Non-Traditional Tv February 2016

NON-TRADITIONAL TV FEBRUARY 2016

1 Non-traditional, online-only video content is a growing source of competition for total viewing time

• Reach: Single-week audience for top 10 multichannel networks on YouTube reaches 370 million views* • Frequency: More than 1/3 of viewers 16-29 watch online video at least 3 times per day – usually not on a TV set* % of time with online video spent on mobile devices • Engagement: Among young viewers, YouTube personalities are rated more appealing and influential than Hollywood celebrities** 58% 40% 23% * Piksel, August 2015 **August 2015 survey by Variety 2012 2014 2016^

Source: Zenith Optimedia 2 ^ Projected But it also offers an opportunity for traditional providers to adapt to the new TV marketplace • A way to get noticed: Win new audiences on platforms that make it easier to find and target viewers who will be interested • Lower costs: Leverage existing audiences, shorter development cycles, and lower production costs • New genres and audiences: Build content around very specific genres, like gaming, lifestyle, and eSports, with millions of potential viewers • New ways to monetize: Advertisers can be part, or a partner, in the show— and can take advantage of opportunities to hyper-target viewers

3 But there are also barriers “big media” companies need to contend with in entering this market

• Distribution Cuts: Existing platforms like YouTube take a big slice of revenue, and Facebook doesn’t share revenue at all • Brand Image Risk: Investing in online video—where the line between consumer and producer starts to blur —represents a certain loss of control over content • Perceived Authenticity: An attempt to exert too much control could “kill the golden goose”, by undercutting the independence that draws many viewers to these sources in the first place

4 Goals of this research:

• How big is the audience for online video? • How often do people view? Audience • What are the characteristics of viewers overall, and viewers of specific genres?

• What’s the fundamental appeal of online video viewing? Attraction • What genres and sub-genres are most popular?

• What’s the impact of online video viewing on viewing of traditional shows from TV networks? Impact • Which online video genres complement, or cannibalize, traditional viewing?

• Do online video viewers see a place for established media companies in the online video ecosystem? Opportunities • How can established companies most effectively take advantage of these opportunities?

5 Nontraditional, online-only video: Survey definition

The survey focused on online-only video content, defined for respondents as including the following:

• Videos that are only available online: You can’t watch them on a traditional TV network like NBC, ABC, AMC, HBO, etc. • They can be of any length of format: The length of a regular show, or short-form videos • They can include shows created by online TV sources: For example, original shows from Netflix, Hulu or Amazon like House of Cards, Orange is the New Black, etc. that are only available from those online sources • They’re put out by individuals or companies on a regular basis: We’re not including one-off videos, taken with a phone, from by regular people

66 We surveyed 1,246 TV consumers:

• Age 16 to 74 • We sampled younger consumers more heavily to enable deeper analysis of online video activity • At least 5 hours of TV per week • Broadband access at home • Sample weighted to U.S. census distributions • Data collection completed in February 2016

77 We captured viewing behavior around 12 categories of online video content:

These have the same general length and structure as shows on 1. "Online Original" regular TV, except they’re only available online. Some well known TV shows examples: House of Cards, Orange is the New Black, Narcos, Transparent, Master of None, etc.

Videos from popular performers like Katy Perry, Bruno Mars, 2. Music videos Rihanna, One Direction, Taylor Swift, Justin Bieber, or from amateurs doing a version of a popular song 3. Clips from TV Online videos that show a segment from a regular TV show, like Jimmy Fallon, Jimmy Kimmel, Conan O’Brien, The Daily Show, The Shows Ellen Show, etc. 4. Online video Video series that come out regularly online, with a theme, like Bad Lip Reading, Funny or Die, College Humor, AutoTune the News, series Barely Political, etc. Video clips with latest news (world, national, business, technology, 5. News entertainment, science, etc.), sports highlights or clips, weather, etc. Videos on a range of lifestyle topics or hobbies, including food, 6. Special interest travel, autos, beauty, health, mindfulness, business and finance, etc.

8 We captured viewing behavior around 12 categories of online video content:

Videos to educate on a topic or how to do tasks or projects, such 7. Educational as Ted Talks, NASA TV, Talks at Google, Crazy Russian Hacker, etc.

8. Gaming videos Videos with gameplay from video games like Minecraft, Grand Theft Auto, Battlefield, Halo, etc.

9. Product reviews Video reviews of new products being introduced, or videos showing people opening up the boxes that new products come in

Video series that come out regularly online, created or hosted by 10. Online series with the same person. For example: PewDiePie, Smosh, My Drunk Kitchen, Good Mythical Morning, FouseyTube, Jenna Marbles, hosts Superwoman, Jérôme Jarre, Shaun McBride, Cameron Dallas, Brittany Furlan, etc. 11. “Extra” content Webisodes, interviews or behind the scenes videos from popular TV shows (The Walking Dead, Empire, Game of Thrones, etc.), from shows on TV only available online

12. Videos for kids Cartoons or other video content targeted to kids, only available online, like Little Baby Bum, ChuChu TV, Mother Goose Club, etc.

