What's Tv Worth?

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WHAT’S TV WORTH? APRIL 2016

1 13 3 We surveyed 1,502 TV consumers…

• Age 16 to 74* • Watch at least 5 hours of TV per week • Have broadband at home • U.S. census balanced • Data collection completed in March 2016

• Prior to 2015, the age range for this study was 16-64. On slides with trending to 2014 or 11 earlier, the data is for viewers age 16-64 The New Normal: the average viewer combines multiple TV sources to make their own TV package

ELECTRONIC SELL THROUGH

SVOD ONLINE CHANNEL OR MCN

SCREENS MVPD AND CONNECTORS

Live VOD DVR TV Everywhere

2 “What’s TV Worth” tracks how consumers choose, use, and allocate their time across these options

Which TV platforms consumers are using, USAGE independently and together

The screens viewers watch on, and the devices DEVICES they use to connect their TVs to the internet

Which sources viewers see as their “default” – the DEFAULT first thing they turn on when they want to watch

Which TV platforms, and which specific brands, VALUE do consumers perceive to be most valuable

Which features and attributes drive viewers to use CHOICE certain TV sources over others

3 Executive Summary Overview of Key Findings

4 Is 2016 the year the dust begins to settle?

5 SVOD is emerging as the dominant model for consuming TV

Rising Usage High Perceived Value More users are adopting SVOD Perceptions of major SVOD platforms platforms, and many are using more continue to rise, while pay TV is flat than one % RATE “GOOD” use at least one SVOD, OR “EXCELLENT” VALUE 68% up from 47% in 2015 67% Ç Netflix streaming subscribe to 2 or more 61% SVODs – twice as many 37% 60% Ç as last year (19%) Amazon Prime 67% 49% prefer streaming

subscribe to 3 or more, 46% 2016 PayPay TV TV 14% 43% up from 2% last year 2015 Ç Significantly higher than 2015

6 For the first time, more online viewing happens on TV sets than any other device

WHICH DEVICES HAVE YOU USED TO WATCH ONLINE TV SHOWS?

72%

TV Set

70% Computer

42% Tablet

36% Smartphone

7 Pay TV subscriptions are still ubiquitous

• 89% of respondents have an MVPD subscription—unchanged since 2013

8 But traditional linear viewing continues to drift farther from the hub of the TV universe

2016: % WHO DEFAULT TO LIVE TV 2014

Age 16-64

Live TV’s position All viewers 43% 55% as the default source for TV continues to fall Netflix subs 35% 43%

Age 18-24 27% 32%

9 State of the Cord Trends in MVPD usage

10 The proportion of viewers with some kind of pay TV subscription remains at about 90%

DO YOU HAVE A PAY TV SUBSCRIPTION?

Among viewers age 16-64

5% 5% 4% 5%

5% 6% 5% 6%

89% 90% 89% 89%

2013 2014 2015 2016 Cord Nevers: Have never had a pay TV subscription Cord Cutters: No pay TV, but have had in the past Subscriber: Have cable, satellite, or fiber TV subscription

Q2A: Do you currently have any of the following television services in your home? 11 Q2B: Have you ever had a cable, satellite, or fiber optic TV subscription in your name? Among viewers 16-74, there’s no change since 2015 in proportion that subscribe to premium networks

PREMIUM CHANNELS SUBSCRIPTION Among 16-74 year olds with a Pay TV subscription 39%

29%

26%

18%

None of these 47% 2016 Q2E. Thinking about your service today, which of the following premium subscription channels do you currently get with your service from [PROVIDER]? 12 Millennials are just as likely as the average viewer to subscribe to premium networks

PREMIUM CHANNELS SUBSCRIPTION Among 16-74 year olds with a Pay TV subscription

TOTAL Age 16-74 Millennials Users Users

39% 42% 44% 46%

29% 27% 31% 32%

26% 25% 28% 31%

18% 16% 19% 18%

18% 16% 18% 18%

Ç Significantly higher than total È Significantly lower than total

Q2E. Thinking about your service today, which of the following premium subscription channels do you currently get with your service from [PROVIDER]? 13 Pay TV subs with Netflix or Amazon are more likely than average viewers to subscribe to premium networks

PREMIUM CHANNELS SUBSCRIPTION Among 16-74 year olds with a Pay TV subscription

TOTAL Age 16-74 Millennials Users Users

39% 42% 44% 46%

29% 27% 31% 32%

26% 25% 28% 31%

18% 16% 19% 18%

18% 16% 18% 18%

Ç Significantly higher than total È Significantly lower than total

Q2E. Thinking about your service today, which of the following premium subscription channels do you currently get with your service from [PROVIDER]? 14 Most pay TV subscribers still have HD and DVR (also the case in 2015)

AS PART OF YOUR SERVICE, DO YOU HAVE…? Among 16-74 year olds with a Pay TV subscription

HD service 69%

DVR 56%

Neither 16%

Q2F: As part of your service, do you have…? 15 As in previous years, fewer than 10 percent say they definitely play to cut their pay TV service

HOW LIKELY ARE YOU TO HAVE A PAY TV SUBSCRIPTION A YEAR FROM NOW? Among 16-64 year olds with a Pay TV subscription

30% 30% 29% Definitely Will 69% still have my subscription Definitely or Probably 39% 41% 42% Probably Will will

24% 22% 22% Might or might not 7% 7% 7% Definitely/Probably Won’t 2016 2015 2014

Q2J1: One year from now, how likely are you to still have at least some service from [PROVIDER FROM Q2A]? 16 Is Pay TV Vulnerable? The of online TV options, today and in the future

17 As in past years, those with no pay TV are split roughly evenly between cord cutters and cord nevers

WHICH OF THE FOLLOWING BEST DESCRIBES YOU? Among 16-74 yea r o lds

Those without a pay TV subscription are split roughly evenly between cord cutters, and those who have never had pay TV Subscriber: Currently have a cable, satellite, or telco TV subscription Cord Cutter: 6% Don’t have pay TV now, but did in the past 89% 5% Cord Never: Don’t have pay TV now, and never have

Q2A. Do you currently have any of the following television services in your home? Q2B. Have you ever had a cable, satellite, or fiber optic TV subscription in your name? 18 Cord cutters most often mention financial drivers-–but more than half say they switched to online TV sources

WHICH OF THE FOLLOWING BEST WHICH WERE MAJOR REASONS* FOR DESCRIBES YOU? DROPPING YOUR PAY TV SERVICE? Among 16-74 yea r o lds Among cord cutters

The service wasn’t worth the money 85%

Subscriber: To save money 71% Currently have a cable, satellite, or telco TV subscription Decided to use online 53% 6% sources of TV instead 89% Not watching enough TV 22% 5% Moved and decided to do without Pay TV 14%

