’Free TV services are often bundled and sold for a small monthly fee, and analogue cable is paid through utility bills in Germany, so many households consider it to be ‘free TV’ whereas we would consider this to be Pay TV. They are therefore less likely to churn. So, this 20% statistic [the proportion of homes who subscribe to Pay TV but use it lightly] is mainly seen in Germany out of the countries surveyed. In the UK the figure is circa 10%.”

In Spain, PVR-based time-shifted viewing accounted for a 41% share of non-linear viewing time – indicating that the country’s on-demand platforms have not grown at the same rate as the other countries covered in this report. “In France, for example, PVR viewing stands at 8.8 minutes to Spain’s 9.6 minutes, but its on-demand platforms take up a 15% share of total viewing compared to Spain’s 6% share,” says Moyser.

The IHS Markit research shows that overall, total television viewing times across the U.S. and major European markets have declined slightly as consumers increasingly use non-linear as a substitute for traditional TV viewing, rather than as an addition .

Excluding social media, total average daily video viewing time for the countries analysed stood at 273.7 minutes per-person per-day in 2018. This compares to a peak of 284.3 minutes in 2013, when linear viewing held an 87% share of total viewing in contrast to a 67% share in 2018.

“The decline in minutes suggests a shift in viewing habits as non-linear becomes the television format of choice for more viewers in the United States, the United Kingdom, France, Germany, Italy, Spain and the Netherlands,” IHS Markit reports.

Rob Moyser explains: “During previous years, non-linear television viewing was largely additive to traditional linear TV viewing, driving up the total number of minutes watched. However, non-linear has now become an alternative for linear TV for many consumers. As a result, total cross-platform viewing time is returning to levels seen prior to the rise of on-demand viewing.”

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