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The TV Switching Study

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The TV Switching Study Analysis of viewer’s TV services, engagement & future intentions This pilot wave uses April data and was published in October 2020 Copyright 2020. The NPD Group, Inc. All Rights Reserved. This presentation is proprietary and confidential and may not be disclosed in any manner, in whole or in part, to any third party without the express written consent of NPD. Table of Contents Executive Summary 4-5 3- Engagement Frequency Steps to Find Movie You Want to Watch 23 1- TV Service Subscriptions & Free Streaming Engagement Frequency by TV Service Type 24 Incidence of Subscribing/Using TV & Video Services 7 Engagement Frequency by Pay TV Provider 25 Avg. # Subscription & Free Services 8 Engagement Frequency by Premium Network 26 Subscription & free streaming overlap 9 Engagement Frequency - Top 10 SVOD Services 27 Free Streaming Services Used in Past Year 10 Most Frequently Used SVOD Services & % Using More Often 28 Top 10 SVOD Services 11 Engagement Frequency – Free Streaming Services 29 Percent of Free/Trial subscribers among top 10 SVOD services 12 Most Frequently Used Free Streaming Services & % Using More Often 30 Most Common Bundle Among Top 4 SVOD Services 13 Most Common Bundle Among Top 4 SVOD Services By Age 14 4- Reasons for subscribing and increased usage Most Common Bundle Among Top 4 SVOD Services By Kids in HH 15 Top 10 Reasons for Signing up/Increased Usage (All TV Services) 32 Most Common Bundle Among Top 4 SVOD Services by TV-Connected Device 16 Top 10 Reasons for Signing up/Increased Usage (MVPDs) 33 Top 10 Reasons for Signing up/Increased Usage (vMVPDs) 34 2- SVOD & vMVPD sign-up method & device Top 10 Reasons for Signing up/Increased Usage (SVOD) 35 Sign-up Method for SVOD Services 18 SVOD Service Ranking Among Reasons for Signing up/Increased Usage 36 Sign-up Method for Top 4 SVOD Services 19 Top 10 Reasons for Starting/Increased Usage (Free Streaming Services) 37 Device Used to Sign-up for SVOD Services 20 Free Streaming Service Ranking Among Reasons for Starting/Increased Usage 38 Sign-up Method for vMVPDs 21 The NPD Group, Inc. | Proprietary and confidential 2 Table of Contents (cont.) 5- Future Interest 7- Cancellation Risk Likelihood to Subscribe/Use New TV/Video Service in Next 12 Months 40-41 Likelihood to Cancel/Stop Using TV/Video Service in Next 12 Months 55 TV Service Types Likely to Subscribe/Use in Next 12 Months 42 TV Service Types Likely to Cancel/Stop Using in Next 12 Months 56 Potential Annual Growth Rate: MVPDs/vMVPDs 43 Potential Annual Churn Rate: MVPDs/vMVPDs 57 Potential Annual Growth Rate: Top 10 SVOD Services 44 Potential Annual Churn Rate: Top 10 SVOD Services 58 Potential Annual Growth Rate: Free Streaming Services 45 Potential Annual Churn Rate: Free Streaming Services 59 6- Reason for cancelling and decreased usage Appendix Top 10 Reasons for Cancelling/Decreased Usage (All TV Services) 47 Methodology 61 Top 10 Reasons for Cancelling/Decreased Usage (MVPDs) 48 SVOD & Direct-to-Consumer App List 62 Top 10 Reasons for Cancelling/Decreased Usage (vMVPDs) 49 MVPDs, vMVPDs & Premium Network List 63 Top 10 Reasons for Cancelling/Decreased Usage Usage (SVOD) 50 Free Streaming Services & Transactional Digital List 64 SVOD Service Ranking Among Reasons for Cancelling/Decreased Usage 51 Top 10 Reasons for Stopping/Decreased Usage (Free Streaming Services) 52 Free Streaming Service Ranking Among Reasons for Stopping/Decreased Usage 53 The NPD Group, Inc. | Proprietary and confidential 3 Executive Summary Overall, more viewers are considering adding TV services than those citing a likelihood to cancel them. The growing array of SVOD services are poised to take advantage of this. And, free streaming is well positioned to supplement this viewing. The proliferation of direct-to-consumer networks such as Disney+ drove SVOD to critical mass, now reaching 79 percent of viewers. The average subscriber has 4.1 services with Netflix, Amazon Prime, Disney+ and Hulu being the most common. The most common SVOD bundle is Netflix and Amazon Prime. For Amazon, sign-up due to Prime membership propelled the user base and has kept potential churn risk low. However, younger viewers, those with younger children at home and those using TV- connected devices such as Roku are more likely to subscribe to all four of the top four services; not just two. Amazon Prime aside, Netflix, Hulu and Disney+ generate a lot of sign-up through their own website. But, TV-connected device sign-up can’t be ignored as it accounts for an average of 42 percent of past year subscriptions among the 42 SVOD services evaluated. Perceptions of affordability continue to drive virtual MVPD and SVOD users to sign-up. The services that lead in this area are the top four SVOD services, Netflix, Hulu, Prime Video Disney+ as well as vMVPDs Philo, Sling TV and YouTube TV. Perceptions of high