Decided to use DVDs and other non- online sources 12%

There was a change in my living situation 10%

*Note: Reasons under 10% not shown

Q2A. Do you currently have any of the following television services in your home? Q2B. Have you ever had a [PAY TV] subscription in your name? Q2D: How much of a reason was each of the following for dropping your subscription? 19 Compared to last year, cord cutters were more likely to mention issues related to cost or value

WHICH OF THE FOLLOWING BEST WHICH WERE MAJOR REASONS* FOR DESCRIBES YOU? DROPPING YOUR PAY TV SERVICE? Among 16-74 yea r o lds Among cord cutters

The service wasn’t 85% worth the money 68%

Subscriber: To save money 71% Currently have a cable, satellite, 60% or telco TV subscription Decided to use online 53% 6% sources of TV instead 53% Not watching enough TV 22% 89% 20% 5% Moved and decided to 14% do without Pay TV 6% Decided to use DVDs and other non- 12% online sources 10% 2016 There was a change 10% in my living situation 24% 2015 *Note: Reasons under 10% not shown

Q2A. Do you currently have any of the following television services in your home? Q2B. Have you ever had a [PAY TV] subscription in your name? Q2D: How much of a reason was each of the following for dropping your subscription? 20 “Cord nevers” also mentioned financial reasons first, followed by online alternatives

WHICH OF THE FOLLOWING BEST WHICH WERE MAJOR REASONS FOR DESCRIBES YOU? NEVER HAVING PAY TV? Among 16-74 yea r o lds Among cord nevers

You want to save money 81%

Don’t think it is worth the Subscriber: money 80% Currently have a cable, satellite, There’s enough from online or telco TV subscription sources 61% 6% 89% You don’t watch that much TV 39% 5% Enough to watch from non- online sources 34%

Never got around to signing up 7%

Any other reason 9%

Q2A. Do you currently have any of the following television services in your home? Q2B. Have you ever had a cable, satellite, or fiber optic TV subscription in your name? Q2E1: How much of a reason is each of the following for why you’ve never had cable,21 satellite, or fiber optic service in your Financial reasons in particular were mentioned more often in 2016

WHICH OF THE FOLLOWING BEST WHICH WERE MAJOR REASONS FOR DESCRIBES YOU? NEVER HAVING PAY TV? Among 16-74 yea r o lds Among cord nevers

81% You want to save money 62%

Don’t think it is worth the 80% Subscriber: money 53% Currently have a cable, satellite, There’s enough from online 61% or telco TV subscription sources 50% 6% 39% You don’t watch that much TV 89% 27% 5% Enough to watch from non- 34% online sources 26% 7% Never got around to signing up 3%

9% Any other reason 2016 6% 2015 Q2A. Do you currently have any of the following television services in your home? Q2B. Have you ever had a cable, satellite, or fiber optic TV subscription in your name? Q2E1: How much of a reason is each of the following for why you’ve never had cable,22 satellite, or fiber optic service in your Fewer pay TV subs made changes—either adding or cutting back—to their service this year

HAVE YOU MADE ANY CHANGES TO YOUR TELEVISION SERVICES OR PRODUCTS? Among 16-74 yea r o lds 2015 2016 Had Pay TV but dropped it 24% Yes Yes Have always had È Pay TV 36% 30% No Never had No 64% 64% Pay TV 70%Ç 12%

Ç Significantly higher than 2015 È Significantly lower than 2015

Q2H. Have you made any changes to the television services or products you get from [COMPANY] in the past year, such as adding, cutting back, or both? 23 Again—those who had made changes were more likely to have cut channels than to have added them

HAVE YOU ADDED OR CUT BACK ON THE CHANNELS YOU PAY FOR IN THE PAST YEAR? Among 16-74 year olds who have made changes in past year

Cut Back Added

57% 2015 38%

55% 2016 41%

Q2I: Specifically, have you added or cut back on any of the following in the past year? 24 However: those who made changes to hardware (HD, DVR, # of boxes) were more likely to have added

HAVE YOU ADDED OR CUT BACK ON HD OR DVR SERVICE OR BOXES IN THE PAST YEAR? Among 16-74 year olds who have made changes in past year

Cut Back Added

29% 2015 38%

27% 2016 38%

Q2I: Specifically, have you added or cut back on any of the following in the past year? 25 Among those who cut back, ¾ said that saving money was a major reason—most common by far

WHY DID YOU CUT BACK ON YOUR PAY TV SERVICE? % WHO SAID “MAJOR REASON”

Among 16-74 year old pay TV subs who cut back on channels or services

To save money 74%

Certain channels or services were not worth it 43%

There were services I wasn't using much 42%

There were channels I didn't watch much 41%

There was enough to watch from online sources 20%

There was enough to watch from non-online sources 14%

Switched to online subscriptions to channels like HBO or Showtime that I used to get from [PROVIDER] 11%

Any other reason 6%

Q2N1: How much of a reason was each of the following for cutting back on service from [COMPANY] in the past year? 26 Younger viewers were much less likely to reference “saving money” as a major reason

WHY DID YOU CUT BACK ON YOUR PAY TV SERVICE? % WHO SAID “MAJOR REASON”

Among 16-74 year old pay TV subs who cut back on channels or services

To save money 74%

Certain channels or services were not worth it 43%

There were services I wasn't using much 42%

There were channels I didn't watch much 41%

There was enough to watch from online sources 20%

There was enough to watch from non-online sources 14% Millennials 64%È Switched to online subscriptions to channels like HBO or Showtime that I used to get from [PROVIDER] 11% 35 + 83%Ç

Any other reason 6% Ç Significantly higher vs. segment È Significantly lower vs. segment

Q2N1: How much of a reason was each of the following for cutting back on service from [COMPANY] in the past year? 27 And fewer gave that reason than in 2015—evidence that cord shaving is driven by merit and not just by cost

WHY DID YOU CUT BACK ON YOUR PAY TV SERVICE? % WHO SAID “MAJOR REASON”

Among 16-74 year old pay TV subs who cut back on channels or services

To save money 74%È 83% 43% Certain channels or services were not worth it 43% 42% There were services I wasn't using much 51% 41% There were channels I didn't watch much 48% 20% There was enough to watch from online sources 22% 14% There was enough to watch from non-online sources 16% Switched to online subscriptions to channels like 11% HBO or Showtime that I used to get from [PROVIDER] 2016 Any other reason 6% 6% 2015 Ç Significantly higher than 2015 È Significantly lower than 2015

Q2N1: How much of a reason was each of the following for cutting back on service from [COMPANY] in the past year? 28 Use of Online Sources The evolution, televised

29 80 percent of viewers watch from at least one online source – the highest since we began tracking

