Going with the Flow: How to Captivate Video Streamers the Opinions and Behaviors of Adult Broadband Users

GOING WITH THE FLOW: HOW TO CAPTIVATE VIDEO STREAMERS THE OPINIONS AND BEHAVIORS OF ADULT BROADBAND USERS

A WHITE PAPER GOING WITH THE FLOW VIDEO STREAMERS — A CSG WHITE PAPER | 2

CONTENTS

2 Introduction

5 Value of Streaming vs. Pay TV

7 Devices and Viewing Time

10 Future Plans for Pay TV

11 Value Added “Features” and Bundles

13 CSG Conclusions

14 About This Survey

14 About CSG

There are expanding choices for their viewing INTRODUCTION pleasure spanning free content, consumer-generated content, studio content and original programming HOW DO VIEWERS STREAM VIDEO? from new and highly creative (and motivated!) sources like Netflix and Amazon Prime. Some of the long- We believe that consumers are streaming video at an established leading providers of content have entered ever-increasing rate, and on more devices—across their the streaming video fray in recent months, including television sets, computers, smart phones and tablets. HBO, CBS, the NFL and the MLB to name only a few.

CSG thought it was important to explore the impact of all are cautioned that there are noted intentions to of this streaming viewership on the consumer’s opinion: downgrade or disconnect Pay TV subscriptions this year.

Do they value streaming? There is a marked trend for subscribing to more than one streaming service, and as a result, subscribers Does streaming change the way they feel about greatly value subscription management “features” that traditional television offerings? facilitate their finding and paying for these services What are their expectations for managing the through a single service. expanding catalog of video content from a Service providers will delight customers through growing number of sources? increased partnerships and constructing a consolidated To measure behaviors and assess their opinions and subscriber portal for searching, content management and values, CSG worked with TDG Research to survey adult billing across each personalized bundle of video content. video streamers (herein ‘streamers’) from across the United States. This document explores key insights from this study.

SUBSCRIBE TO AT LEAST STREAM VIDEO ON THEIR OF ALL STREAMERS PLAN TO 1 PREMIUM VIDEO SERVICE TELEVISION SETS SWITCH, DOWNGRADE OR KEY FINDINGS CANCEL THEIR PAY TV SERVICES IN THE NEXT 6 MONTHS

We have confirmed that viewers are streaming video, and GREATER THAN paying for it, at tremendous rates, on numerous devices.

OF STREAMERS GREATLY VALUE OF MILLENNIALS SPEND The TV is the preferred device for streaming, and while FEATURE BUNDLES TO MANAGE THEIR TV TIME WATCHING ALL THEIR SUBSCRIPTIONS STREAMING VIDEO total hours of TV watching is consistent across all age groups, younger groups spent the majority of their TV time Streaming Video On Demand rather than watching live broadcast television. 18-34s SEE NET DECREASED VALUE

The prevalence of streaming impacts the perceived IN THEIR PAY TV SERVICES value of traditional TV services, and service providers

SURVEY METHODOLOGY O OIO O S SOS S S COMIS O S MOGICS In January 2016, CSG sponsored an online survey of 1,900 US adult broadband users that stream NORTH video—be it short-form, long-form, premium, or EAST 22% free—to one or more Internet-connected devices. MIDWEST WEST 22% 22% The survey was administered to a randomly chosen group drawn from a panel of more than two million

US adults. Quotas were set to ensure that the SOUTH collection of respondents was representative of 36% US adult video streamers.

All sample surveys and polls may be subject to multiple sources of error, including, but not limited to sampling error, coverage error, and measurement error. OSO ICOM

SURVEY TERMINOLOGY $150,000 For a detailed glossary of terminology used in the survey, please refer to this appendix. $100,000- UNDER $30,000 $149,999 Key terms used throughout this document include:

$75,000- $99,999 $30,000- $39,999

$50,000-$74,999 $40,000- $49,999 STREAMER DEVICE SVOD An individual who Devices explored Streaming Video on views long- or include TVs, PCs, Demand is watching short-form video, laptops, smartphones non-broadcast content whether free or and tablets on an internet-connected paid-for device G G

