Life Stage Analysis of Millenials' Media Consumption Habits

Executive Insights Media & Entertainment Analysis

Perennial Millennials: a viral phenomenon

L.E.K. has conducted the first analysis of U.K. Millennials’ media habits by life stage. The research covers six life stages, from living at home with parents all the way through to starting their own families.

In the first installment of the Executive Insights Spotlight on Media and Entertainment: “The Perennial Millennial” series, L.E.K. highlights revelatory findings from the proprietary research:

• Millennials’ preference for new media is broadly consistent across all life stages • Millennial behavior is viral and spreading to Non-millennials and older generations • The change in media usage is faster and more pervasive than originally thought

How do Millennials consume traditional and new media? t

The Perennial Millennial research and analysis was conducted by Maria Palm and Martin Pilkington, both partners in L.E.K.’s European Media, Entertainment and Technology practice. Maria and Martin are based in London.

For more information, please contact [email protected]. Executive Insights Media & Entertainment Analysis

Millennials spend significantly less time on traditional media than older generations...

Millennials (people aged 16 – 34 Average weekly media consumption by type in 2015) spend a similar number of Number of hours hours consuming media as older generations but their mix of media is 60 - 56 very different. 54

Video gaming* Traditional media such as TV, radio Digital media and print represents only 35% of total Social media media consumption for Millennials vs. over 60% for Non-millennials. 40 - Internet “New” Millennials spend twice as much time media as Non-millennials on new media, Streaming / download such as online video services (11 vs. 5 hours per week) and social media (7 Online TV and video vs. 3 hours per week). 20 - However, the key question is not if the Other traditional media** Millennials are different in aggregate, Radio “Traditional” but whether or not these differences media are sustained through life stages. TV

0 Non-millennials Millennials

Note: Q: On average, how many hours of the following types of media do you personally consume in a typical week? Do Millennial consumption *Includes both traditional gaming and online gaming. ** Includes print media, DVD, CD and cinema patterns change as they age? Source: L.E.K. survey t

Perennial Millennials: a viral phenomemon Executive Insights Media & Entertainment Analysis

… and this behavior continues through life stages

L.E.K.’s Perennial Millennial survey Average weekly media consumption by type shows that media consumption trends Number of hours are broadly consistent throughout the life stages of the Millennial 60 - generation. Later life stage Millennials with kids are more similar to other 50 - Gaming* Millennial cohorts than they are to Digital media Social older generations. media 40 - While Millennials’ use of traditional Internet “New” media media is lowest for students and flat Music 30 - sharers, it remains significantly below Online TV and video Non-millennials even as they get their own place and have children. 20 - Other traditional New media consumption remains media** Radio “Traditional” significantly above Non-millennials 10 - media for all Millennial life stages, albeit TV time spent on social media and 0 music streaming is highest for earlier Non- Millennials Millennials Students Flat sharing Getting your Young families Young families life stage Millennials (at home and millennials at home own place (<25 years) (25 - 34) students). Millennials by life stage

Note: Q: On average, how many hours of the following types of media do you personally consume in a typical week? What are the TV and video *Includes both traditional gaming and online gaming. ** Includes print media, DVD, CD and Cinema consumption patterns? Source: L.E.K. survey t

Perennial Millennials: a viral phenomemon Executive Insights Media & Entertainment Analysis

Millennials across life stages spend significantly less time consuming traditional TV and are much higher users of online video

Millennials spend far less time Average weekly video consumption by type than Non-millennials consuming Hours per week traditional linear and recorded TV including pay TV, although overall 30 27 video consumption is similar. The 26 consumption of traditional TV 25 Free online video does not increase significantly for 23 23 TVOD Millennials with families. Supscription “New” 20 OTT media

Online video consumption in Catch-up aggregate remains high across all 15 DVD Millennial life stages. However, the Cinema mix changes. The use of free online 10 video services such as YouTube is “Traditional” lower for Millennials with kids than media TV earlier life stage Millennials and their 5 use of paid for online video services is higher. 0 Non-millennials At home or student Working no kids With kids

Millennials by life stage

Note: Q: On average, how many hours of the following types of media do you personally consume in a typical week? What about other media forms? Source: L.E.K. survey t

Perennial Millennials: a viral phenomemon Executive Insights Media & Entertainment Analysis

Consumption of other forms of traditional media is also lower for Millennials than older generations