WATCH TV OR MOVIES FROM AT LEAST ONE ONLINE SOURCE:

Among 16-64 year olds

78% 80% 74%

2014 2015 20162016

Q3A: Have you ever watched TV programs or movies from an online source, on any device? 30 The most common (again): SVOD subscriptions

WHICH OF THE FOLLOWING HAVE YOU USED TO WATCH TV SHOWS OR MOVIES ON IN THE PAST SIX MONTHS? Among 16-74 yea r o lds

Online streaming subscription 68% e.g. Netflix, Amazon Prime, Hulu Plus

TV network site or app 37%

Free aggregator 30% e.g. Crackle, free version of Hulu

MVPD site or app 20%

Online shows and movies 16% bought/paid for individually

“Unofficial” sites 13% e.g. Putlocker, uTorrent, Pirate Bay

Q3A: Have you ever watched TV programs or movies from an online source, on any device? 31 SVOD usage has shot up since 2015…

WHICH OF THE FOLLOWING HAVE YOU USED TO WATCH TV SHOWS OR MOVIES ON IN THE PAST SIX MONTHS? Among 16-74 yea r o lds Online streaming subscription 68% Ç e.g. Netflix, Amazon Prime, Hulu Plus 47% 37% TV network site or app 41%

Free aggregator 30% e.g. Crackle, free version of Hulu 33%

20% Ç MVPD site or app 24%

Online shows and movies 16% Ç bought/paid for individually 19% 2016 “Unofficial” sites 13% e.g. Putlocker, uTorrent, Pirate Bay 14% 2015 Ç Significantly higher than 2015 È Significantly lower than 2015

Q3A: Have you ever watched TV programs or movies from an online source, on any device? 32 …while usage of most other platforms has remained flat, or slightly declined

Free aggregator 30% e.g. Crackle, free version of Hulu 33%

20% Ç MVPD site or app 24%

Q3A: Have you ever watched TV programs or movies from an online source, on any device? 33 Use of transactional platforms is again the lowest (not counting pirate sites), and continues to decline

Free aggregator 30% e.g. Crackle, free version of Hulu 33%

20% Ç MVPD site or app 24%

Q3A: Have you ever watched TV programs or movies from an online source, on any device? 34 Use of Netflix, Amazon, and paid Hulu subscriptions continue to grow

DO YOU CURRENTLY USE…?

Among 16-64 year olds

62%Ç

50% 43%

28% Ç 18% 18% Ç 15% 9% 11%

Ç Significantly higher g 2014 g 2015 g 2016

*Hulu 2014-15 data shows penetration of Hulu Plus; 2016 data is based on Hulu Limited/No Commercials subscription

Q3B. Do you currently have a Netflix subscription specifically, for either its online streaming service or its DVD by mail service? Q3D: Which of the following other online streaming subscription services does your household subscribe to? 35 Use of the free version of Hulu continues to fall, and transactional platforms remain least used

DO YOU CURRENTLY USE…?

Among 16-64 year olds

g 2014 g 2015 g 2016 29% 25%

15% 11%

8% 8% Ç 5% 3% 3% 2% 3% 3% 3% 3% 3%

Free Ç Significantly lower

Q3K. Which site or app with free programs from different networks (with commercials) have you used to watch TV programs in the past? Q3L: Which site or online service have you purchased TV programs or movies from in the past? 36 Far more viewers prefer to stream TV shows than to download them

PREFERED METHODS OF WATCHING ONLINE? Among 16-74 yea r o lds

No preference

26% Streaming 67%

Q7O. In general, which method of watching shows online do you prefer?; Q7P: What are the main reasons you prefer [streaming/downloading] TV shows? 37 Streamers like that no storage is required on their device, as well as not having to wait for content to download

PREFERED METHODS OF WATCHING WHY DO YOU PREFER STREAMING? ONLINE? Among 16-74 yea r o lds

7% Doesn't take up storage 52%

No preference Easier to use 50%

26% Streaming 67% Don't have to wait 47%

Less expensive 41%

More familiar with that method 36%

Q7O. In general, which method of watching, and paying for, shows online do you prefer?; Q7P: What are the main reasons you prefer [streaming/downloading] TV shows? 38 Downloaders like being independent of a broadband connection, as well as the idea of “owning” their content

PREFERED METHODS OF WATCHING WHY DO YOU PREFER DOWNLOADING? ONLINE? Among 16-74 yea r o lds

7% Shows don't buffer 45%

You "own" the show 43% No preference Can watch when not online 42% 26% Streaming 67% Easier to use 36% Less expensive 27%

More familiar with that method 26%

Don't need as fast connection 25%

Q7O. In general, which method of watching, and paying for, shows online do you prefer?; Q7P: What are the main reasons you prefer [streaming/downloading] TV shows? 39 “DIY” Television The TV bundles consumers create on their own

40 The average number of online content sources used by viewers continues to climb, up from 2.3 to 2.5 in 2016

AVERAGE NUMBER OF SOURCES USED TO WATCH TV ONLINE Among pay TV subscribers

2.3 2.5 2.0 2.0

2.3

2013 2014 2015 20162016

Q3A: Have you ever watched TV programs or movies from an online source, on any device? 41 One striking trend: the number of people with multiple SVODs has nearly doubled in just one year

NUMBER OF SUBSCRIPTION ONLINE SERVICES USED

Among 16-74 yea r o lds

28% Ç One SVOD subscription only 34%

37%Ç Two or more SVOD subscriptions 19%

14%Ç 2016 Three or more SVOD subscriptions 2% 2015

Ç Significantly higher than 2015 È Significantly lower than 2015

Q3A: Have you ever watched TV programs or movies from an online source, on any device? 42 And among consumers who watch any TV online in general, Netflix continues to climb as the default source

“DEFAULT” SOURCE FOR TV SHOWS

Among 16-64 year olds who watch at least some TV online 2016 38% Live TV from 2015 38% MVPD 2014 49%

2016 15% Shows on 2015 your DVR 19%

2014 18%

2016 23% 2015 20%

2014 14% Ç Significantly higher than 2015 Q4F. Think about the different sources you use for TV programs. Which would you say is your “default” source--the one you are most likely to turn to first when you want to watch something? 43 To measure the extent of the DIY phenomenon, we calculated the percent using various combinations of online sources

• Specifically, we calculated the proportion of pay TV subscribers who also use each possible combination of…

• SVOD services (e.g., Netflix, Amazon) • EST services (e.g., iTunes, Amazon Instant) • TVE sources (MVPD and network websites and apps) • Free ad-supported sources (e.g., Hulu) • Standalone network sources (HBO Now, Showtime, CBS All Access)