9 Executive Summary Key Findings

10 There’s a massive audience for non-traditional, online video content in the categories we tested

77% of all viewers have watched these kinds of online videos in the past 6 months

88% of those age 16-24 have viewed in past 6 months

11 In addition to significant reach, viewers are highly engaged

of viewers watch at watch every day 76% least once a week 35%

38% subscribe to at least one online video channel

12 Online video is different from “regular” TV in some key, and appealing, ways

• They’re shorter: For certain genres, we see up to 75% watching in sessions of 15 minutes or less—a window that “regular” TV doesn’t offer FORMAT: • They’re easy to consume on laptops and mobile devices—overwhelmingly how younger viewers watch them

They’re perceived as more inventive and creative —without a hard line between creators and QUALITY: consumers, and outside the paradigm of traditional TV shows

• The vast variety means viewers can find content exactly relevant to their interests CONNECTION: • Discovery takes no effort: 49% of all video viewing is “pushed” to viewers, on posts, sent by others, or through notifications

13 For these reasons, it does take a bite out of traditional TV viewing. Those who watch online videos…

Watch 2 fewer hours per week of traditional TV shows

37% say they watch less TV since they’ve been watching online videos

35% think they’ll watch less TV in the future because of the time they spend watching online video

14 But this is also a category where traditional media companies could expand, successfully

48%

say they would feel “positive” about an online video personality they watch signing on with a major media company

34%

prefer online videos from “big” media companies, vs. only 14% who say they’d rather only watch individual creators

15 Online Video Use How many watch—and how often?

16 More than ¾ of all viewers have watched video from at least one of the online video categories we tested

HAVE YOU WATCHED ANY VIDEO FROM THESE CATEGORIES IN THE PAST 6 MONTHS?

No 23%

Yes 77%

Q5B: Here are some different categories of online-only videos. Please tell us if you have watched at least some videos from each in the past six months. 17 Among viewers age 16-24, almost 9 in 10 watch these kinds of videos

HAVE YOU WATCHED ANY VIDEO FROM THESE CATEGORIES IN THE PAST 6 MONTHS?

No 12% 23%

Yes Yes 77% 88%

Age 16-24

Q5B: Here are some different categories of online-only videos. Please tell us if you have watched at least some videos from each in the past six months. 18 What’s more, nearly all viewers who watch TV on a mobile device also watch some kind of online video content

HAVE YOU WATCHED ANY VIDEO FROM THESE CATEGORIES IN THE PAST 6 MONTHS? No 9%

No 23%

Yes Yes 77% 91%

Watch on a mobile device

Q5B: Here are some different categories of online-only videos. Please tell us if you have watched at least some videos from each in the past six months. 19 Online videos have become woven into consumers’ routine: more than a third watch every day; 3 in 4 watch weekly

HOW OFTEN DO YOU WATCH THESE KINDS OF VIDEO?

Among those who have watched online video categories in the past 6 months

Daily Multiple times Less often 35% than that per day 24% 20%

Once a day Once a week 15% 17% Every couple of days 24%

Q5C: How often would you say you watch videos in any of these categories? 20 More than half of viewers age 16-24, and especially men in that age group, watch every day

% WHO WATCH EVERY DAY

Among those who have watched online video categories in the past 6 months 58% 53% 48% 48%

38% 38% 35%

25%

Age 35 + All viewers Watch TV on Netflix subs Hulu Subs Millennials Age 16-24 Men 16-24 mobile device subs subs (18-34)

21 Among those who watch at all, the average viewer spends about 8 hours per week watching online video

MEAN HOURS/WEEK WATCHING NON-TRADITIONAL VIDEO Among those who watch them at all HOURS MINUTES 8 : 12

Q5D: Hours per week watching non-traditional TV (MEAN) 22 The same viewers watch about 22 hours of traditional TV shows in a week...

MEAN HOURS/WEEK WATCHING MEAN HOURS/WEEK WATCHING NON-TRADITIONAL VIDEO TRADITIONAL TV SHOWS Among those who watch them at all Among those who watch non-traditional video. at all HOURS MINUTES HOURS MINUTES 8 : 12 22 : 06

Q5D: Hours per week watching non-traditional TV (MEAN) 23 The same viewers watch about 22 hours of traditional TV shows in a week...