65+ 18-24 55-64 ALL VIDEO PREMIUM VIDEO FEMALE MALE STREAMERS (AVS) OTT SERVICES 25-34 The total population of In the context of this SVOD services for which the survey respondents survey, OTT means the streamer pays a fee, 45-54 in all charts Streaming Video on whether one-o or on a Demand when viewed subscription basisce 34-44 on a TV

VALUE OF STREAMING PREMIUM SPORTS SUBSCRIPTIONS Respondents indicated whether they knew of, VS. PAY TV once subscribed to or currently subscribe to these premium sports services: THE VALUE OF STREAMING Verizon go90 Respondents were asked if they currently subscribe NBA League Pass to these premium services: Netflix, Amazon Prime, Hulu, Sling TV, HBO Now, Sony Vue, CBS All Access, NHL Center Live any premium sports service, or other. MLB TV Not surprisingly, 80 percent of streamers subscribe NFL Network Gamepass to at least one premium service. Among these subscribers, half of them subscribe to more than UFC Stream one service. WWE Network A similar trend was discovered when exploring the Streamers were asked “Professional and collegiate adoption of streaming sports: 40 percent of sports sports leagues have also offered standalone apps— package users subscribe to more than one service. that is, you pay for specific leagues without having From these behaviors we conclude that the attributes to subscribe to a cable or satellite service. How of streaming—seeking out specific content in which familiar are you with each of the following standalone they are interested and viewing it on demand, streaming services?1” meaning on whatever device at whatever time they choose—are greatly valued. Once a user experiences O M MIM SOS SICS this from one service they are likely to seek more of O O C SSCI O 25% the same.

20%

O M SSCIIO IO SICS O O C 15%

10%

SUBSCRIBE TO AT SUBSCRIBE TO 5% LEAST ONE MORE THAN ONE PREMIUM SERVICE PREMIUM SERVICE

0% 18 24 25 34 35 44 45 54 55 64 65+

SUBSCRIBE TO MORE THAN ONE SUBSCRIBE TO AT LEAST ONE PREMIUM SPORTS SERVICE PREMIUM SPORTS SERVICE

THE VALUE OF “TRADITIONAL” TV The not so good news is that because of SVOD, the younger age groups—Millennials and Generation X— Among streamers, we explored their views towards value traditional Pay TV services offered by cable or the fundamental attributes of “traditional” television: satellite providers less. Providers should take note Watching “live” shows when first broadcast that expectations are high among this set and the (defined as “live” for this survey and not the availability of alternate sources of content means Nielsen definition that includes a DVR window) they will become more difficult to retain as they value traditional services less. Having access to an extensive “bundle” of Pay TV channels that make up the traditional Impact of SVOD in “Traditional” TV cable or satellite package The net impact reflects the percentage of Commercials respondents who indicated the value of Watching live TV shows

Having access to traditional home TV services 36 45 65+ had significantly increased (scores of 6 or 7) less the 24 18 44 percentage of respondents who indicated the value of these activities had significantly decreased (scores

VALUE OF WATCHING TV SHOWS WHEN of 1 or 2). FIRST BROADCAST NET IMPACT The value of live TV shows for all is greatly enhanced by access to streaming video, while the 18-44s see a decline in the value of traditional Pay TV services. 45 65+

-8 18 44 MILLENNIALS DISLIKE COMMERCIALS

The survey asked respondents various questions VALUE OF WATCHING TV SHOWS WHEN FIRST BROADCAST NET IMPACT about their attitudes towards commercials. This chart illustrates the sentiments with which they most strongly agreed (top 2 scores on a 5-point scale).

The good news is that SVOD has a net positive The younger age groups demonstrate significantly impact on watching live TV shows across all age stronger dislike of commercials than the older demographics. One can imagine that having access audiences. to a large catalog of content backlog—say, all of the Additionally, the 18-24 group represents fervent past episodes of “X-Files,” “Mad Men” or “Game of commercial avoidance (43 percent often or always Thrones”—enables viewers to catch up with the most avoid) at a much greater rate than the overall popular shows and become more engaged as new population (35 percent). episodes are broadcast.