44 Five of the nine most common TV packages viewers create, include Netflix

% of Pay TV TV Network MVPD Netflix subscribers using… Sites/Apps Sites/Apps 2016

1) Pay TV Only 20% 2) Pay TV plus… ✔ 10% 3) Pay TV plus… ✔ ✔ 4% 4) Pay TV plus… ✔ 4% 5) Pay TV plus… ✔ ✔ 3% 6) Pay TV plus… ✔ 2% 7) Pay TV plus… ✔ ✔ 2% 8) Pay TV plus… ✔ ✔ ✔ 1% 9) Pay TV plus… ✔ 1%

Among 16-74 year olds with a Pay TV subscription

45 However, more than half use a combination falling outside the top 9, and that proportion is climbing

% of Pay TV TV Network MVPD Netflix subscribers using… Sites/Apps Sites/Apps 2016

1) Pay TV Only 20% 2) Pay TV plus… ✔ 10% 3) Pay TV plus… ✔ ✔ 4% 4) Pay TV plus… ✔ 4% 5) Pay TV plus… ✔ ✔ 3% 6) Pay TV plus… ✔ 2% 7) Pay TV plus… ✔ ✔ 2% 8) Pay TV plus… ✔ ✔ ✔ 1% 9) Pay TV plus… ✔ 1% 10) SOME OTHER COMBINATION 53%

2015: 46% Among 16-74 year olds with a Pay TV subscription

46 Awareness of standalone online subscriptions has increased by 7 points since 2015

HAVE HEARD OF STANDALONE ONLINE SUBSCRIPTIONS OVERALL

Among 16-74 year olds 60% Ç 53%

37% 30%

23% 23% Think I have

Definitely have

2016 2015 Ç Significantly higher than 2015

Q7J: Have you heard about stand-alone online TV services? 47 Awareness is highest by far for HBO Now

HAVE HEARD OF SPECIFIC STANDALONE ONLINE SUBSCRIPTIONS

Among 16-74 year olds 71% standalone online 44% 43% 41% add-on to 33% add-on to 32% 30% add-on to 28% 10%

QNEW7K: Have you heard of any of these before this interview? 48 But actual usage is lower: HBO Now is highest, at 8 percent of all respondents • Adding in potential subscribers (those saying they’ll definitely or probably sign up), penetration for the most popular services could reach 10%-15% STANDALONE ONLINE SUBSCRIPTIONS: USE AND POTENTIAL

Among 16-74 year olds Total HBO Now 8% 2% 5% 15% Showtime to an Amazonadd-on subscriptionto 5% 1% 5% 11%

Starz to an Amazonadd-on subscriptionto 3% 2% 6% 11%

Seeso 3% 2% 5% 10%

Showtime to aa Huludd-on subscription to 4% 1% 5% 10%

CBS All Access 3% 2% 5% 10%

Sling TV 3% 1% 5% 9%

standaloneShowtime online 5% 1% 3% 9%

PlayStation VUE 2% 1% 3% 6% Already have Definitely subscribe Probably subscribe

Q7G. How interested would you be in subscribing to each of these services? 49 Interest and adoption are much higher among younger viewers

STANDALONE ONLINE SUBSCRIPTIONS: USE AND POTENTIAL Among 16-74 year olds Total Millennials

HBO Now 8% 2% 5% 15% 25%

Showtime to an Amazonadd-on subscriptionto 5% 1% 5% 11% 22%

Starz to an Amazonadd-on subscriptionto 3% 2% 6% 11% 23%

Seeso 3% 2% 5% 10% 23% add-on to Showtime to a Hulu subscription 4% 1% 5% 10% 22%

CBS All Access 3% 2% 5% 10% 20%

Sling TV 3% 1% 5% 9% 20%

standaloneShowtime online 5% 1% 3% 9% 14%

PlayStation VUE 2% 1% 3% 6% 16%

Already have Definitely subscribe Probably subscribe g Significantly higher than total

Q7G. How interested would you be in subscribing to each of these services? 50 Standalone/”skinny” offerings don’t appear to drive large numbers of MVPD subs to cut back on their networks

HAVE YOU CORD SHAVED AND ADDED STANDALONE SUBSCRIPTIONS? Among 16-74 year olds with Pay TV

Have cut back on Subscribe to MVPD standalone channels services Only 7% have both 17% Yes 32% subscribed to standalone78% services, *and* cut back on the channels they get

Have done both from their MVPD 7%

Q2A. Do you currently have any of the following television services in your home? Q2B. Have you ever had a cable, satellite, or fiber optic TV subscription in your name? 51 But those who *have* done both tend to say the availability of standalone offers drove them to cut back

HAVE YOU CORD SHAVED AND ADDED DID YOU CUT BACK PAY TV BECAUSE YOU STANDALONE SUBSCRIPTIONS? COULD SUB TO STANDALONE SERVICES? Among 16-74 year olds with Pay TV

No Have cut Subscribe to 22% back standalone channels services 17% Yes 32% 78%

Have done both 7%

Q3M: Did you decide to cut back on channels from [provider] specifically because you knew could subscribe to these additional services? 52 TV Devices The screens and TV connectors people use to watch

53 After three years of increase, the number of devices used to watch TV online has slid back to 2014 levels

AVERAGEAVERAGE NUMBER NUMBER OF OF DEVICES DEVICES USED USED TO TO WATCH WATCH TV TV ONLINE** ONLINE* Among 16-64 who watch online at all 2.7 20162016 3.2 2015 2.7 3.1 2.3 2014 2.7

2013 2.4 2013 2015 20152015

*Online devices only— **Online devices only— does not include DVR, does not include DVR, VOD, or set-top box for VOD, or set-top box for Live TV Live TV

Q3A: Have you ever watched TV programs or movies from an online source, on any device? 54 One reason why: TV viewing on tablets has dropped 9 points since last year

DEVICES USED FOR WATCHING TV ONLINE

Among 16-64 year olds who have watched from an online source

g 2013 g 2014 g 2015 g 2016 81%79% 77% 70% È 71% 72%

60%62% 51% 42% È 36% 37% 36% 31% 30% 27%

A computer A TV set A tablet A smartphone È Significantly lower than 2015

Q4A. Please tell us if you have ever used a TV, computer, tablet or smartphone to watch programs from that source? 55 We’ve seen this trend in data from other sources. For example…

• Online viewing data from Adobe and Digitalsmiths • Falling tablet sales reported by manufacturers

Q4A. Please tell us if you have ever used a TV, computer, tablet or smartphone to watch programs from that source? 56 A critical line: For the first time, viewers are most likely to say they watched online content on a TV set

