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AVOD/SVOD fuel explosion in TV service stacking

TV service stacking in the US 2018-2020

Hub says that the average number of TV services stacked together by U.S. viewers increased by 30% to 4.8 over the last year. AVOD and SVOD services are significant contributors to the growth in TV service stacking, while linear TV services are dragging the number down.

TV viewers are using more services

According to new data from Hub Entertainment Research, we are using more TV services than ever before. The company asked 2,000 16 to 74-year-olds how many TV service providers they were using from the following categories: MVPD, VMVPD, SVOD, DTC, AVOD, OTA, and transactional VOD. In 2018, the average TV viewer was using 3.0 services. The number rose to 3.7 (up 23%) in 2019 and in the latest poll increased to 4.8, a record increase of 30%.

Perhaps it is not surprising that there was such a significant increase in the latest Hub poll. The survey was fielded in the first week of April, as many people were entering their third or fourth week of shelter-in-place orders.

The Hub data demonstrates that more services equate to happier viewers. 40% of people with one or two services said their TV needs were met, and 53% of those with four or more.

Looking at the data, it is clear which service types are driving the increase in TV service adoption and which are not.

AVOD usage grows strongly

The Hub data shows that the number of people using free advertising-supported TV platforms increased from 33% in 2019 to AVOD use in the US 2019 202040% in 2020. The increase is very much in line with what AVOD providers are reporting. Speaking with nScreenNoise on Let’s DEW Lunch, Erick Opeka, Cinedigm Network’s President, said he had observed:

“… a pretty sizable uptick in consumption over the last 60 days.  We are seeing about a 30% to 32% range depending on the channel. Some channels we’ve seen a more than 50% increases.”

It could be that the growth will continue. With over 30 million newly unemployed Americans, broadband will be the priority over paid TV service. Parks says that three-quarters of householders say broadband is critical within the home. What is more, 3-in-5 households say they are more likely to cancel pay TV before broadband. Under these conditions, free ad-supported services are sure to attract a lot of cash-strapped viewers over the next few months.

SVOD penetration and stacking increases

SVOD services contributed to the increase in TV service usage in two ways. Firstly, Hub says SVOD penetration grew from 72% in 2019 to 78% in 2020. Secondly, many consumers stacked more services together. The number of people using two or more of the big three – Netflix, Amazon Prime Video, and Hulu – increased 3% between 2019 and 2020 to reach 46%. More significantly, 31% started using Disney+, and 6% added Apple TV+ to their entertainment mix.

Continued growth in SVOD stacking could continue with the entry of Peacock and HBO MAX in the second quarter of 2020.

Transactional VOD (TVOD) a recent contributor

Digital Entertainment Group (DEG) numbers show that digital movie rental and purchase revenue growth stalled between 2018 and 2019. However, movie studios have begun to release movies destined for the theaters direct to digital while theaters remain closed due to the COVID-19 emergency. Trolls World Tour was a big success in its first three weeks of availability for rent through online movie stores. Expect more movie releases to follow, driving up the number of new customers for TVOD stores.

More people leaving traditional linear TV than joining

Cable, satellite, and telco TV continued their downward spiral in Q1. Comcast lost 3% of its video customers in the first quarter, and AT&T lost over 4% of its DirecTV and U-verse customers. The industry could be headed for a 10% subscriber loss this year.

Some, but not all, of those defecting customers may have joined a virtual MVPD like YouTube TV, Sling TV, and fuboTV. fuboTV increased customers by 37% between Q1 2019 and Q1 2020, to reach 315,789 at the end of Q1 2020. Overall, the industry grew almost 10% in 2019, adding just under a million subscribers.

Over-the-air antenna (OTA) use has grown significantly. Nielsen says, the number of OTA users increased by 3.8% to reach 16.3 million homes between Q3 2018 and Q3 2019.

That said, traditional pay TV losses far exceeded the gains made by OTA and vMVPDs in 2019. The gap is liable to widen in 2020.

Why it matters

TV service stacking is the norm in the U.S., and the practice is growing.

Traditional pay TV is shrinking, and vMVPDs and over-the-air antenna use are not growing anywhere nearly enough to cover the losses.

SVOD and AVOD usage and stacking is growing fast.

TVOD is contributing to stacking growth but at a slower rate.

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