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Video on Demand Attitudes & Opportunities

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Video on Demand Attitudes & Opportunities Video on Demand Attitudes & Opportunities A consumer study by: E-Poll Market Research January 2006 TABLE OF CONTENTS INTRODUCTION ....................................................................................................................................................................................................................... 3 METHODOLOGY....................................................................................................................................................................................................................... 4 EXECUTIVE SUMMARY.............................................................................................................................................................................................................. 5 DETAILED FINDINGS................................................................................................................................................................................................................. 7 VOD Consumer Segments.................................................................................................................................................................................................................................. 7 Awareness and Interest ..................................................................................................................................................................................................................................... 8 Future Intent and Pricing ................................................................................................................................................................................................................................. 17 VOD Usage....................................................................................................................................................................................................................................................... 23 User Experience ............................................................................................................................................................................................................................................... 32 Usage of Entertainment-Related Services........................................................................................................................................................................................................ 37 TV Viewing Habits ............................................................................................................................................................................................................................................ 47 Cable Service................................................................................................................................................................................................................................................... 49 CONCLUSIONS ...................................................................................................................................................................................................................... 51 ABOUT E-POLL® MARKET RESEARCH....................................................................................................................................................................................... 53 2 INTRODUCTION As 2006 unfolds, the promise of VOD as the next big thing in media consumption seems to still be just that, a promise. Networks are cautiously beginning to test the VOD waters with some of their Prime Time programs. However, key stakeholders, including the networks, their affiliates, advertisers, media buyers, and cable operators naturally want to ensure VOD serves their needs before making a financial or strategic commitment. In addition to serving these stakeholders, we need to look at the most salient factor in the success of VOD, the viewer. Consumers have numerous choices for the delivery of movies, TV programs and special event programming. Currently, many view VOD as a “last resort” when choosing their television for entertainment. The purpose of this E-Poll survey is to address the critical issues for VOD’s success from the consumers’ perspective. To support the promise of VOD, we address the following questions: What do viewers want to watch on VOD? Which pricing model is preferred by viewers? How can advertising be effectively integrated into VOD? How do non-users perceive VOD? What VOD features are most appealing? How VOD can be more competitive with the DVR? This study is essential for advertisers, cable operators, content providers and other key stakeholders looking to: Bring VOD more top of mind with current users Identify a revenue model and long term strategy to fuel the growth of VOD 3 METHODOLOGY A random sample of 2,109 consumers with cable TV service was recruited from E-Poll’s nationally representative panel and asked about their awareness, perceptions and usage of VOD. The respondents naturally segmented themselves into four groups: 1. Don't have VOD but are aware 2. Have VOD but never used 3. Have VOD and have used it but don’t currently 4. Currently use VOD They were screened for gender (about half men and half women) and age (13-49 years). The survey was conducted October 2005 with a follow up survey conducted December 2005. A sample size of 2109 yields a margin of error of +-2.4% at a 95% level of confidence. Subsample data are more sensitive to sampling error. 4 EXECUTIVE SUMMARY Current Status of On Demand Video on Demand is still in the early stages of development. The technology continues to evolve and service offerings are expanding. While awareness of the service is high (91%), non-user familiarity and interest are low. Usage is also low (20% of those surveyed), and those who do use VOD have not significantly increased their usage of the service since initial trial. The VOD service is primarily used to watch movies at a convenient time. Its other primary use is as a last resort when there is nothing else on TV. It is simply not viewed as the go-to source for TV or other types of entertainment. When consumers first turn on their TV sets, VOD is not a first stop for current VOD users, nor would it be for non-users if they had access. Contrast this with the interactive program guide (IPG), which has become a must-have for many consumers. More respondents mention the IPG than all other options as the first place they go when they turn on their TV set. In addition, although VOD is seen primarily as a vehicle for movies, VOD users perceive the selection of movies and programs as limited. Current VOD Customers Current VOD customers are relatively satisfied with the service. However, those who also own a DVR are significantly more likely to prefer their DVR. This is primarily due to content availability and convenience. With a DVR, respondents can record their favorite TV programs and watch them at any time. VOD is perceived as less flexible than using a DVR. This limited flexibility stems from having to choose from a narrow list of programming options, combined with a limited amount of time to view the programs. Although current VOD customers engage in other types of entertainment about as often as non-users, their purchase/rental of DVD and VHS movies has decreased since they obtained their VOD service. In addition, they are significantly more likely than non-users to subscribe to premium movie channels. However, current VOD users are most likely “early adopters” so their opinions may differ from those of future VOD users as the service diffuses through the general population. Target Market The key target demographic for VOD appears to be young males. However, while this segment expresses higher awareness of and interest in VOD offerings, the older male and female portions of the audience, while not the strongest segments today, may offer a more stable growth opportunity due to the unpredictable nature of the young male segment. Consumers without access to VOD are more interested than the other non-user groups in the various features and benefits of VOD. However, not having digital cable is a major drawback for them, and they are not willing to pay extra for this service. VOD Features and Pricing The most popular types of potential programming for VOD are recent release movies and this season’s Prime Time TV programs. When these options are incorporated into the On Demand service, the appeal of the service will most likely increase. The VOD feature that elicits the greatest level of interest is free programming. Two-thirds of the respondents (87% of the current users) are very interested in this feature, and more current users have taken advantage of free programming than any other VOD offering. The major objection to VOD among non-users is the perceived cost. Most non-users think the cost is very high (almost $5.00 per program or a $22 per month incremental average cost), but in reality, many VOD programs are free. This perception of cost presents a significant hurdle for VOD content providers and operators to overcome. 5 In the study, consumers were presented with three theoretical “pricing” options: (1) a per-item fee ($.99 or $1.99), (2) a monthly fee ($10 or $15) or (3) free programs, but with advertising preceding the programs. They were asked to select their preferred option. In all variations, the free program preceded
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