Streaming Media
Netflix is trialling a scheduled programming feature targeting older audiences in a move likely to be replicated in North America. The move is also seen as a response to advertising video on demand (AVOD) services.
The streamer soft-launched the test channel, named Direct, in France last week and will make it more broadly available in the country in a month.
Direct packages Netflix content into a real-time, linear channel accessible to French subscribers via the service's web browser.
"It is effectively zero cost for Netflix to stream programming in a linear fashion," says Guy Bisson, Executive Director, Ampere Analysis. "At the same time, it incrementally gets you a few more viewers, increases stickiness and reduces churn. There are no negatives."
The trial, one of many the service is testing, can potentially increase viewing time and engagement and turn the operation of the service into a lean-back activity, allowing for consumers not to have to think about what they want to view, according to Tristan Veale, analyst, media and entertainment, Futuresource Consulting.
"Consumer research consistently shows that one of the key advantages of linear TV is that it's entertainment without having to mentally engage and choose what to watch," he says.
Unsurprisingly, that particularly appeals to the older generation, a demographic which is proving key to Netflix growth.
"Netflix's demographic base is changing so while it does still skew young the fastest growing segment are in the +45 age group," says Bisson. "That demographic is slightly keener on linear tv than younger demographics so it potentially satisfies some demand and interest there and gives a new way of engaging a new audience."
As Ampere points out, 2020 has been a unique year, and demand for entertainment content during lockdown has temporarily accelerated some of the underlying sectoral and behavioural changes. Nonetheless, the speed of the viewing shifts which have occurred during the last 12 months indicates that under the right conditions and with the right incentives, video consumption behaviours can change very rapidly indeed.
Given the extensive period of time over which online video products have been available in each market, one might conclude that older consumers will remain loyal broadcast viewers (and subscription online video products will stay a minority contributor to their viewing patterns) for some time. However, Ampere reports the pace of change of viewing behaviours has been rapid over the last year. The average UK and U.S. 55- to 64-year-old's subscription OTT viewing increased by over 50% between Q3 2019 and Q3 2020.
Perhaps most importantly, Ampere data indicates that each age group now lags the next by just one year. The average 55- to 64-year-old's daily SVOD viewing now matches that of the average 45- to 54-year-old's viewing in the prior year—roughly 20 minutes in the UK and 40 minutes in the USA. Similarly, the average 45- to 54-year-old is currently watching the same volume of SVOD as their 35- to 44-year-old counterparts watched on a typical day in Q3 2019.
"I don't see why Netflix wouldn't roll it out in the U.S since the upward trend of older demographics is pretty global," says Bisson. "It also potentially opens up opportunities in the longer term for a hybrid AVOD/SVOD model."
AVOD services and FAST (free ad-supported TV) services that have a mixture of on demand and linear channels "are a phenomenon gaining traction fastest in the U.S. currently and beginning international expansion," reports Veale. "This move from Netflix could be in response to that."
That said, Ampere adheres to its belief that Netflix won't carry ads. "I think it has carved out a position as a premium brand in the space, and ads potentially diminish that," Bisson says.
Another upside to linear viewing which Netflix can hope to tap is widening discovery of its content. "Linear TV encourages the TV to be on in the background [as opposed to destination viewing of non-demand] and leads to happenstance discovery," Bisson adds.
France is the testing ground because of the market's affinity for linear TV, which is more marked than in other western European countries.
"France was the only country in the Western European top five where live TV was the most frequently viewed platform for over half of respondents," says Veale. "However, Netflix has a strong base of subscribers in France, making it the ideal test bed for rolling out a linear service."
According to Futuresource Consulting's consumer research program, Living With Digital, 55% of a nationally representative sample of French respondents say that live TV, whether from a free or paid for source, was the video distribution method they watched most frequently. This significantly exceeded the proportion who said that an SVOD service, such as Netflix, was their go-to service (which reached only 16%).
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