Data released last month by The Diffusion Group (TDG), an online consumer research firm, shows that more than half of consumers able to view online content on their television have increased their use of over-the-top programming sources over the last year. The increase in OTT viewing was reported to be significant by 24% of OTT consumers, while 28.5% said the increase was slight. The consumption of OTT content remained about the same for 33.7% of consumers, according to TDG.
Meanwhile, separate figures from the Leichtman Research Group (LRG) show that large video providers (including cable, satellite and telcos) lost a combined total of more than 26,000 subscribers in the third quarter of 2013 alone. While not as heavy a loss as the 50,000 subscribers lost in the same quarter of 2012, it has been a rough year for large cable companies. LRG states that these providers have lost more than 600,000 subscribers in the third quarter of this year alone. In contrast, satellite and large telco providers gained subscribers. Still, the overall figures show a decline of 80,000 subscribers for the sector this year, compared to a gain of 310,000 subscribers over the prior year, according to LRG.
“That consumers are watching more over-the-top video is not itself surprising,” TDG co-founder Michael Greeson said in a statement. “But to see such a widespread increase in OTT TV viewing is dramatic, especially as pay-TV subscriptions in the U.S. are experiencing their greatest 12-month losses to date.” The move away from traditional cable is still helping satellite and telco providers for the moment, but the trend towards OTT viewing is not showing signs of slowing anytime soon.
Barry Diller, the former broadcasting executive whose Internet and media company IAC InterActivecorp is a major backer of Aereo, says that the online content service could achieve a market penetration of more than one third of consumers, provided that it wins court challenges brought by broadcasters. Aereo, which supplies over-the-air broadcast signals via a broadband connection for $8.00 per month, is very attractive to younger consumers compared to the high price of traditional cable subscriptions, Diller said at a conference sponsored by Bloomberg. “This closed circle of broadcast and cable and satellite is going to break up,” Diller was quoted as saying. “It’s not going to maintain itself in the next decade.”
The notion that ever-higher retransmission consent rates cannot be passed onto cable consumers indefinitely seems to be gaining traction. The CEO of DirecTV has expressed similar sentiments, and a consumer “tipping point” was a major theme among rural providers at the closing panel of the TelcoVision event which took place last month.
Diller also dismissed a statement from the National Football League (NFL) that threatened to shift NFL games from broadcast channels to cable. NFL and Major League Baseball recently filed in support of broadcasters in their court case against Aereo. Earlier this year, some broadcasters had made a similar threat to shift their programming to cable in the event of an Aereo court victory. Diller noted that the NFL makes a significant amount of revenue from showing its games on broadcast channels. While an Aereo victory in the courts would dramatically alter the broadcast market, it is unlikely that programmers and sports leagues would cut themselves off from the large amounts of revenue that would remain available to them via over-the-air transmissions.
By 2015, Americans will consume on average more than 15 hours of traditional and digital media daily per person, or 1.7 trillion hours annually, according to a new report released by the University of Southern California’s Institute for Communications Technology Management.
That quantity of media is equivalent to 8.75 zettabytes annually, or 74 gigabytes — roughly 9 DVDs worth — of data sent to the average consumer per person per day. (A zettabyte is a million million gigabytes, or 1021 bytes.)
According to the report, entitled “How Much Media? 2013 Report on American Consumers,” hours of media consumed grew by more than 5% annually between 2008 and 2013, while consumption measured in bytes grew by 18% annually over the same period. (For purposes of the study, researchers did not include media consumption at work.)
While television and radio contribute 60% to the hours of consumption, newer digital sources are contributing to the gains in bytes consumed. Mobile computers are the fastest growing segment: in 2008, mobile computers accounted for 3% of all bytes consumed, while in 2013 they were responsible for 10%, corresponding to a year-over-year growth rate of 27%.
The report’s authors note that “[w]hile in the past media consumption was overwhelmingly passive—we sat and watched TV or listened to radio—new media consumption is increasingly interactive, with time-delayed, multi-tasking and interrupted viewership fast becoming the typical consumptive behavior.”
Anyone who is keeping count may have noticed that I am linking to a lot of Wall Street Journal articles lately. That is because I spent some expiring frequent flier miles on a subscription. When it runs out, I might revert to citing Sports Illustrated Kids.
Last Wednesday’s Journal featured an article titled, “Meet the Man Who Really Runs the Internet” (for now, we’ll give the Al Gore jokes a rest). The half-page interview featured Andy Jassy, head of Amazon’s Web Services (AWS) division, which sells computing power and cloud services. AWS recently landed a $600 million contract with the CIA, and while Jassy would not disclose how that amount compares to the total volume of AWS sales, he noted that it certainly enhanced the credibility of cloud services, generally.
Some market analysts estimate that the AWS is ringing up about $4 billion in annual sales; Jassy did not dispute reports of his predictions that the cloud division could one day eclipse Amazon’s $60 billion retail business. IBM, Microsoft, and Google are also jumping on the cloud bandwagon, indicating the potential for exponential growth of this sector. Read more
Intel’s efforts to break into the over-the-top video market with its own product may be fading away. Reports surfaced last week that Verizon was in talks to acquire all or part of Intel’s OTT operation. This kind of development is not surprising, as there were doubts about Intel’s ability to obtain sufficient content, and rumors circulated that Intel was talking not only to Verizon, but also to companies like Samsung and Amazon.
Verizon’s interest in the Intel product makes sense, as its OTT-kiosk combination service, Redbox Instant, went live earlier this spring. Verizon’s combination of content, broadband infrastructure and rental kiosks give it what are perhaps some unique advantages in the tough video OTT space. According to one report, Verizon and Outerwall (formerly known as Coinstar), its partner in the Redbox Instant project, plan to increase brand awareness efforts to the Redbox Instant service in the fourth quarter of 2013.
Meanwhile, Amazon, which had also been rumored to be in talks with Intel, has reportedly pushed back the release date of its planned OTT box, possibly past the holiday season and into 2014. Given the Amazon Prime video OTT service and the popularity of Amazon’s Kindle e-reader, which is increasingly evolving into a media player, Amazon is also poised to enhance its position in the OTT market. The exact impacts of the Intel deal will likely be better understood before the end of the year.
The Wall Street Journal (WSJ) reported last week that Comcast video subscriber levels had declined in the last quarter more steeply than the prior year. The losses were attributed in part to increased competition from Verizon and AT&T as their respective FiOS and U-Verse deployments grew and gained more footing. As subscriber rates declined, however, video revenues increased as subscriptions to high-rate services and devices grew. Comcast also noted increased programming costs, an interesting wrinkle given their corporate fraternity with NBC-Universal.
Some observations: first, Verizon and ATT are going for the heart of Comcast when they plant their video offerings in the cable company’s service areas. That is not surprising, but it does illustrate how valuable video is, particularly as it becomes part of a triple play. Read more