...two hours fewer than those who don’t watch online videos at all 24 : 06

Q5D: Hours per week watching non-traditional TV (MEAN) 24 Genres Types of online videos people watch most

25 Among viewers in general, “online originals” like Orange is the New Black are most likely to be viewed at all

TOP SUB-GENRES OF ONLINE VIDEOS

Among viewers of genre

Official music videos from artists 89%

MUSIC VIDEOS Videos with just music and a static image 37%

Videos of amateur musicians 26%

Q5B: Here are some different categories of online-only videos. Please tell us if you have watched at least some videos from each in the past six months. 31 About one-third of video viewers watch live streaming videos from users, à la Periscope

DO YOU WATCH LIVE STREAMING VIDEOS

Among those who have watched online video categories in the past 6 months

Yes

No 35% 65%

Q5I: Some sites allow you to watch these sorts of online videos on a live streaming basis. 32 Live stream viewing is much higher among young consumers and men, including two-thirds of males 16-24

DO YOU WATCH LIVE STREAMING VIDEOS

Among those who have watched online video categories in the past 6 months

Men age 16-24 64% Yes All age16-24 54% No 35% Watch TV on mobile device 40% 65% Age 25-34 38%

All respondents 35%

Age 35+ 27%

Q5I: Some sites allow you to watch these sorts of online videos on a live streaming basis. 33 A Broader View How individual genres group into larger categories

34 The video genres we tested tend to fall into six categories, based on patterns identified through multivariate analysis

“Online Original” Clips from TV Music Videos Video Series TV Shows Shows

Special Interest News Educational Gaming Videos Videos

Extra Content Online Series Product Reviews From Shows on Videos for Kids With Hosts TV

35 1. The first category is DIVERSIONS, made up of short entertainment focused videos

“Online Original” Clips from TV Music Videos video Series TV Shows Shows

Special Interest News Educational Gaming Videos Videos

Extra Content Online Series Product Reviews From Shows on Videos for Kids With Hosts TV

36 2. The second category: RECURRING VIDEO SERIES, with or without hosts—including gaming videos

“Online Original” Clips from TV Music Videos video Series TV Shows Shows

Special Interest News Educational Gaming Videos Videos

Extra Content Online Series Product Reviews From Shows on Videos for Kids With Hosts TV

37 3. Next are INFORMATIONAL videos, offering practical or educational information

“Online Original” Clips from TV Music Videos video Series TV Shows Shows

Special Interest News Educational Gaming Videos Videos

Extra Content Online Series Product Reviews From Shows on Videos for Kids With Hosts TV

38 4. Some genres stand on their own, their own category unlike others, including ONLINE ONLY TV SHOWS

“Online Original” Clips from TV Music Videos video Series TV Shows Shows

Special Interest News Educational Gaming Videos Videos

Extra Content Online Series Product Reviews From Shows on Videos for Kids With Hosts TV

39 5. EXTRA TV SHOW CONTENT is another standalone category

“Online Original” Clips from TV Music Videos video Series TV Shows Shows

Special Interest News Educational Gaming Videos Videos

Extra Content Online Series Product Reviews From Shows on Videos for Kids With Hosts TV

40 6. VIDEO FOR KIDS also stands on its own as a category, unlike others

“Online Original” Clips from TV Music Videos video Series TV Shows Shows

Special Interest News Educational Gaming Videos Videos

Extra Content Online Series Product Reviews From Shows on Videos for Kids With Hosts TV

41 Grouped this way, we see that diversions, information-related videos, and recurring series are most popular

HAVE YOU WATCHED VIDEOS FROM THESE CATEGORIES?

Diversions 47%

Informative Videos 44%

Recurring Video Series 39%

Online Only TV Shows 37%

Extra Content for Shows on TV 12%

Videos for Kids 6%

Q5B: Here are some different categories of online-only videos. Please tell us if you have watched at least some videos from each in the past six months. 42 We also profiled the most frequent viewers of each genre category—those viewing several times a week or more

HOW OFTEN DO YOU WATCH VIDEOS FROM EACH CATEGORY?

Diversions 25% 22% 53%

Informative Videos 27% 16% 56%

Recurring Video Series 24% 28% 48%

Online Only TV Shows 16% 21% 63%

Extra TV Show Content 6%7% 88%

Videos for Kids 4% 2% 94%

Several Times/Week or More Weekly or Less Often Never

Q5B: Here are some different categories of online-only videos. Please tell us if you have watched at least some videos from each in the past six months. 43 Frequent “diversion” video viewers are young, heavy online video users generally—but also heavy VOD users

PROFILE OF FREQUENT VIDEO CATEGORY VIEWERS

Diversions 25% “Diversion” Viewers Are More Likely Than Other Frequent Viewers To … Informative Videos 27% Use VOD 64% Watch online videos every day 65% Recurring Video Series 24% Be Millennials 54% Use pirate TV sources 22%

Online Only TV Shows 16%

Extra TV Show Content 6%

Videos for Kids 4%

Several Times/Week or More

Q5B: Here are some different categories of online-only videos. Please tell us if you have watched at least some videos from each in the past six months. 44 Those who frequently watch informative videos are older, more educated, and came earlier to online videos than others

PROFILE OF FREQUENT VIDEO CATEGORY VIEWERS

Diversions 25% “Informative Video” Viewers Are More Likely Than Other Frequent Viewers To … Be veteran online video viewers, Informative Videos 27% 62% starting more than a year ago Be non-Millennials 54% Recurring Video Series 24% Have a graduate/professional degree 23%

Online Only TV Shows 16%

Extra TV Show Content 6%

Videos for Kids 4%

Several Times/Week or More

Q5B: Here are some different categories of online-only videos. Please tell us if you have watched at least some videos from each in the past six months. 45 The strongest viewers of recurring video series are young, single, male and videophiles on many platforms