DEVICES USED FOR WATCHING TV ONLINE

Among 16-64 year olds who have watched from an online source

g 2013 g 2014 g 2015 g 2016 81%79% 77% 70% È 71% 72%

60%62% 51% 42% È 36% 37% 36% 31% 30% 27%

A computer A TV set A tablet A smartphone È Significantly lower than 2015

Q4A. Please tell us if you have ever used a TV, computer, tablet or smartphone to watch programs from that source? 57 Millennials are more likely than older consumers to use computers and smartphones to watch TV content

DEVICES USED FOR WATCHING TV ONLINE

Among 16-74 who watch at least some online TV

75% Ç 72% 71% g Millennials g Age 35+ 63%

45% 42% 43% Ç

27%

A computer A TV set A tablet A smartphone Ç Significantly higher than age 35+

Q4A. Please tell us if you have ever used a TV, computer, tablet or smartphone to watch programs from that source? 58 Use of most TV connectors is the same compared to last year

• Two have seen declines—BluRay players and the already low-penetrated Amazon Fire USE OF CONNECTED TV DEVICES Among 16-64 who watch at least some online TV on a TV set 2015 2016

Game console 44% 45%

Smart TV 33% 35%

Computer (connected with a cable) 36% 32%

BluRay DVD player 37% 30%

Roku box 18% 15%

Apple TV 15% 12%

Google Chromecast 15% 11%

Amazon Fire 7% 4%

g Significantly lower than 2015

Q4B. Which of the following have you used to watch online programs on your TV? 59 Distribution + Defaults How viewers allocate their TV time, and which sources they try first

60 In total, MVPD sources account for about 60% of viewers’ total TV time

HOW IS YOUR TOTAL VIEWING TIME DISTRIBUTED ACROSS SOURCES?

Among 16-74 yea r o lds 2016

Live TV from MVPD 39%

Shows on a DVR 13%

Netflix streaming 17%

VOD or PPV shows from your MVPD 7% MVPD sources TV network website or app 2% total Amazon Prime 2% 60% Hulu paid subscription 3% MVPD website, tablet app, or smartphone app 1%

Professionally produced TV shows on YouTube 1% Hulu (free version) 1%

Q5A1. About how much of your TOTAL TELEVISION VIEWING these days would you say is from each of these sources? 61 Even though many people don’t have Netflix, it still accounts for 17% of total TV time spent

HOW IS YOUR TOTAL VIEWING TIME DISTRIBUTED ACROSS SOURCES?

Among 16-74 yea r o lds 2016

Live TV from MVPD 39%

Shows on a DVR 13% Netflix streaming 17% …the VOD or PPV shows from your MVPD 7% highest of TV network website or app 2% any source except live Amazon Prime 2% TV Hulu paid subscription 3% MVPD website, tablet app, or smartphone app 1%

Professionally produced TV shows on YouTube 1% Hulu (free version) 1%

Q5A1. About how much of your TOTAL TELEVISION VIEWING these days would you say is from each of these sources? 62 There are no dramatic distribution changes since 2015, although DVR has a slightly lower and Netflix a higher share

HOW IS YOUR TOTAL VIEWING TIME DISTRIBUTED ACROSS SOURCES?

Among 16-74 yea r o lds 2015 2016

Live TV from MVPD 41% 39%

Shows on a DVR 16% 13%

Netflix streaming 13% 17%

VOD or PPV shows from your MVPD 6% 7%

TV network website or app 3% 2%

Amazon Prime 2% 2%

Hulu paid subscription 2% 3% MVPD website, tablet app, or smartphone app 2% 1%

Professionally produced TV shows on YouTube 1% 1% Hulu (free version) 1% 1%

g Significantly higher than 2015 g Significantly lower than 2015

Q5A1. About how much of your TOTAL TELEVISION VIEWING these days would you say is from each of these sources? 63 Netflix accounts for a quarter of Millennials’ TV viewing time. They spend less time watching live TV and shows on a DVR

HOW IS YOUR TOTAL VIEWING TIME DISTRIBUTED ACROSS SOURCES?

Among 16-74 yea r o lds Total 2016 Millennials

Live TV from MVPD 39% 31%

Shows on a DVR 13% 9%

Netflix streaming 17% 23%

VOD or PPV shows from your MVPD 7% 6%

TV network website or app 2% 3%

Amazon Prime 2% 2%

Hulu paid subscription 3% 4% MVPD website, tablet app, or smartphone app 1% 2%

Professionally produced TV shows on YouTube 1% 1% Hulu (free version) 1% 2%

g Significantly higher than total g Significantly lower than total

Q5A1. About how much of your TOTAL TELEVISION VIEWING these days would you say is from each of these sources? 64 Netflix subscribers spend a roughly equal amount of time on Netflix and on live TV

HOW IS YOUR TOTAL VIEWING TIME DISTRIBUTED ACROSS SOURCES?

Among 16-74 yea r o lds Total 2016 Subs

Live TV from MVPD 39% 28%

Shows on a DVR 13% 13%

Netflix streaming 17% 27%

VOD or PPV shows from your MVPD 7% 6%

TV network website or app 2% 3%

Amazon Prime 2% 3%

Hulu paid subscription 3% 4% MVPD website, tablet app, or smartphone app 1% 2%

Professionally produced TV shows on YouTube 1% 1% Hulu (free version) 1% 1%

g Significantly higher than total g Significantly lower than total

Q5A1. About how much of your TOTAL TELEVISION VIEWING these days would you say is from each of these sources? 65 On average, consumers estimate that fewer than half of the TV shows they watch are watched live

IN AN AVERAGE WEEK, WHAT PERCENT OF SHOWS DO YOU WATCH LIVE VS. TIME SHIFTED? Among 16-74 yea r o lds

Watch “live” 47%

Q5CC. Think about all the TV shows you watch over the course of a week. Of all those shows, what percent would you say you watch “live” - and by live, we mean shows you watch when they’re on regular TV at their regular time? 66 Millennials and viewers with an SVOD subscription watch even fewer shows live

PERCENT OF VIEWING THAT IS LIVE

Among 16-74 yea r o lds

Do not have SVOD 61%

Watch Age 35+ 45% “live” Total 47%

47% Millennials 37%

Have SVOD 40%

g Significantly higher than total g Significantly lower than total

Q5CC. Think about all the TV shows you watch over the course of a week. Of all those shows, what percent would you say you watch “live” - and by live, we mean shows you watch when they’re on regular TV at their regular time? 67 About half of time shifted shows are watched within 3 days of when they aired on live TV

TIMEFRAME FOR WATCHING NON-LIVE SHOWS

Among 16-74 year olds who watch some shows time-shifted

7+ days 28% Within 3 days 48%

4-7 days 24%

Q5D1. Next, think about the shows you do NOT watch live on their regular time. Overall, about what percent of those non-live shows do you tend to watch in each of the following timeframes? 68 In 2016, more viewers default to watching on Netflix than to watching shows on a DVR