cost continue to drive cable and satellite TV cord cutting. Source: The TV Switching Study The NPD Group, Inc. | Proprietary and confidential 4 Executive Summary Content, in particular exclusive content, is king and drives engagement. Among the top 10 SVOD services, Disney+ ranks highest for driving subscriptions and engagement through exclusive content, in particular movies. Free and promotional trials have become a key subscriber acquisition tool, amounting to as much as half of the subscriber base for services such as Apple TV+. This opens up significant churn risk if the programming does not continually engage the subscriber base. In fact, the services with the highest rate of customers on free trial, Apple TV+ and CBS All Access, also have the highest potential churn risk. Free streaming services are a supplemental viewing source as only four percent of the population use one of them and doesn’t also have a subscription video app. It’s the free streaming services such as The Roku Channel and Pluto TV, focusing on content expansion, that are seeing the most viewer engagement and the most increase in engagement. However, features, more than content, still top the list of reasons for engagement showing the need to continue to optimize the content mix. Aside from ad loads, the lack of exclusive content and that which is seen to be available elsewhere drives the risk in free streaming service engagement. But the prowess of free is meaningful as these services have the lowest potential churn risk among all TV services evaluated. Source: The TV Switching Study The NPD Group, Inc. | Proprietary and confidential 5 TV Service Subscriptions & Free Streaming The NPD Group, Inc. | Proprietary and confidential Subscription streaming now reaches 79% of viewers, led by mature services Netflix, Amazon, and Hulu & further propelled by DTC networks such as Disney+ Incidence of Subscribing/Using TV & Video Services (% of U.S. Internet HHs, April 2020) 79% 71% 71% 49% 39% 36% 18% 11% Source: The TV Switching Study *Past year users, excludes YouTube Included in the SVOD (net) SVOD includes Netflix/Amazon/Hulu/DTC Networks/DTC Sports Channels, see appendix for app list The NPD Group, Inc. | Proprietary and confidential 7 The average subscription and free streaming bundle has 5.8 services YouTube - Roku Channel - Pluto TV – Netflix – Prime – Hulu - Disney+ Avg. # Subscription & Free Services April 2020 – Among Each User Group SVOD Services Used Weekly 5.8 Netflix AVOD Services Used Weekly Prime Video 4.1 Hulu YouTube Disney+ The Roku Channel 2.7 Pluto TV Free streaming SVOD/Free streaming SVOD Source: TV Switching Study * Callouts based on % ranking of weekly active users The NPD Group, Inc. | Proprietary and confidential 8 Free streaming video is supplemental to subscription services viewers use Nearly all (90%) of viewers age 18-34 use subscription or free streaming service Subscription & free streaming overlap (April 2020) 7% 17% 3% 13% 4% 30% Neither 4% 44% 5% Free streaming only 35% 38% 24% Both 46% 44% 45% 41% SVOD only Total 18-34 35-54 55+ Source: The TV Switching Study The NPD Group, Inc. | Proprietary and confidential 9 The Roku Channel and Pluto TV are the most commonly used free streaming services Free Streaming Services Used in Past Year (% of U.S. Internet HHs, April 2020) LG Channels 6% Xumo 6% Redbox Free Live TV 6% Plex Streaming Live TV 7% Samsung TV Plus 8% WatchFree (Vizio TVs) 8% IMDbTV 12% Tubi Movies & TV 14% Vudu (free video) 14% Crackle 15% Pluto TV 16% The Roku Channel 20% Source: The TV Switching Study The NPD Group, Inc. | Proprietary and confidential 10 Netflix, Amazon Prime, Disney+ and Hulu are the primary streaming services viewers subscribe to, all over-index among home entertainment customers Top 10 SVOD Services (% of U.S. Internet HHs, April 2020) CBS All Access 8% Apple TV+ 8% ESPN+ 10% Starz 11% HBO Now 12% Showtime 13% Hulu (On-Demand) +7%pts. 26% Disney+ +10%pts. 27% Amazon Prime Video +8%pts. 49% Netflix +10%pts. 59% %pts. increase among transactional home entertainment customers Source: The TV Switching Study Includes paid and free/promotional trials Transactional home entertainment included digital and DVD/BD The NPD Group, Inc. | Proprietary and confidential 11 Over half of Apple TV+ subscribers access via free/trial offers Will original content be compelling enough to convert trial to paid subscribers or will viewers switch to adjacent services? Percent of Free/Trial subscribers among top 10 SVOD services Paid Free/Trial Apple TV+ 52% CBS All Access 42% Starz 27% Showtime 26% Disney+ 25% ESPN+ 25% HBO Now 24% Hulu 15% Amazon 8% Netflix 7% Ranked by % in Free/Trial Source: The TV Switching Study The NPD Group, Inc. | Proprietary and confidential 12 Netflix is part of the four most common SVOD bundles Notably, the third most common bundle includes all of the top four SVOD services Most Common SVOD Bundle Among Top 4 Services 14% (% of U.S.
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