PROFILE OF FREQUENT VIDEO CATEGORY VIEWERS

Diversions 25% “Recurring Video Series” Viewers Are More Likely Than Other Frequent Viewers To … Have premium channels (among Informative Videos 27% 70% Pay TV subs) Be male 67% Recurring Video Series 24% Subscribe to some online video 66% channels Online Only TV Shows 16% Be Millennials 65% Watch live streaming user videos 62% Extra TV Show Content 6% Be single 58% Watch online videos multiple times 47% per day Videos for Kids 4%

Several Times/Week or More

Q5B: Here are some different categories of online-only videos. Please tell us if you have watched at least some videos from each in the past six months. 46 Heavy online-only TV viewers fit the SVOD viewer profile— frequent binge viewers and fans of stacked seasons

PROFILE OF FREQUENT VIDEO CATEGORY VIEWERS

Diversions 25% “Online-Only TV Viewers” Viewers Are More Likely Than Other Frequent Viewers To … Informative Videos 27% Be SVOD subs 93% Be Millennials 62% Recurring Video Series 24% Watch online videos daily 59% Subscribe to some video channels 55% Like “stacked seasons” idea a lot 54% Online Only TV Shows 16% Binge view at least weekly 44%

Extra TV Show Content 6%

Videos for Kids 4%

Several Times/Week or More

Q5B: Here are some different categories of online-only videos. Please tell us if you have watched at least some videos from each in the past six months. 47 Extra TV content viewers are not only videophiles generally, but also avid users of Pay TV services

PROFILE OF FREQUENT VIDEO CATEGORY VIEWERS

Diversions 25% “Extra Content Viewers” Viewers Are More Likely Than Other Frequent Viewers To … Informative Videos 27% Have Pay TV 94% Have premium channels (among Pay 84% TV subs) Recurring Video Series 24% Watch live streaming user videos 64% Be Millennials 62% Online Only TV Shows 16% Binge view at least weekly 45% Watch online video multiple times 44% Extra TV Show Content 6% per day Watch VOD daily 37% Videos for Kids 4%

Several Times/Week or More

Q5B: Here are some different categories of online-only videos. Please tell us if you have watched at least some videos from each in the past six months. 48 The Process How videos are discovered and viewed

49 We tested the following methods of discovering videos

Through Browsing/Searching Videos that you find on your own—by searching or 1. browsing sites for specific videos or types of videos

Videos that someone you know tells you to watch—for 2. Sent By Other example, on your Facebook wall or private message, or in a text or email, or by word of mouth Videos that you see posted on your Facebook timeline, 3. Posted for All Twitter feed, or other social media source—posted for everyone to see

Extra Content Videos that are included in websites you go to for other 4. purposes—like news sites or forums

Notifications Videos that you get notifications for as part of a channel 5. subscription

6. Other Videos that you find in any other way

50 Methods of discovering videos are fairly evenly divided between active and passive

• 38% of videos are found by viewers browsing and searching for them, while 37% come from posts or communications from others

DISTRIBUTION OF DISCOVERY METHODS

Among those who have watched online video categories in the past 6 months

12% 10% Notifications Extra 3% Other Content 16% Sent by Others to Individual

22% 38% Browsing or Mass Post for Searching Anyone to See

Q6A: Think about all of the online-only videos you watch, including long or short videos. What percent fall into the following groups? 51 Passive discovery is especially common among women— 42% of their viewing comes from videos pushed to them

• Among men, the proportion is 33%

DISTRIBUTION OF DISCOVERY METHODS

Among those who have watched online video categories in the past 6 months

12% 10% Notifications Extra 3% Other Content 16% Sent by Others to Individual

Mass Post or Sent By Others 22% 38% Browsing or Women 42% Mass Post for Searching Anyone to See Men 33%

Q6A: Think about all of the online-only videos you watch, including long or short videos. What percent fall into the following groups? 52 When it comes to platforms, Netflix is the most commonly used paid-for source of online only video

POPULAR SOURCES FOR WATCHING ONLINE VIDEOS

Among those who have watched online video categories in the past 6 months

SUBSCRIPTION SOURCES (NET) 64% Netflix 55% 29% Hulu 16%

*Sources under 5% not included Q5J: From which of the following sources have you watched online-only videos in the past six months? 53 The most common free source—and most common source overall—is YouTube

POPULAR SOURCES FOR WATCHING ONLINE VIDEOS

Among those who have watched online video categories in the past 6 months

SUBSCRIPTION SOURCES (NET) 64% Netflix 55% 29% Hulu 16%

FREE SOURCES (NET) 91% YouTube 76% 40% (free) 21% 16% 13% 12% 11% From videos sent to you by others 10%

*Sources under 5% not included Q5J: From which of the following sources have you watched online-only videos in the past six months? 54 Video viewing is most likely to happen on a computer, but mobile viewing is especially popular among young people

