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Future of connectivity: Rise of TV streaming

October 2018

Over the past decade, there has been a notable change in television consumer habits. While the pay television industry has experienced a continuous decline in subscriptions, there has been a significant increase in an entirely new mode of entertainment in the form of subscription video on demand or SVOD, commonly known as streaming. As the television industry struggles for its existence, streaming seems to be taking over more and more of the entertainment market.

Decline of Pay TV

With just under 80% household penetration, at present the cable and satellite companies and their advertisers are facing a dire situation. While the rate of decline shows no sign of slowing, IBIS World predicts that current trend of -2% compound growth will continue for the next 5 years till 2023. Along with the decline in paid subscriptions, the television industry is also experiencing a decrease in television Ad sales as a direct result of the shift in viewing habits from traditional television to online video streaming. eMarketer is estimating that the U.S. television’s share of total advertising spending will decline from 33.5% in 2018 to 29.4% in 2021 and the reallocation of dollars may move to digital channels.


% of TV Households Subscribing to a Pay TV Service

When compared with 2010, the number of TV households subscribing to Pay TV service in 2017 has reduced by 11%.

When compared with 2010, the number of TV households subscribing to Pay TV service in 2017 has reduced by 11%.

Coexistence of streaming and Pay TV

As Pay TV subscriptions dwindle, the percentage of U.S. households that use a streaming service has risen dramatically from 47% in 2014 to 64% in 2017. Despite streaming's aggressive household penetration, it appears that streaming is complementing Pay TV. Based on the study by Leichtman Research Group, 62% of Pay TV users also make use of a streaming service. And, the 2017 data from Raymond James indicates that 55% of respondents plan to retain their cable package subscription for the next 12 months – a trend that has remained unchanged over the past three years. Reasons for this point to bundling, video on demand, as well as certain cable specific content like sports and news. Although the Pay TV share continues to remain high, there is uncertainty about how much longer this trend will continue, especially due to the heightened competition from digital services and the convergence of technology and services within the telecommunications space.

In order to succeed in this area, advertisers must align their strategies with consumer interests – namely online video streaming. A strong video streaming user strategy is imperative to increasing the penetration and curbing subscription loss. Consumers are searching for streaming services that have become synonymous with streaming along with their specific TV shows, movies, live sporting events – areas where advertisers can capture the streamer audience. In 2016, the average number of videos on demand services per household were around 1.3, a figure that is probably slightly higher today. With streaming penetration at 62% and roughly 51% of all streaming users subscribing to more than one service, there may still be room for new customer penetration. After the customers reach a saturation point with their subscription services, convincing the rival service customers to switch platforms will become an immediate necessity.

Competitive strategy for Pay TV and streaming

To better understand the importance of a sound competitive strategy, advertisers must study the consumer spending and video viewing habits. Studies indicate that despite multiple media options available to consumers, the disposable income allocated to entertainment has remained around 5.5% over the past 85 years. The only change was between 1934 and 1936 when the statistic hovered around 5.4%. Although there may still be some opportunity to penetrate households that do not use either service, those households are limited in quantity. Combined with a limited customer share of wallet, advertisers will eventually have to strongly compete for existing customers of rival services.

US Consumer Spending on Entertainment 2008-2013

When compared with 2008, U.S. household budget and consumer spending allocated to entertainment in 2013 has reduced by more than $300.

When compared with 2008, U.S. household budget and consumer spending allocated to entertainment in 2013 has reduced by more than $300.

We have to keep in mind that consumers have a limited amount of video consumption capacity. In the U.S., currently, the average time spent on video is around five hours and 13 minutes per day and this is expected to remain the same in the coming years. The same consumers are beginning to spend a lot of time on streaming content. But the number of hours in a day are limited, along with the number of channels consumers actively watch. Back when cable channels were on a growth spurt and packages were incorporating more networks, Nielsen found that the average number of channels viewed remained constant between 17 and 20. The only route to gain incremental subscribers seems to be through competitor customer acquisition.

Average time spent per day with video by U.S. adult
(hours | minutes)

Compared to 2015, U.S. adults are spending less time overall watching videos. However, time spent watching videos on digital video devices has gone up.

When compared with 2015, the average time spent by U.S. adults on videos in 2018 has reduced by 18 minutes per day and is projected to reduce further in 2019.

The Bing Ads analytics team evaluates rich search and audience data to help advertisers tackle their business challenges. In a recent audience segmentation study, cable/satellite and streaming services were compared to the average telecommunications/entertainment options. Bing’s cable/satellite prospects are 52% more likely to click on a streaming related term than the average telecommunications/entertainment prospect. For streaming advertisers, this means that there is an opportunity to gain more share from the cable/satellite audiences. On the other hand, one in five streaming prospects also search for cable/satellite. This means that for cable/satellite advertisers, the streaming audience is one to consider for incremental subscriptions.

Having a sound competitive strategy is not the only way to gain ground on subscription losses. Consistent messaging across all media channels catering to diverse audiences is equally important. For Internet providers, this means promoting a reason why consumers should consider faster speeds and higher bandwidths.