WHAT’S YOUR DEFAULT SOURCE FOR TV? Among 16-64 year olds 2016 Live TV 43% from 2015 45% MVPD 2014 55%

2016 17% Shows on 2015 your DVR 19% 2014 18%

2016 19% 2015 16% 2014 11%

Q4F. Think about the different sources you use for TV programs. Which would you say is your “default” source--the one you are most likely to turn to first when you want to watch something? 69 Among consumers who watch any TV online generally, Netflix continues to climb as the default source

“DEFAULT” SOURCE FOR TV SHOWS: AMONG ONLINE VIEWERS

2016 38% Live TV from 2015 38% MVPD 2014 49%

2016 15% Shows on 2015 your DVR 19%

2014 18%

2016 23% 2015 20%

2014 14%

Q4F. Think about the different sources you use for TV programs. Which would you say is your “default” source--the one you are most likely to turn to first when you want to watch something? 70 Among Millennials, Netflix as the default source has jumped since 2015 (now tied with live TV)

“DEFAULT” SOURCE FOR TV SHOWS: AMONG MILLENNIALS Among 16-64 year olds 2016 32% Live TV from 2015 34% MVPD 2014 43%

2016 12% Shows on 2015 your DVR 14%

2014 17%

2016 31% Ç 2015 23%

2014 19% Ç Significantly higher than 2015 Q4F. Think about the different sources you use for TV programs. Which would you say is your “default” source--the one you are most likely to turn to first when you want to watch something? 71 Almost one-third of Netflix subscribers say that Netflix is their default when they want to watch TV

“DEFAULT” SOURCE FOR TV SHOWS: AMONG NETFLIX SUBSCRIBERS Among 16-64 year olds 2016 35% Live TV from 2015 34% MVPD 2014 43%

2016 17% Shows on 2015 your DVR 18%

2014 18%

2016 31% 2015 31%

2014 26% Ç Significantly higher than 2015 Q4F. Think about the different sources you use for TV programs. Which would you say is your “default” source--the one you are most likely to turn to first when you want to watch something? 72 Turning to devices, Millennials spend more time watching on computers and phones than older consumers • Only 40% of the TV shows watched by Millennials who view some content online comes via the MVPD set-top box

VIEWING DISTRIBUTION ACROSS DEVICES Among 16-74 year olds who have MVPD service and watch online TOTAL 2016 MILLENNIALS

MVPD set-top box 51% 40%

Connected TV 19% 24%

Computer 18% 21%

Tablet 6% 6%

Smartphone 3% 4%

g Significantly higher than total g Significantly lower than total

Q5F. About how much of your TOTAL TELEVISION VIEWING would you say is from each device?; 73 The proportion of Millennials who default to the MVPD box is more than 10 points lower than for all consumers

DEFAULT DEVICE FOR TV

Among 16-74 year olds with MVPD service and watch online TOTAL 2016 MILLENNIALS

MVPD set-top box 60% 49%

Computer 16% 20%

Connected TV 15% 22%

Tablet 4% 3%

Smartphone 2% 5%

g Significantly lower than total

Q5G Which would you say is your “default” device--the one you are most likely to turn to first when you want to watch something? 74 Value Which sources deliver the best value for the money?

75 Netflix ranks highest in perceived value

HOW MUCH VALUE DO YOU ASSOCIATE WITH EACH OF THE FOLLOWING? % Excellent or Good Value Among 16-74 yea r o lds

32% 35% 67%

Free sites with ads 24% 39% 63%

free 24% 37% 61%

24% 36% 60%

SVOD generally 17% 37% 54%

Standalone “skinny” subscription 11% 35% 46%

Pay TV subscription 13% 33% 46% Excellent Value Good Value

Q6A. Tell us how much value you associate with each of the following ways of accessing TV shows. 76 As in past research, EST/transactional sources rank the lowest when it comes to perceived value

HOW MUCH VALUE DO YOU ASSOCIATE WITH EACH OF THE FOLLOWING? % Excellent or Good Value Among 16-74 yea r o lds subscription Hulu Plus subscription 10% 30% 40%

A subscription to Netflix DVDsDVDs through via the mailmail service 10% 29% 39%

Renting or buyingRenting an individual or buyingshow or movie from from Amazon Instant Video 7% 26% 33%

A subscription to a premiumPremium cable network, cable like subscriptionsHBO, Showtime, or Starz 9% 22% 31%

Renting or buyingRenting a movie orthrough buying your game via console (e.g. like Xbox Marketplace or PlayStation Network) 8% 22% 30%

Ordering individual programs or seasons of programs, and paying for each Ordering individualone separately programs generally 7% 20% 27%

Ordering and paying Orderingfor individual programsfrom and movies from iTunes 7% 20% 27%

Excellent Value Good Value

Q6A. Tell us how much value you associate with each of the following ways of accessing TV shows. 77 The perceived value of Netflix and especially Amazon are higher than a year ago

HOW MUCH VALUE DO YOU ASSOCIATE WITH EACH OF THE FOLLOWING? % Excellent or Good Value Among 16-74 yea r o lds g 2015 g 2016 67%Ç 61% 60%61% 60%Ç

49% 43%46% 39%40% 30%31%

Pay TV Premium cable streaming subscription subscription Ç Significantly higher than 2015

Q6A. Tell us how much value you associate with each of the following ways of accessing TV shows. 78 Three quarters of MVPD subscribers are satisfied with the service they get from their provider

IN GENERAL, HOW SATISFIED ARE YOU WITH THE SERVICE YOU GET FROM YOUR TV PROVIDER? Among 16-74 yea r o lds

Dissatisfied

9% Completely satisfied Neutral 19% 19%

Mostly satisfied 53%

Q2H1. In general, how satisfied would you say you are with the service you get from [provider]? 79 MVPD subs are most satisfied with the picture/sound quality, and the breadth of selection • They’re least satisfied with how much they pay, and the value they get in return

HOW SATISFIED ARE YOU WITH EACH ASPECT OF YOUR SERVICE?