DEVICES USED FOR WATCHING ANY TYPE OF ONLINE VIDEOS

Among those who have watched online video categories in the past 6 months

16-24 36% 18-34 45% 35+ 45%

16-24 79% 18-34 75% 35+ 65%

16-24 40% 18-34 40% 35+ 37%

16-24 56% 18-34 55% 35+ 30%

Q5G: And on which devices have you watched each category of video in the past six months? 55 About a third of those who watch online videos subscribe to at least one online video channel

SUBSCRIBE TO VIDEO CHANNELS

Among those who have watched online video categories in the past 6 months

Yes

No 38% 62%

Q5K: Do you subscribe to any channels on YouTube or other video sites?; 56 But among young viewers this number is much higher (67%)

SUBSCRIBE TO VIDEO CHANNELS

Among those who have watched online video categories in the past 6 months

Age 16-24 67% Yes Watch TV on mobile device 47% No 38% Age 25-34 44% 62% Households with kids 42%

All respondents 38%

Age 35 + 25%

Q5K: Do you subscribe to any channels on YouTube or other video sites?; 57 Among subscribers, music videos are most likely to be named as one of their top 3 favorite subscriptions

FAVORITE ONLINE VIDEO CHANNELS SUBSCRIBED TO Among those who subscribe to video channels

Music videos 36%

Online video series 33%

Gaming videos 30%

Clips from TV Shows 22%

Special interest videos 21%

Online series with hosts 20%

Educational 15%

News 12%

Product reviews 9%

“Extra” content from shows on TV 9%

Videos for kids 3%

Q5M: Of the specific online video channels you subscribe to, which 3 are your favorite? [TOP 3] 58 But online gaming videos and recurring video series are most often mentioned as their single favorite overall

FAVORITE ONLINE VIDEO CHANNELS SUBSCRIBED TO Among those who subscribe to video channels

Music videos 12% 36%

Online video series 14% 33%

Gaming videos 17% 30%

Clips from TV Shows 4% 22%

Special interest videos 9% 21%

Online series with hosts 6% 20%

Educational 3% 15%

News 4% 12%

Product reviews 1% 9% MOST favorite “Extra” content from shows on TV 1% 9%

Videos for kids 1% 3% Among 3 most favorite

Q5M: Of the specific online video channels you subscribe to, which 3 are your favorite? [TOP 3] 59 Most video viewing is spontaneous, happening when the viewer comes across a video, even if it interrupts other things

• 57% of viewing is spontaneous; 43% is planned—with the viewer setting aside time in advance to watch videos

WHAT PERCENT OF YOUR VIEWING IS SPONTANEOUS VS. PLANNED?

Among those who have watched online video categories in the past 6 months

43% of viewing is 57% planned of viewing is spontaneous

Q6B: What percent of all your online-only video viewing falls into these categories? 60 When viewers watch a video, they’re more likely than not to be watching it alone

WHAT PERCENT OF YOUR VIEWING IS ALONE VS. WITH OTHERS

Among those who have watched online video categories in the past 6 months

25% Viewing with others

75% viewing alone

Q6C/D: And what percent of your online-only video viewing falls into these categories? 61 In addition, most video viewing takes place at home

• However, Millennials are more likely than others to view outside the home, as are adults with kids

WHAT PERCENT OF YOUR VIEWING FALLS INTO THESE CATEGORIES?

Among those who have watched online video categories in the past 6 months

• Millennials: 25% of viewing is outside the home (vs. only 16% 81% among those 35+) at home 9% At work • HH with kids: 25% of viewing 10% is outside the home (vs. only Other location 13% among those without kids)

Q6C/D: And what percent of your online-only video viewing falls into these categories? 62 The Appeal What drives interest in online video?

63 We tested a number of reasons why people might prefer online videos to traditional TV shows

1. Shorter videos These videos fit better into your spare time

2. More Inventive The people who make these videos can experiment or be more edgy than big media companies

3. More Relevant There are more videos that fit the topics I’m interested in, even my very specific/specialized interests

4. Independent The producers of these videos don’t have to worry about staying on the good side of advertisers

5. More Genuine These videos are made by people like you, not by big companies

6. More new episodes These videos come out every few days or every day, instead of once a week like regular shows

7. More Buzz Your friends are talking about these videos more than regular TV shows

64 Three reasons rise to the top: shorter length, more inventiveness/creativity, and greater relevance to interests

HOW DO ONLINE VIDEOS COMPARE WITH REGULAR TV?

