Playout & Transmission Global Viewpoint – November 2018

Original Content-Key to Streaming Viewership?

According to a recent survey, when TV viewers were asked about watching a favorite TV show, more consumers than ever say they watch that show on line. Is the broadcast of original content a key factor in that development?

There has been much press coverage about the growth of streaming services. Amazon, Hulu and Netflix represent the largest of such providers. Yet, new companies form and seek to challenge the three Goliaths, with Apple likely to be the newest competitor.

What viewing factors will attract and hold subscribers? Press coverage would have you believe that developing original content is nirvana to a successful streaming operation.Yet each streaming vendor supplies widely different programming and various levels of original programming. And no single vendor has what any single viewer might like to watch. Let’s look at some ingredients to attracting and holding a streaming subscriber.

Live TV Versus Streaming

In November, 2018, Hub Research released its fall report on TV viewing habits. The study looked at some factors that influence an audience’s decision to purchase and then stay with a streaming network.

These findings are from Hub’s “Conquering Content” study, conducted among 1,699 US consumers with broadband, who watch at least 1 hour of TV per week. The data was collected in October 2018.

The survey looked at several elements in the mix, but one immediately jumps out. For the first time, viewers are now more likely to watch their favorite TV show on Netflix than live TV.Live TV is defined as viewing from STB, DVD and VOD sources.

Figure 1 illustrates that more viewers (56%) now watch their favorite show on line rather than from live TV sources, (44%). This represents a 12-point advantage for streaming audience size versus live TV viewing. Last year’s survey showed only a 4-point difference between the two sources.

Figure 1. When the survey asked how viewers watched their favorite show live, 56% said that it came from on line. Click to enlarge.

Figure 1. When the survey asked how viewers watched their favorite show live, 56% said that it came from on line. Click to enlarge.

The streaming onslaught is further highlighted in Figure 2. For the first time in the survey’s history, more survey respondents now say they watch their favorite TV show on Netflix (32%) than on live TV (26%). This makes Netflix the number one source for “favorite shows,” with live TV falling further behind, a trend that began in 2014.

Figure 2. For the first time, Netflix outpaced live TV as the primary source for favorite TV shows. Click to enlarge.

Figure 2. For the first time, Netflix outpaced live TV as the primary source for favorite TV shows. Click to enlarge.

Subscriber Retention

Many streaming services offer a brief free trial period. For these networks, a key to profitability is holding on to those new audience members when the free trial ends. What works longer term?

The survey asked respondents about the number of favorite TV shows. The data indicates that viewers have fewer favorite shows than ever. In 2017 the median number of favorite shows was 5.2. This year, that number drops to 4.4 shows. See Figure 3.

Hub Research says two factors weigh in the data. First, today’s audiences can now binge view their favorite programs, and second, viewers have become more critical about what they watch. Says Hub, “Greater pickiness and binge viewing mean that viewers are highly engaged – but with a smaller number of shows.”

Figure 3. Streaming viewers become more picky with show selection, now indicating they have about four favorite TV shows, versus five favorites in 2016. Click to enlarge.

Figure 3. Streaming viewers become more picky with show selection, now indicating they have about four favorite TV shows, versus five favorites in 2016. Click to enlarge.

The Impact of Original Content

While plenty of both real and electronic ink has been spent touting the benefits of streaming networks developing their own original content, research indicates the success of such expensive efforts is complicated

It’s no secret that the big three streaming services, Amazon, Hulu, and Netflix are spending heavily to develop their own branded content. Even Apple hints that it too wants to purchase original content for its yet-to-be-announced, perhaps, streaming network. Whether nor not such programming is an audience magnet seems even less clear.

Survey respondents who were not-yet using a streaming service were asked if having access to original content made them; A lot more likely to subscribe, or A little more likely to subscribe. See Figure 4.

When questioned about the big three streaming services, no more than 7% indicated original content would make them, a lot more likely to subscribe. That willingness to subscribe increases to as much as 30% when the question is broadened to a little more likely to subscribe.

Figure 4. Capturing the new customer. Click to enlarge.

Figure 4. Capturing the new customer. Click to enlarge.

However, original content does appear to have an overall larger positive effect on subscriber retention. About 75% of those using Amazon, Hulu or Netflix say that having access to original content makes them more likely to keep subscribing. See Figure 5.

More than two-thirds of streaming network subscribers indicate they would keep their subscriptions even if the network did not provide original content.

While creating (buying) original content may not substantially increase the conversion rate from free to a paying viewer, the network’s owned content may help retain an already existing subscriber.

Figure 5. When it comes to subscriber retention, three-quarters of the big three customers said that original content was a factor in their renewals. Click to enlarge.

Figure 5. When it comes to subscriber retention, three-quarters of the big three customers said that original content was a factor in their renewals. Click to enlarge.

The Role of Original Content

Original content is being positioned as a, maybe even “the”, key driver to attract and retain subscribers. But does it? Hub Principal, and the study’s co-author, Jon Giegengack, provides some insight.

Giegengack: "Original content is not the main reason that people subscribe to SVOD platforms like Netflix or Hulu. Netflix’s originals get a ton of attention today, but that’s a relatively new thing - their streaming platform was a huge success even when the number of original shows was in the single digits.

And platforms like Hulu or Amazon have much smaller libraries of original content. We think this is why original shows are much more effective at getting existing SVOD subscribers to keep their content, than at getting people who don’t subscribe to sign up."

Why Pay For Content That May Be Available Elsewhere?

Giegengack: "One big reason is simplicity: even though some (but not all) of their non-original content may be available elsewhere, it’s not all available in one place. Viewers would have to go back and forth between multiple platforms.

Another is that Netflix is ad-free, which many consumers are willing to pay for. Another is the quality of their interface, which makes it easy (or even fun) to negotiate the huge amount of content available to find something you’ll like, even if you didn’t know about it when you sat down to watch.

And finally another is cost: even with recent price increases, the perceived value of a Netflix subscription is high."

Editor note:

An excerpt of the entire Hub Research report, “Conquering Content,” is available at this link.

Graph images from Hub Research.

Commenting is not available in this channel entry.

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