US OTT Subs to Hit 277 Million by 2026

NAB News

More evidence of the rise and rise of OTT: Subscriptions in the US will increase another 20% to 277 million nationwide over the next five years.

https://amplify.nabshow.com/articles/us-ott-subs-to-hit-277-million-by-2026/

In a new report, The Evolving Digital Media Landscape, Parks Associates and partner Everise reveal that in Q1 2021, the average OTT subscription in US broadband households has an extremely strong correlation with age — subscription lengths for younger consumers are much shorter than for older consumers. Older consumers subscribe to fewer services but keep them for a longer period. By contrast, younger consumers may subscribe to a larger number of services but are more likely to churn through them.

Generational changes may prove to be a challenge to OTT companies going forward. Although a majority of Gen Z adults own and use televisions, adoption is declining — only 72% of Gen Z householders report owning and using a TV, compared to 77% of Millennials, 88% of Gen X, and 93% of Boomers.

Smart TV ownership is likewise lower — less than half of Gen Z householders report owning and using a smart TV, compared to 56% of US broadband households overall. “Companies must make multiplatform support a priority,” the researchers conclude.

Dave Palmer, President of Everise says, “The emergence of multiplatform viewing further drives the need for [media companies] to protect both themselves and their customers with a multichannel content moderation and omnichannel support strategy.”

Catching Service “Hoppers”

Further complicating customer retention is that, roughly one quarter of OTT service subscribers are “hoppers” who switch between services and re-subscribe multiple times.

Hoppers are unique in that they stay with their services for less time, the report says, have a higher average number of subscriptions, and cancel more services over the past 12 months. They do not necessarily subscribe to a service with the intention of cancelling it, but they are certainly more willing to cancel a service and move to another one offering a desired program. These customers are among OTT services’ most demanding subscribers and disproportionately contribute to services’ churn.

“Hoppers are younger than average OTT subscribers, well-educated, and earn higher incomes than average OTT subscribers. Certain services may offer seasonal content or have small catalogues occasionally refreshed with blockbuster shows. For these services, customer churn is less of a threat and more of a way of life. Their primary goal is to make sure that these customers return again later in the year.”

One emerging challenge for companies in the video entertainment space is a growing competition for consumers’ free time. Video gaming is a prime target and may be one reason why Netflix is launching a games unit, with a Stranger Things spin-off one of its first releases.

“OTT companies are increasingly recognizing games as their new competitor…Brands will need to change their retention strategies, offering value to consumers both at-home and on-the-go. Long term, gaming will either prove to be a challenge — or an opportunity — to players in this space.”

Live TV Remains a TV Zone

The live TV space has yet to embrace alternative, non-TV platforms. Per the report, video consumption of live TV by consumers remains heavily tilted towards televisions, while VOD is consumed on a mix of platforms and more closely represents the online video space overall. It is still difficult for viewers on these platforms to access the content they’re looking for, concludes Parks Associates, with many apps and services not offering users any way to watch content live.

“This is one of the reasons young consumers consume relatively little traditional live TV.”