Among those who have watched online video categories in the past 6 months

Shorter videos 20% 43% 63%

More inventive 18% 43% 62%

More relevant 18% 41% 59%

More independent 17% 36% 53%

More genuine 16% 35% 51%

More new episodes 16% 34% 50%

More buzz 10% 28% 38%

Strongly agree Agree

Q7A: Please tell us how strongly you agree or disagree with these statements about how these videos compare with regular shows. 65 Millennials and those with kids focus especially on tangible aspects—shorter length and greater quantity of new content

HOW DO ONLINE VIDEOS COMPARE WITH REGULAR TV? More Likely Than Average To Value Among those who have watched online video categories in the past 6 months Attribute:

Millennials 68% Shorter videos 20% 43% 63% Have kids <5 74% More inventive 18% 43% 62%

More relevant 18% 41% 59%

More independent 17% 36% 53%

More genuine 16% 35% 51% Millennials 58% More new episodes 16% 34% 50% Have kids <5 61% More buzz 10% 28% 38%

Strongly agree Agree

Q7A: Please tell us how strongly you agree or disagree with these statements about how these videos compare with regular shows. 66 Millennials in particular are also influenced by the “buzz” around certain videos or video personalities

HOW DO ONLINE VIDEOS COMPARE WITH REGULAR TV? More Likely Than Average To Value Among those who have watched online video categories in the past 6 months Attribute:

Shorter videos 20% 43% 63%

More inventive 18% 43% 62%

More relevant 18% 41% 59%

More independent 17% 36% 53%

More genuine 16% 35% 51%

More new episodes 16% 34% 50%

More buzz 10% 28% 38% Millennials 47%

Strongly agree Agree

Q7A: Please tell us how strongly you agree or disagree with these statements about how these videos compare with regular shows. 67 The youngest viewers are more likely to cite videos being more “genuine”, made by people like them

HOW DO ONLINE VIDEOS COMPARE WITH REGULAR TV? More Likely Than Average To Value Among those who have watched online video categories in the past 6 months Attribute:

Shorter videos 20% 43% 63%

More inventive 18% 43% 62%

More relevant 18% 41% 59%

More independent 17% 36% 53%

More genuine 16% 35% 51% Age 18-24 64%

More new episodes 16% 34% 50%

More buzz 10% 28% 38%

Strongly agree Agree

Q7A: Please tell us how strongly you agree or disagree with these statements about how these videos compare with regular shows. 68 Men are more likely than average to watch because videos more closely fit their interests or lifestyle

HOW DO ONLINE VIDEOS COMPARE WITH REGULAR TV? More Likely Than Average To Value Among those who have watched online video categories in the past 6 months Attribute:

Shorter videos 20% 43% 63%

More inventive 18% 43% 62%

More relevant 18% 41% 59% Men 63%

More independent 17% 36% 53%

More genuine 16% 35% 51%

More new episodes 16% 34% 50%

More buzz 10% 28% 38%

Strongly agree Agree

Q7A: Please tell us how strongly you agree or disagree with these statements about how these videos compare with regular shows. 69 Half of video viewers would react positively if a favorite video personality signed with a major media company • 41% would feel neutral—very few would have a negative reaction

IF A FAVORITE VIDEO PERSONALITY SIGNED WITH A MEDIA COMPANY…

Among those who have watched online video categories in the past 6 months

2% Very negative POSITIVE

WOULD YOUR REACTION 9% BE POSITIVE OR Somewhat 48% negative 17% NEGATIVE? Very positive

31% 41% Somewhat Neutral positive

Q7B: Suppose you read that one of your favorite independent video personalities had just been signed by a large, familiar media company. In general, would your reaction to this news be …; 70 Q7C: Would you...? Half of video viewers would react positively if a favorite video personality signed with a major media company • 41% would feel neutral—very few would have a negative reaction

IF A FAVORITE VIDEO PERSONALITY SIGNED WITH A MEDIA COMPANY…

Among those who have watched online video categories in the past 6 months

2% Very negative POSITIVE

WOULD YOUR REACTION 9% BE POSITIVE OR Somewhat 48% negative 17% NEGATIVE? Very positive

31% 41% Somewhat Neutral positive • Millennials: 55% of millennials would feel more positive, vs. only 43% of those 35+

Q7B: Suppose you read that one of your favorite independent video personalities had just been signed by a large, familiar media company. In general, would your reaction to this news be …; 71 Q7C: Would you...? And while some would have a “wait and see” attitude, the majority would be at least “as likely” to watch • That includes nearly one-third who would be MORE likely to watch if a video personality signed with a major company

IF A FAVORITE VIDEO PERSONALITY SIGNED WITH A MEDIA COMPANY…

Among those who have watched online video categories in the past 6 months

MORE LIKELY WOULD YOU BE MOER 13% OR LESS LIKELY TO 12% 29% wait WATCH? 3% & a lot a lot less see more

9% 16% a little less a little more

45% just as likely

Q7B: Suppose you read that one of your favorite independent video personalities had just been signed by a large, familiar media company. In general, would your reaction to this news be …; 72 Q7C: Would you...? Similarly, video viewers are more than twice as likely to prefer videos produced by familiar media companies vs. individuals

WOULD YOU RATHER WATCH VIDEOS PRODUCED BY TRADITIONAL MEDIA COMPANIES, OR BY INDEPENDENT PRODUCERS?

