Summer Not Loving for SVOD

It’s been an eventful second half to what has been a great year of television.  Broadcast TV, against the backdrop of new competitors and often hyperbolic screeching of its demise, we have seen a plethora of big hitting, ratings winners. I will come back to that particular topic in another post however. Today I would just like to turn our attention back towards SVOD (what? Again?!).

At the beginning of this year, SVOD was continuing its meteoric rise. In fact, across Q1 we saw the strongest SVOD subscriber growth measured by BARB.  So much so, I even predicted that I expect total SVOD subscriber penetration to break 50% of all households by the end of this year.

However, following that strong Q1 growth, we have witness two subsequent slower growth periods, culminating in Q3 figures that shows the slowest growth ever recorded by BARB.

SVOD Numbers

Across the entire three months, SVOD services added less than 50k households to their subscriber services, with all three main players experiencing flat returns on the quarter.

Now, it’s fair to say that the third quarter of any year is not exactly a boon time for growth, it is the summer after all, and TV viewing historically is impacted severely during the summer months and in hot weather.  So, in part, it is not surprising that after a long hot summer, this had a knock on effect on SVOD take up, as well as traditional TV viewership.

WeatherModel

It is of course unclear as to whether this slowdown in growth is temporary or a potential plateau in the scale of these services, and eyes will be on Q4 data when it is released by BARB in early 2019.  Until then we can just hypothesise.

What we do know of course is that the role of SVOD is already mainstream, and whether a plateau or not, with 41% of all UK households subscribing to a service, their influence on TV continues to be significant. 

So much is the impact of SVOD, that at a recent Royal Television Society evening, Justin Sampson, CEO BARB, highlighted that the amount of viewing on the TV set that is ‘unidentified’, and therefore to content that does not relate to a broadcast programme, has increased by 58% since 2015.

This equates to 19% of all TV set viewing.  Now, what is not clear, by definition of being ‘unidentified’, is that we dont know how much of this is SVOD, but the trend is clear. Justin Sampson even went further, with flagging that for 16-34s, the ‘unidentified’ component equates to 38% of all their TV set viewing.  

Not surprisingly, Justin announced that identifying this content was of utmost priority for BARB in the coming months and years, with investments and tests with both Nielsen and Kantar Media technologies.

Nielsen themselves announced at the recent ASI TV & Video conference that they are now regularly reporting SVOD viewing figures at a programme level to subscribers in the US, with some fascinating results. Unsurprisingly, there were large viewing levels to the big promoted shows across Netflix, Amazon etc, but of increasing interest was the value that archive, low-cost comedy series provide in viewership levels. Friends for example across the year providing as much minutage of viewing as some of the high budget commissions. Although at first surprising, you can see, even from data in the UK, why Netflix first went for the show, it still drives constant audiences to Comedy Central, getting a reach over the year in excess of 15m. Being able to look at this non-linear SVOD viewing as well however provides event more context. With this extra data, existing within a single source data sets, subscribers will not only be able to see whether SVOD viewing is cannibalising their broadcast, but additionally it will allow their programme sales teams to potentially re-evaluate the true value of their programmes, many years after their initial broadcast rights cycle. Netflix in particular already spend multiple billions on programme acquisitions, should this sort of data become increasingly available, it may be that traditional studios begin demanding a fairer share for their content?  We can see this with Friends itself, quite possibly off the back of the data provided by Nielsen, with Netflix having to increase its rights offer by $70m to a whopping $100m, up from its current $30m.

Q4 promises to be a crucial few months in the growing position of SVOD in the UK TV Landscape, all eyes will be on BARB in early 2019.

Netflix Ad’d value?

It was recently announced that Netflix has been in the process of both developing and testing the ability to insert targeted promotions within its programming and its got people quite excited. The reason being, is this the start of Netflix moving to an ad-funded model?

It is easy to see the potential attraction, its base of subscribers continues to grow, viewing levels are now on par with one of the larger (UK) TV channels, and with viewer data and profiles, the ability of the platform (sic) to insert the right ad to the right person is a potential game changer, what’s not to like?

However, as a content provider, Netflix is already successful and the trend is in a right place, it’s USP has always been an ad-free positioning, so why change that?  Well, of course, the reality might be a two or even three price point plan, potentially offering a subs free access for access with ads perhaps, whilst still providing an ad-free service to those that are happy to pay. A winner.

But let’s look at the numbers?

Latest BARB data suggests that Netflix continued its impressive growth in Q2 of this year, increasing subscriber households by over half a million, to now account for 9.7m households. That means Netflix is in 34% of all UK households, and they are paying (kerching).

SVOD Numbers

So, on the one hand there is plenty of scope for additional household penetration who may be happy to accept ads without having to pay, indeed, 66% of UK households dont have Netflix.

However, when we break this down by demographics, then the scope starts to look less attractive.  At the end of 2017 BARB estimated that just under 60% of 16-24s had access to Netflix in a subscribing household. Since then, Netflix has added an additional 1.5m subscribers, so some simple profile factoring and we can estimate that 60-65% of 16-24s already have access to Netflix.  As we know, this is a prime, attractive, advertising sub-demographic and they already have an ad-free Netflix access.  So, is the intention to just try and attract the remaining 35%? Maybe.   If so, then the proposition to planners becomes less attractive.  One of the biggest draws, and indeed drivers of effectiveness for TV is its mass reach brand building impact. So, if only 35% of your target audience is potentially available, then it’s less of a one stop shop, and now just one of many avenues in my marketing mix in which to place my campaign.  That’s not to say it will still not be a valuable channel for marketers, it is just not the ‘game changer’ some have made it out to be. The TV sales houses can sleep easy for now.