Among 16-74 year olds with an MVPD subscription

Picture and Sound 36% 44% 80% Ease of Finding/Watching Live TV from Set-… 38% 41% 79% Choice of Things to Watch 23% 44% 67% Ease of Using DVR 30% 30% 60% On-Demand Ease of Use 23% 34% 57% Customer Service 21% 32% 53% On-Demand Selection 18% 34% 52% Online Viewing Options 18% 32% 50% Value 13% 29% 42% Price 10% 20% 30% Completely satisfied Mostly satisfied

Q2H2. And how would you rate your satisfaction with [provider] In each of the following areas? 80 Many MVPDs have been making investments to improve their products and customer service…

HAVE YOU NOTICED ANY CHANGE IN QUALITY OF SERVICE OVER THE PAST YEAR? Among 16-74 year olds with a MVPD subscription Much better Worse 8% • Most subscribers say they 13% A little better haven’t noticed a difference 19% • However, those that have

The same are about twice as likely to 59% say their service has improved

Q2H3: All things considered, have you noticed any change in the service you get from [provider] over the past year? 81 Millennials who subscribe to pay TV are significantly more likely to say their service has improved

HAVE YOU NOTICED ANY CHANGE IN QUALITY OF SERVICE OVER THE PAST YEAR? Among 16-74 year olds with a MVPD subscription Much better Worse 8% 13% A little better 19% Millennials 39% Total 27% The same 59% Age 35+ 20%

g Significantly higher than total g Significantly lower than total

Q2H3: All things considered, have you noticed any change in the service you get from [provider] over the past year? 82 What Matters Most? Which sources are most indispensable, and which features most important?

83 Which TV sources are most indispensable?

We showed people a list of all the TV sources they said they use, and asked them two questions…

If you had to drop ONE source of TV, 1 which would it be?

If you had to drop all your TV sources EXCEPT 2 FOR ONE, which one source would you keep?

84 Free Hulu is most likely to be the first source dropped, followed by VOD sources and live TV

IF I HAD TO DROP ONE SOURCE, I’D CHOOSE… Among users of each source

2015 2016 free 17% 32% On-demand programs from MVPD 25% 22% Live television from your MVPD 17% 21% Professionally produced TV shows on 14% 19% TV network sites or apps 15% 16% 14% 13% 10% 13% MVPD site or app 18% 10% Shows on your DVR or TiVo box 9% 7%

Q5C. Of the TV sources you have--if you had to drop ONE, which one would it be? 85 Compared to last year, the free version of Hulu is about twice as likely to be the first dropped

IF I HAD TO DROP ONE SOURCE, I’D CHOOSE… Among users of each source

Q5C. Of the TV sources you have--if you had to drop ONE, which one would it be? 86 Millennials are much less likely than older consumers to drop Netflix first, and more likely to drop live TV

IF I HAD TO DROP ONE SOURCE, I’D CHOOSE… Among users of each source

Millennials Age 35+ free 26% 30% Live television from your MVPD 25% 17% On-demand programs from MVPD 21% 23% Professionally produced TV shows on 20% 21% 18% 9% TV network sites or apps 13% 22% 10% 20% MVPD sites or apps 9% 13% Shows on your DVR or TiVo box 9% 6%

g Significantly higher than age 35+ g Significantly lower than age 35+

*Note: Services 2% or less are not displayed Q5C. Of the TV sources you have--if you had to drop ONE, which one would it be? 87 Live TV and Netflix are tied as the platforms viewers would be most likely to hold onto over every other source

IF I HAD TO DROP ALL MY TV SOURCES EXCEPT FOR ONE, I’D KEEP… Among users of each source

2015 2016 Live television from your MVPD 47% 41% 36% 40%

Shows on your DVR or TiVo box 25% 23%

subscription 23% 16%

MVPD sites or apps 6% 7%

On-demand programs from your MVPD 8% 7% 9% 6%

TV network sites or apps 4% 4%

Q5D. If you had to drop all your TV sources EXCEPT for one, which one source would you keep? 88 This is a major shift from a year ago, when live TV was seen as indispensable by significantly more viewers

IF I HAD TO DROP ALL MY TV SOURCES EXCEPT FOR ONE, I’D KEEP… Among users of each source

2015 2016 Live television from your MVPD 47% 41% 36% 40%

Shows on your DVR or TiVo box 25% 23%

subscription 23% 16%

MVPD sites or apps 6% 7%

On-demand programs from your MVPD 8% 7% 9% 6%

TV network sites or apps 4% 4%

Q5D. If you had to drop all your TV sources EXCEPT for one, which one source would you keep? 89 And among Millennials, Netflix has surpassed live TV as “most indispensable”, by a significant margin

IF I HAD TO DROP ALL MY TV SOURCES EXCEPT FOR ONE, I’D KEEP… Among users of each source

Millennials Age 35+ Live television from your MVPD 34% 51% 45% 28%

Shows on your DVR or TiVo box 18% 28%

subscription 19% 4%

MVPD sites or apps 11% 4%

On-demand programs from your MVPD 4% 9% 3% 10%

TV network sites or apps 5% 2%

g Significantly higher than age 35+ g Significantly lower than age 35+

Q5D. If you had to drop all your TV sources EXCEPT for one, which one source would you keep? 90 Which features and attributes matter the most when it comes to platform selection?

• We used a technique called Maximum Difference Scaling to quantify how much influence specific features have on viewers’ choice of one TV platform over another. • How it works: we tested a total of 16 attributes. Respondents saw 4 attributes at a time, along with this question:

Imagine you have just sat down to watch a show on TV. You can choose from any TV source, and watch on or through any device you want to. On the following screens, you’re going to see groups of 4 benefits that different TV platforms might offer. From each group, select…

The benefit that would make you MOST LIKELY to choose one TV source over another

The benefit that would make you LEAST LIKELY to choose a source

91 We tested 16 attributes:

The interface makes it easy to find something to watch when I don’t 1. Easy to Browse have something specific in mind

The interface makes it easy to search for a specific program I have 2. Easy to Search in mind

Puts a wide range of different content, from different sources, all in 3. One-stop Shop one place

Includes features that help me find new shows that I didn’t already 4. Discovery know about

5. Flexible Allows me to watch TV or movies wherever and whenever I want to

6. Low Price The cost to view TV is lower than other sources

7. Selection Quantity Has a deep selection of programs to choose from

8. Viewing Quality Offers high definition picture quality

List continues on next page 92 We tested 16 attributes:

Allows me to watch original or exclusive shows that are not 9. Exclusives available from any other source

Offers live episodes of drama, comedy, or reality shows on the 10. Live Shows day and time they air for the first time

11. Live Sports Offers sports events that you can watch live

Allows you to watch new and older episodes of shows from 12. Premium Network Shows premium networks like HBO and Showtime

Allows you to watch new and older episodes of shows from basic 13. Basic Cable Shows cable networks like AMC, A&E, TBS, and USA

Allows you to watch new and older episodes of shows from 14. Broadcast Network Shows broadcast networks like ABC, CBS, FOX, NBC, and PBS

Allows you to watch new and older episodes of shows from 15. Access to Online Shows online sources like Netflix or Hulu

Makes it easy for you to choose only the shows and networks 16. Customized you’re interested in, and ignore those you aren’t interested in