Among those who have watched online video categories in the past 6 months MORE INTERESTED IN MORE INTERESTED IN FAMILIAR INDEPENDENT PEOPLE MEDIA COMPANIES 14% 34%

A lot A little Equally interested in both A little more A lot more more more 5% 9% 52% 21% 13%

Q7D: In general, are you more interested in watching online-only videos put out by familiar media companies, like TV networks OR more interested in watching online-only videos put out by independent people with no connection to media companies? 73 Similarly, video viewers are more than twice as likely to prefer videos produced by familiar media companies vs. individuals

WOULD YOU RATHER WATCH VIDEOS PRODUCED BY TRADITIONAL MEDIA COMPANIES, OR BY INDEPENDENT PRODUCERS?

Among those who have watched online video categories in the past 6 months MORE INTERESTED IN MORE INTERESTED IN FAMILIAR INDEPENDENT PEOPLE MEDIA COMPANIES 14% 34%

A lot A little Equally interested in both A little A lot 5% 9% 52% 21% 13%

• Age 16-24: 25% The youngest respondents are more likely to favor independent producers

Q7D: In general, are you more interested in watching online-only videos put out by familiar media companies, like TV networks OR more interested in watching online-only videos put out by independent people with no connection to media companies? 74 Impact How online video viewing influences traditional TV viewing

75 Online video viewing appears to take a bite out of viewing of more traditional TV shows • As we’ve seen, those who watch any online video estimate that they watch 2 fewer hours of full-length TV programming per week

MEAN HOURS WATCHING TV SHOWS PER WEEK, BY VIDEO VIEWING

MEAN TV HOURS

Don’t watch online video 24.1 Watch any online video 22.1

Watch video less than weekly 20.2 Watch weekly or once a day 22.8 Watch multiple times a day 23.3

Watch video 1 hour or less per week 20.4 Watch 2-5 hours per week 22.3 Watch 6+ hours per week 23.8

Q1F: About how many hours do you personally watch television programs per week on any type of device? 76 However, the most frequent online video viewers tend to also be heavier TV viewers • Their TV viewing doesn’t quite reach that of non-video viewers, but it’s close— suggesting that a segment exists that’s comprised of lovers of video in any form

MEAN HOURS WATCHING TV SHOWS PER WEEK, BY VIDEO VIEWING

MEAN TV HOURS

Don’t watch video 24.1 Watch any video 22.1

Watch video less than weekly 20.2 Watch weekly or once a day 22.8 Watch multiple times a day 23.3

Watch video 1 hour or less per week 20.4 Watch 2-5 hours per week 22.3 Watch 6+ hours per week 23.8

Q1F: About how many hours do you personally watch television programs per week on any type of device? 77 More than one-third of consumers say online video viewing has caused them to spend less time watching TV shows

HOW DOES YOUR VIEWING OF ONLINE VIDEOS IMPACT THE TIME YOU SPEND WATCHING REGULAR TV? Among those who have watched videos in the past 6 months WATCH LESS WATCH MORE 37% 14%

Much less Less About the same amount More Much more 14% 23% 49% 6% 8%

Q8B: How does the time you’re spending watching these videos impact the amount of time you spend watching shows on regular TV? 78 The impact has been even stronger among Millennials and households with kids

HOW DOES YOUR VIEWING OF ONLINE VIDEOS IMPACT THE TIME YOU SPEND WATCHING REGULAR TV? Among those who have watched videos in the past 6 months

WATCH LESS WATCH MORE 37% 14%

Much less Less About the same amount More Much more 14% 23% 49% 6% 8%

Watching Less Millennials 46% Watch TV on mobile 42% HH with kids 41%

Q8B: How does the time you’re spending watching these videos impact the amount of time you spend watching shows on regular TV? 79 Similar proportions of video viewers say they’ll continue to watch less TV in the future, because of online videos

HOW WILL ONLINE VIDEO AFFECT THE TIME YOU SPEND WATCHING REGULAR TV, IN THE FUTURE? Among those who have watched videos in the past 6 months WILL WATCH LESS WILL WATCH MORE 35% 8%

Much less Less About the same amount More Much more 13% 22% 58% 4% 4%

Q8C: And looking to the future, do you think these online-only videos will cause you to watch...? 80 The perception of lower viewing is again strongest among younger consumers and those with kids in the household

HOW WILL ONLINE VIDEO AFFECT THE TIME YOU SPEND WATCHING REGULAR TV, IN THE FUTURE? Among those who have watched videos in the past 6 months WILL WATCH LESS WILL WATCH MORE 35% 8%

Much less Less About the same amount More Much more 13% 22% 58% 4% 4%

Will Watch Less Millennials 43% HH with kids 40% Watch TV on mobile 39%

Q8C: And looking to the future, do you think these online-only videos will cause you to watch...? 81 Looking specifically at full-length online original TV shows, we see an even stronger impact • Nearly half of those who watch professionally produced TV shows only available online say they spend less time watching TV shows on traditional networks IMPACT ON REGULAR TV SHOW WATCHING FROM ONLINE ORIGINAL SHOWS Among those who watch online original shows

4% DO YOU SPEND MORE TIME more time OR LESS TIME WATCHING SHOWS FROM TRADITIONAL NETWORKS? 47% 49% less time same amount of time

Q8D: You mentioned that you watch longer dramas and comedies that are only available from online TV providers. Since you’ve been watching those online shows, do you... 82 The news is mixed for clips from popular TV shows: they’re equally likely to cause less viewing than more viewing

IMPACT ON REGULAR TV SHOW WATCHING FROM VIDEO CLIPS FROM TV SHOWS

Among those who watch clips from TV shows DO VIDEO CLIPS MAKE YOU MORE LIKELY TO WATCH ACTUAL SHOW?