The other alternative of course is that Netflix takes a hit on actual subscribers in order to offer ads to clients. This is a dangerous game for any brand that has positioned itself not to accept advertising, and also one that is still doing relatively well to increase market share.  It would of course also be a big gamble, hoping the TV ad revenue would more than compensate for the lost subs. With decreasing linear TV viewing time, then there is scope, but its a risky business for sure.

Elsewhere, although Netflix continued its strong growth in Q2, Amazon Video was relatively unchanged, adding less than 100k subs in the quarter.  Now TV fared only marginally better with just over 100k additional subscribers in the quarter.

SVOD Penetration

This means that across the three main services, Netflix, Amazon Video and Now TV, Netflix is now growing the strongest. Overall, UK households subscribing to an SVOD service increased by 22% in the year to June with 41% of UK households now having at least one of the three services.

SVOD Annual Growth

As for Netflix and their plans to introduce advertising, the next 12 months should prove very interesting and the devil will very much be in the detail.

Netflix takes The Crown

It’s now official. In the latest BARB data for Q1 2018, in terms of the number of subscribing households, Netflix is now the largest paid for TV provider in the UK, knocking Sky off it’s throne that it has sat on for over 30 years.

Its been called a disruptor, a new entrant, a protagonist, but there is now no escaping that Netflix is mainstream and availability alone, the largest player in town.

SkyvsNetflix

Netflix in the first three months of 2018 saw its largest increase in subscribing households since BARB began measuring, with nearly 1m new households taking up the service early this year. It is now estimated that 9.1m households in the UK are subscribing to Netflix. That’s a 12% increase in just a single quarter.

SVOD Numbers

It’s not just Netflix that has performed well in Q1 of course, Amazon Video also continues to increase it’s footprint, with an increase of 0.6m households in the quarter, a quarterly growth of 13%, in line with that of Netflix.  Alongside these double digit increases however, Now TV experienced a relatively sluggish Q1 remaining relatively unchanged on Q4 2017.

Although these are no doubt disappointing numbers for Now TV, underlying this is a yearly growth that does indeed outpace it’s rivals (albeit from a much lower base).  Comparing Q1 figures year on year, Now TV has seen a 38% uplift in subscribers, above that of Netflix (31%) and Amazon Video (35%).  So, it’s possibly too early to tell whether this quarter is simply a blip or a slowdown in general.

SVOD Annual Growth

So, what does all this mean to the average household in the UK. Well, as already mentioned, Netflix is now the leading distributor of paid television in the UK, with 32% of all households in the UK paying for Netflix. This is followed by Amazon Video which is in 17% of homes, and Now TV in 5%.  Overall, 39% of all homes have access to at least one SVOD service, and if this rate of growth continues, this may get close to 50% by the end of 2018.

SVOD Penetration

This data highlights an interesting question of course, the UK has always had a traditional free to air cohort of homes of around 10-11m. We’ve seen in previous analyses from BARB that SVOD subscribers skew heavily towards pay-tv so potentially the biggest disruption of these services will be if they take hold in homes that have otherwise previously been reluctant to pay for television, and given the growth above, that looks like it’s already happening.  If Netflix, and Amazon can convert those types of households to embrace paying for access, then they truly are a game changer. Interesting times ahead for sure.

 

Vodding along nicely

It was a good end to 2017 over at Netflix HQ as they recently announced that worldwide subscriptions had now numbered 117 million, a rise of 8.3m in the final quarter, of which 6.4m from outside the US.  Impressive growth by anyone’s standards.

So, clearly non-US growth is becoming a major revenue stream to Netflix, but where does the UK come in all of this. Well, BARB, has now released their latest data for quarter 4 2017. Arguably, one of the best estimatse of subscription numbers in the UK, their Q4 data is based on a sample of over 12,000 randomly selected households.

After a slow Q3 for all the major players, it seems the winter months, and potentially the Christmas and holiday season has rejuvenated interest.  In the final 3 months of the year, BARB estimates that Netflix subscribers grew by 662k households to 8.1m homes overall, a quarterly growth of 8.8%.  It further means that the UK represented around 10% of the entire of the non-US growth in subscriptions in the final quarter, suggesting the importance of the UK for it’s platform. The recent announcement of a tie-up with Sky just goes to prove this point.

Amazon Video likewise, saw an increase of 424k homes to a base now of 4.3m households, a whopping 11% quarterly growth.  Now TV posted the most modest increase, of just 54k households, but that still means it achieved a year on year growth of an impressive 40%.

SVOD Numbers

What this means for the UK, is that there are now over 10m homes in the country that subscribe to an additional SVOD service, as well as their traditional linear TV services. and the take-up doesn’t yet look like stopping.

SVOD Penetration

Not yet in a majority of homes, but growing, SVOD services are now in over 36% of all homes, Netflix in 28.8%, Amazon Video in 15% and Now TV in a respectable 5%.

If rates continue, then in as little as 36 months, SVOD services could be in the majority of UK homes, a tipping point when it really can be said to be ‘mainstream’.  Whether this will happen however is debatable of course. But what does seem to be clear, is that the need for additional content viewed in a non-linear fashion is becoming a staple part of our viewer preference, and this will almost undoubtedly have an impact on scheduled television for years to come.