93 How to interpret the results:

The results rank the attributes in order of importance, and also quantify their relative impact on which source that viewer chooses to watch. • The number next to each item represents the mean importance of that item across all respondents. • They also represent the relative impact on choice of platform. In other words, an item with a “10” score has twice the impact one scored a “5”

94 So – which attributes matter the most?

WHICH ATTRIBUTES HAVE GREATEST IMPACT ON CHOICE OF PLATFORM? Among 16-74 yea r o lds Low Price 13.1 Broadcast Network Shows 8.8 Selection Quantity 8.8 Basic Cable Shows 8.7 Viewing Quality 7.3 Flexible 6.6 Customized 6.0 One-stop Shop 5.7 Premium Network Shows 5.3 Access to Online Shows 5.3 Live Sports 5.2 Live Shows 5.1 Easy to Browse 4.9 Easy to Search 4.3 MEAN SCORE Exclusives 3.0 Discovery 2.0 6.3

Q7D MAXDIFF. What factors make you choose one TV source over another. [MEANS] 95 Price carries the most weight, by a significant margin

IMPORTANCE OF FACTORS WHEN CHOOSING TV CONTENT SOURCE Among 16-74 yea r o lds Low Price 13.1 Broadcast Network Shows 8.8 Selection Quantity 8.8 Basic Cable Shows 8.7 Viewing Quality 7.3 Flexible 6.6 Customized 6.0 One-stop Shop 5.7 Premium Network Shows 5.3 Access to Online Shows 5.3 Live Sports 5.2 Live Shows 5.1 Easy to Browse 4.9 Easy to Search 4.3 MEAN SCORE Exclusives 3.0 Discovery 2.0 6.3

Q7D MAXDIFF. What factors make you choose one TV source over another. [MEANS] 96 The ability to access broadcast and basic cable shows also ranks near the top

Q7D MAXDIFF. What factors make you choose one TV source over another. [MEANS] 97 The volume of shows a platform offers is the third most important factor

Q7D MAXDIFF. What factors make you choose one TV source over another. [MEANS] 98 Three of these factors show a change in relative importance vs. 2015

IMPORTANCE OF FACTORS WHEN CHOOSING TV CONTENT SOURCE

Among 16-74 yea r o lds

7.3Ç Viewing Quality 5.9

6.6 È Flexible 8.4

5.7 Ç One-stop Shop 4.9

Ç Significantly higher than 2015 È Significantly lower than 2015

Q7D MAXDIFF. What factors make you choose one TV source over another. [MEANS] 99 The quality of the viewing experience, and having a centralized source, are more important now than last year • With consumers growing more accustomed to HD, even from online sources via compression advances, viewing quality is moving from “nice to have” to expected • And as we’ve seen in other research, expanding options lead consumers to crave a one-stop source for content—and that need continues to grow

IMPORTANCE OF FACTORS WHEN CHOOSING TV CONTENT SOURCE

Among 16-74 yea r o lds 24% 7.3Ç Viewing Quality increase 5.9 È 6.6 Flexible 8.4

5.7 Ç One-stop Shop 25% 4.9 increase

Ç Significantly higher than 2015 È Significantly lower than 2015

Q7D MAXDIFF. What factors make you choose one TV source over another. [MEANS] 100 On the flip side, with consumers coalescing around connected TVs, multiple-device flexibility has become less important

IMPORTANCE OF FACTORS WHEN CHOOSING TV CONTENT SOURCE

Among 16-74 yea r o lds

7.3Ç Viewing Quality 5.9

6.6È Flexible 21% 8.4 decrease

5.7 One-stop Shop Ç 4.9

Ç Significantly higher than 2015 È Significantly lower than 2015

101 Q7D MAXDIFF. What factors make you choose one TV source over another. [MEANS] Contrary to conventional wisdom, Millennials are actually less price sensitive—a finding we’ve seen in other research • And consistent with their lower price sensitivity, Millennials place greater value on availability of premium network content

IMPORTANCE OF FACTORS WHEN CHOOSING TV CONTENT SOURCE

Among 16-74 yea r o lds

12.1 È Low Price 13.5

Access to Broadcast 8.0 È Network Shows 9.2

Access to Premium 6.5Ç Network Shows 4.9 6.4 Millennials Access to Online Shows Ç 4.9 Age 35+

Ç Significantly higher than age 35+ È Significantly lower than age 35+

Q7D MAXDIFF. What factors make you choose one TV source over another. [MEANS] 102 And for Millennials, the linear vs. online divide grows, with more importance placed on online show availability…

• And less importance placed on access to broadcast network shows

IMPORTANCE OF FACTORS WHEN CHOOSING TV CONTENT SOURCE

Among 16-74 yea r o lds

12.1 È Low Price 13.5

Access to Broadcast 8.0 È Network Shows 9.2

Access to Premium 6.5Ç Network Shows 4.9 6.4 Millennials Access to Online Shows Ç 4.9 Age 35+

Ç Significantly higher than age 35+ È Significantly lower than age 35+

Q7D MAXDIFF. What factors make you choose one TV source over another. [MEANS] 103 Takeaways Things to remember

104 Conclusions

SVOD services are an Led by strong growth for Netflix, Amazon, even stronger force to and Hulu—along with inroads from 1 standalone services—SVOD subscriptions be reckoned with than have jumped more than 20 points in the just a year ago past year.

Netflix is seen as a better value than free, In particular, Netflix in ad supported services. In fact, the bloom has surpassed free appears to have left the rose for free 2 services in perceptions sources of online TV. For example, the percentage using the free version of Hulu is of “value” just half what it was two years ago.

105 Conclusions

With a vast range of options to choose from, One-size-fits-all consumers feel more and more empowered to build their own, custom-designed TV bundles. 3 television has left the And a new twist this year: dramatic growth in building consumers choosing MULTIPLE SVOD services.

Cord cutting is still very much the exception rather than the rule, and single-digits say Still—the vast majority they’ll drop pay TV in the coming year. 4 of viewers still have a subsctiption to pay TV The reason? Pay TV continues to offer three strong benefits: relatively bulletproof picture and sound, familiarity, and deep selection.

106 Conclusions

Only 7% of consumers have both subscribed While “skinny to standalone online services AND cut pay TV channels. But even though these services bundles” have not yet are still very new.... 5 made a dent in pay TV • A majority have heard of them use, the potential is • Awareness of the is up significantly since 2015 clearly there • Millennials find the services especially appealing

In the end, while pay Live TV as consumers’ “default” source of TV TV has not taken a has reached its lowest point since we started huge hit when it comes tracking. Young consumers and online 6 viewers are even less likely to consider live to subscriber numbers, TV their home base—with Netflix gaining its “share of mind” is a momentum as the first thing these viewers different matter turn on.

107