23% 23% less likely to watch more likely to More Likely To Watch watch Male 29% Female 16% Millennials 27% 55% Non-Millennials 18% no impact

Q8E: You mentioned that you watch video clips from TV shows like Jimmy Fallon, Jimmy Kimmel, Conan O’Brien, The Daily Show, etc. Does watching those clips...? 83 One bright spot: more than one-third say extra online content related to specific TV shows makes them more engaged

IMPACT ON WATCHING ORIGINAL SHOW FROM EXTRA TV CONTENT Among those who watch extra content from TV shows

INTEREST IN WATCHING SHOW LIKELIHOOD TO WATCH SHOW

11% 14% no more less likely 37% a lot more 52% interested More likely to 34% watch 52% No impact a little more interested

Q8F: You mentioned that you watch additional content online for shows you watch on regular TV. Does watching that additional content make you… ? Q8G: And does that additional content...? 84 Frequent viewers of extra TV content watch more regular TV; kids’ video, diversions, and series viewers watch less

• This and the following charts show the mean number of hours of TV viewed overall, broken out by frequent viewers of each online video category

FREQUENT VIEWERS OF:

Online Videos Recurring Extra TV Diversions Informative Only for Series Content Shows Kids

Mean hours of TV 22.6 22.3 shows viewed 21.8 22.0 25.4 21.5

85 But while those watching extra content watch more TV than others, they’re most likely to say they watch less than before

• Recurring video series viewers are also more likely to say they’re watching less; kids’ video viewers are least likely to say they’re TV viewing has declined

FREQUENT VIEWERS OF:

Online Videos Recurring Extra TV Diversions Informative Only for Series Content Shows Kids

Mean hours of TV 22.6 22.3 shows viewed 21.8 22.0 25.4 21.5 Watch less regular TV since started watching 43% 41% 54% 52% 57% 38% videos

86 Extra content viewers, and viewers of series and online originals, are most likely to watch less TV going forward

FREQUENT VIEWERS OF:

Online Videos Recurring Extra TV Diversions Informative Only for Series Content Shows Kids

Mean hours of TV 22.6 22.3 shows viewed 21.8 22.0 25.4 21.5

Watch less regular TV since started watching 43% 41% 54% 52% 57% 38% videos

Will watch less regular 42% 43% TV in future 48% 48% 54% 31%

87 While kids’ video viewers watch less TV than other groups, and extra content viewers will watch less TV in the future…

• Both groups are more likely to feel they can’t live without Pay TV—both are the most likely to say they’ll DEFINITELY have Pay TV a year from now • The same can’t be said for viewers of other online video genres—all are significantly less certain they’ll stick with Pay TV FREQUENT VIEWERS OF:

Online Videos Recurring Extra TV Diversions Informative Only for Series Content Shows Kids

Mean hours of TV 22.6 22.3 shows viewed 21.8 22.0 25.4 21.5

Watch less regular TV since started watching 43% 41% 54% 52% 57% 38% videos

Will watch less regular 42% 43% TV in future 48% 48% 54% 31% Will definitely still have Pay TV in one year 39% 38% 38% 36% 48% 46% (among current subs)

88 Conclusions The most important things to remember

89 Conclusions

Yes, you can still find cat videos. But the online video ecosystem has grown organically into much more. • Massive reach and frequency Online video is • Especially among viewers that advertisers covet— 1 thriving Millennials, but also 16-24 year olds specifically • Woven into the daily routine of consumers, so much so that they interrupt other things they’re doing to watch spontaneously In many ways online video performs best where traditional TV is weakest • Tremendous amounts of content • Desirable genres/formats traditional TV doesn’t Traditional media offer—including niche genres and sub-genres that 2 would be unprofitable for a mass medium is vulnerable • Consumption is especially strong on mobile, where young people watch but traditional TV lags • Many options for whether and how to pay • Near effortless distribution that makes sharing with others part of the experience

90 Conclusions

Consumers who view online video already watch fewer hours of TV than non-viewers—not surprising given that Online viewers the average viewer already watches 8 hours of video content per week. 3 watch less traditional TV And many predict that they’ll watch less TV in the future as a result these video options. The threat to TV’s business model is real.

Even the youngest consumers don’t see an adversarial But the way is clear relationship between online video and traditional TV. In fact, it’s just the opposite. for “big media” to • Most would welcome seeing popular video 4 participate in non- personalities sign with established media firms traditional TV • More prefer videos from established companies than from individuals