The pattern is broadly similar for Average weekly audio consumption by type “Information” consumption by type other media: the use of traditional Hours per week Hours per week media is significantly lower for Millennials of all life stages compared 30 30 to Non-millennials. This is true for both radio and print media. 25 25

However, some areas are different 21 between life stages. Music streaming 20 20 17 18 and social media are more important 15 for earlier life stages. The importance 15 15 of alternative social media platforms Social media also differs. Facebook use is high 10 10 10 across all life stages but the uptake of 9 8 7 newer platforms, e.g. Instagram and General Online internet Snapchat, is significantly higher in the 5 music 5 CDs earlier life stage segments. Digital Radio Radio media Print 0 0 Non- At home Working With kids Non- At home Working With kids millennials or student no kids millennials or student no kids

Millennials Millennials

Note: Q: On average, how many hours of the following types of media do you personally consume in a typical week? What forms of media are Source: L.E.K. survey “must-haves” for the Millennials, and which are not? t

Perennial Millennials: a viral phenomemon Executive Insights Media & Entertainment Analysis

Millennials place higher value on social media, music and subscription OTT video than traditional Pay and Free-To-Air TV

When asked which three media they Top three media you would take with you to a “Desert Island” would choose to take with them Percent of respondents Millenials (n=1,308) if stranded on a “desert island”, Non-millenials (n=685) Millennials’ selections are very 50 different to Non-millennials.

The top three media for Millennials 40 are social media, music and subscription OTT video services while Non-millennials would prioritize radio, free-to-air (FTA) and pay TV. 30

For video, Millennials rate subscription OTT ahead of traditional TV (pay and 20 FTA) and free online video (such as YouTube) is rated at a similar level to FTA TV. 10 For communication, Millennials rate phone voice and text, significantly below social media. 0 Social Music Subscription Pay TV Internet FTA TV Free Video Phone Phone Print Radio Digital Transaction media OTT online gaming (voice) (messages) media media VOD video

Note: Q: Imagine that you are stranded on a desert island and can choose only three types of media for entertainment purposes. Is migration from traditional to new Which would you select? Please rank the top three. media continuing? Source: L.E.K. survey t

Perennial Millennials: a viral phenomemon Executive Insights Media & Entertainment Analysis

Both Millennials and Non-millennials are shifting consumption to new media but the speed of change and the migration patterns are different

Both Millennials and Non-millennials Net change in media consumption by type over last year are decreasing their use of traditional Percent of respondents that have increased their usage by >10% less percentage that have decreased usage by >10% media and shifting consumption to new media. 20

However, a larger proportion of Millennials state they have reduced 10 the use of traditional media, in particular for traditional TV. 0 Moreover, while Non-millennials are shifting from traditional linear and (10) recorded TV to catch-up (likely staying Millennials with the same broadcaster brands), (20) Non-millennials Millennials are shifting to new platforms offering subscription OTT (30) services and / or free online video. CDs DVDs Radio

Both Millennials and Non-millennials Cinema Print media TV catch-up Social media are reducing their use of transaction- Music online Digital media General internet based VOD services. Both groups are VOD Transaction Free online video Free Subscription OTT increasing their use of social media TV (live / recorded) and the internet. “Traditional” media “New” media

Note: Q: Compared to last year, has your personal (not including other members of your household) weekly consumption (in hours) for different types of media increased, decreased or remained the same as current levels? What is the rate of adoption of Source: L.E.K. survey OTT services? t

Perennial Millennials: a viral phenomemon Executive Insights Media & Entertainment Analysis

Millennials are significantly more likely to use Over-The-Top (OTT) video services

Millennials across all life stages have Household penetration of subscription OTT video services significantly higher adoption of online Percent of respondents video subscription services: 38% for 50 Millennials pre-family and 32% for Millennials with kids vs. 15% for Non- millennials. 40 Of OTT providers, Netflix has by far the highest uptake amongst Millennials. 85% of Millennials with 30 OTT have Netflix, 30% have Amazon and 12% have NowTV. The pattern does not vary significantly by life 20 stage.