Advertisers and the streaming audience

As highlighted earlier, the streaming is here to stay, and advertisers need to cater to the audience that uses connected devices. The comScore chart below indicates that households with more than two individuals tend have a higher likelihood to stream than a single person household and as the household size increases, that usage also surges. More members in the family means many connected devices that consume a variety of content throughout the day, thus placing a considerable strain on a network. And because excellent video quality is utmost important for streaming services, anything short of a positive experience could lead to major discontent with the internet service. So, marketing messaging should reason around why consumers need to buy faster speeds and better bandwidth as opposed to simply stating that those options are available. And communicating the “why” behind fast speed and high bandwidth on search and other digital mediums will help bring more consistency to what is already being communicated through television.

Streaming Index by Household Size

Larger households equate to a larger streaming audience.

Bigger the household sizes means a greater increase in streaming audience.

In addition to speed and bandwidth messaging, advertisers need to customize their copy to include the issues that matter most to their consumers, namely price and content. Generally, Bing Network searchers looking for streaming services are 59% more likely to search for cable, satellite, or internet pricing and 58% are more likely to search for programming content than the average Bing telecommunications or entertainment prospect.

It is interesting to note that the consumers who stream tend to have lower incomes and are younger in age., This price conscious audience group expects to receive the best deal and an excellent streaming experience from their internet service provider. When it comes to content, the consumers spend 30% of their time on time on streaming services discovering programming, which isn’t much different from what is happening on the search engines.

Of the total cable/satellite Bing Network prospects, 26% search for programming content, with 13% of their searches centered around shows, movies, and live broadcast events, including sports. Of the 42% streaming Bing Network prospects who search for programming, 22% of the searches centered on movies, television shows, and broadcast events (sporting, etc.). Many of the searches based on programming titles/episodes/seasons/networks or titles plus “streaming/online/live.” Advertisers can use this knowledge to get ahead of relevant season premiers and events to boost subscriptions.

Untapped potential in 5G and dawn of the data age

So, where are the untapped areas of potential that advertisers should consider in the near future? Despite the undeveloped infrastructure, 5G is a topic that advertisers may want to get ahead of. The 3G, 4G, and 5G are marketing terms that reference and simplify the labeling of the next generation of networks which make up of diverse technologies and standards working together. Each generation enables new services and produces new hardware desired by the masses. Let’s start with 1G which enabled voice calling with limited handoff, poor quality and poor reliability. Without 1G, the first cell phones, which were large and had low battery life, would have been useless. 2G launched in the early 90’s and enabled text messaging with clearer voice calls. Data speeds increased more than 25 times to 64kbps. The clearer voice calls were marketed heavily, and texting soon became an in thing as phones became smaller and less expensive.

At the same time as phones became smaller, there was an evolution in the internet. The internet was no longer only a resource for information or a way to pay your gas bill. It evolved into services like ecommerce and new online services began to grow. Streaming videos over the internet became a new hobby for many. However, 2G could not handle the video. Over time, the need for significant improvements was noticed, which led to the need for a next generation network. Higher speeds were needed and upgraded networks needed to grow with demand. This led to the entrance of 3G in the early 2000. With 3G, speeds increased up to 30 times and web browsing, and video were enabled. This was followed by the smartphones and applications which ushered in a new era of devices and ecosystems that took advantage of 3G. 4G made streaming easy and gave broadband gigabit speeds to all. As the network grew more complex and faster, so did the hardware. Phones became faster and more complex and more expensive.

Today the landscape is changing, and the phone original equipment manufacturers are introducing new phones each year. They are constantly innovating to keep up with each other. The more data that needs to be processed, the faster the phones need to be and the demand for data is increasing on a constant basis.

5G is much more than the next generation network that carriers are going to take advantage of. It marks the beginning of a new age of digital services and infrastructure that will impact almost all the fields including finance, pharma, autos, real estate, entertainment and manufacturing. It is the dawn of the data age. Data has the potential to become mainstream in our daily lives and in the products that we use. The combination of 5G along with the investment in artificial intelligence and cloud services is changing the world we live in. There is excitement for the future as new revenue streams and new services are born. The Bing Network platform is primed for this change and is evolving with the new Microsoft Audience Network and its targeting capabilities.

There was a time when you were not supposed to have a calculator in class because you were told you will not have a calculator in your pocket when you need it as an adult. Also, you were told not to talk to strangers, or get into a stranger’s car. Today, smartphones let us quickly access calculators and let us call on a stranger in order to get into his/her car e.g. UBER and Lyft.

Our current mobile world will continue to get more mobile per day. Generation Z, or the generation born in 1994, mostly grew up with a smart phone in their hand. They will also be the ones most influenced by 5G. It is predicted that they will be hit hard by artificial intelligence, augmented reality, virtual reality, services and connected everything (Internet of Things). Now is the time to take advantage of the Bing Network audience as the buying power index based on comScore data has not been higher in the last 4 years. Don’t wait to harness the power of Bing Network, do it now.