Netflix is also the leading provider for 10 Non-millennials, but the gap between Netflix and Amazon is significantly smaller (63% of Non-millennials 0 with OTT have Netflix and 41% have Total Millennials Students Flat sharing Getting your Young families Young families Amazon Prime). Non-millennials at home own place (<25 years) (25 - 34)

Millennials by life stage

Note: Q: Compared to last year, has your personal (not including other members of your household) weekly consumption (in hours) for different types of media How fast will Millennial behavior increased, decreased or remained the same as current levels? become mass market? Source: L.E.K. survey t

Perennial Millennials: a viral phenomemon Executive Insights Media & Entertainment Analysis

Millennial media behavior is viral and is spreading across generations: from Millennials to Non-millennials with kids, to all generations

The behavior of Millennials will not remain contained within age groups born after 1981.

Their habits spread to older generations: from teenagers at home, to their parents, to wider family and their networks of friends.

What is the impact on different forms of media? t

Perennial Millennials: a viral phenomemon Executive Insights Media & Entertainment Analysis

Millennial behavior has already been picked up by Non-millennials for mature digital media and is spreading rapidly in other areas

The viral effect is evident when Less mature “new media” looking at the uptake of new media of different maturity. Internet usage at home Frequent users of Facebook Uptake of subscription OTT Hours per week Percent of respondents using at least daily Percent of respondents subscribing to OTT General internet usage is now high 12 80 40 across all age groups and actually 36 highest amongst older generation 70 10 Non-millennials. 10 63 60 30 Facebook usage is almost as high for 8 8 25 Non-Millennials with children at home 7 as for Millennials. However, it is still 41 significantly lower for Non-millennials 6 40 20 without children at home. 4 12 For more recent digital services, 20 10 such as subscription OTT, adoption 2 of all Non-millennials is still below Millennials. However, uptake is significantly higher for Non-millennials 0 0 0 Millennials With kids No kids Millennials With kids No kids Millennials With kids No kids with children at home compared to at home at home at home at home at home at home other Non-millennials. Non-millennials Non-millennials Non-millennials

Note: Q: On average, how many hours of the following types of media do you personally consume in a typical week? How frequently do you use Facebook? Which of the following TV services do you use at home or for your personal use? Source: L.E.K. survey

What are the implications? t

Perennial Millennials: a viral phenomemon Executive Insights Media & Entertainment Analysis

The change in consumption habits is faster and more pervasive than previously thought. Traditional media participants need to adapt rapidly Millennial media consumption behavior is very different to older generations: • They consume significantly less traditional media, in particular linear / recorded TV and radio • Uptake of new digital media platforms is significantly higher • They are continuing to change away from traditional media and their rate of change is faster and more fundamental than for older generations • There is a strong interest in slim OTT bundles from Millennials

Their behavior remains different to Non-millennials through all life stages and does not revert to more traditional media consumption patterns. Their behavior is viral and is spreading to older generations.

What does this mean for the media industry? • The change in media consumption is coming faster and is far more pervasive than previously thought

• Traditional media participants will need to adapt rapidly to compete in this fast-emerging new environment

• There needs to be further and faster innovation to develop propositions that capture the interest and behavior patterns of the Millennial generation

About the authors t

Perennial Millennials: a viral phenomemon Executive Insights Media & Entertainment Analysis

Research Methodology

For The Perennial Millennial, L.E.K. Consulting conducted online research of 1,308 Millennials and 685 Non-millennials living across the U.K.

The research took place in September 2015.

About the Authors Maria Palm is a partner in L.E.K. Consulting’s London office. Martin Pilkington is a partner in L.E.K. Consulting’s London office She has over 22 years of experience in the telecommunications and is one of the leaders of L.E.K.’s European Aviation & Travel and Media, industry and has assisted various clients with commercial due Entertainment & Technology practices. Martin has more than 22 years diligence, sales and distribution strategy, and valuation projects. of experience helping clients address issues including growth strategy, Maria first worked for L.E.K. between 1993 and1997 before portfolio optimization, transactions, sales and marketing strategy, pricing, leaving to join British Telecommunications as a strategy manager. performance improvement, new product development and market She returned to L.E.K. London in 2000. entry strategy.

About L.E.K. Consulting L.E.K. Consulting is a global management consulting firm that uses deep industry expertise and rigorous analysis to help business leaders achieve practical results with real impact. We are uncompromising in our approach to helping clients consistently make better decisions, deliver improved business performance and create greater shareholder returns. The firm advises and supports global companies that are leaders in their industries — including the largest private and public sector organizations, private equity firms and emerging entrepreneurial businesses. Founded more than 30 years ago, L.E.K. employs more than 1,200 professionals across the Americas, Asia-Pacific and Europe. For more information, go to www.lek.com.