O O OOIG SMS C O I O COMMCIS

70% FERVENT COMMERCIAL AVOIDANCE 60%

50%

40%

30%

20%

10%

0% 18 24 25 34 35 44 45 54 55 64 65+

COMMERCIALS ALLOW ME TO GET UP AND GO I PREFER NOT TO WATCH TV SHOWS AT ALL THAN TO THE FRIDGE, THE BATHROOM, ETC. TO WATCH TV SHOWS WITH COMMERCIALS

COMMERCIALS INTERFERE WITH MY WE'LL NEVER BE ABLE TO GET RID OF ENJOYMENT OF TV SHOWS COMMERCIALS THEY ARE INEVITABLE

I HATE ALL COMMERCIALS COMMERCIALS ARE MORE FUN TO WATCH THAN THE TV SHOW COMMERCIAL AVOIDANCE DEVICES & VIEWING TIME So, the strongest feelings about commercials are the Millennials, and guess what—they don’t like them! STREAMING ON MULTIPLE DEVICES They are more likely to avoid commercials than any other age group. The TV dominates when streaming video, likely reflecting both its size (optimized for the best viewing Millennials’ negative views of commercials are experience) and the fact that video entertainment is stronger than any other age group: still largely an in-home activity. They leave the room when they come on more Smartphones, laptops and tablets are also used than others extensively, most so in the youngest age groups, They consider them an interference more than reflecting the appeal of video portability. others Several device pairs are notable within the survey results: They hate them more than others! TV + PC is the most prevalent combination of Providers should take note; it is likely that this devices used (57 percent of AVS), indicating avoidance behavior will continue as they age, and they a preference for larger screen sizes when will be looking for alternatives to their video content watching video that minimize their exposure to commercials. Tablets + smartphones is the least prevalent combination (29 percent of AVS), confirming the appeal of larger screens

100%

90%

80% TV

70%

Smartphone 60% Tablet

50% Laptop PC 40%

30%

20%

10%

0% 1824 2534 3544 4554 5564 65+

TV SMARTPHONE LAPTOP TABLET PC

SWITCHING BETWEEN DEVICES CG O IO SMS G SIC ICS S OC MO I Our survey revealed that over 40 percent of CIG SOS IOS streamers age 18-44 switch between devices when streaming their programs. For example, they will VIEWERS VIEWERS finish watching their program on a TV if they started AGE 18 44 OVER 45 on a PC or mobile, and vice versa. A significant contrast to their senior counterparts with only 12 percent of streamers over 45 years of age reporting the same behavior.

PERCENTAGE OF VIDEO STREAMERS BY AGE THAT SWITCH DEVICES AT LEAST ONCE A MONTH WHILE WATCHING SHOWS AND VIDEOS

AVS 18-24 25-34 35-44 45-54 55-64 65+

I started watching on TV and finish on PC or mobile at least once a month 29% 42% 41% 39% 19% 13% 4%

I start watching on a PC or mobile and finish on TV at least once a month 27% 39% 40% 32% 17% 15% 4%

HOW MUCH STREAMING? MILLENNIAL CONCLUSIONS (THE FUTURE OF TV?)

Millennials (18-34) stream more than all other In general they hate commercials demographic groups on every device type. They have a greater tendency to not pay for The 14.8 hours this group spends on OTT, or streaming traditional Pay TV services activity on their TV, represents >50 percent of their They have a greater propensity to subscribe total TV time for the week, whereas the general to multiple premium services for programmed population spends 43 percent of their total TV time content and sports on OTT or streaming video activity. Streaming is a more valued and more prevalent activity for them and they benefit from switching G SMIG IM IC content from one device to another

OTT PC TABLET SMARTPHONE . . . .

0 5 10 15 20 25 30 35 40 45

WHICH OF THE FOLLOWING BEST DESCRIBES YOUR USE FUTURE PLANS FOR OF TRADITIONAL HOME PAY-TV SERVICES CABLE SATELLITE TELCO ETC. PAY TV 100% 90% CURRENT USE OF PAY TV 80% 70%

Within the survey we measured current use of Pay 60% TV services. 50% Among the total population (AVS), 30 percent do 40% not currently subscribe to a Pay TV service of any 30% sort (cable or satellite) from any provider. 20% 10% Among Young Millennials, that proportion jumps to 0% 50 percent. Unless significant value can be proven to AVS 18 24 25 34 35 44 45 54 55 64 65+ them, there are already so many options for them that I CURRENTLY LIVE WITH I ONCE USED A TRADITIONAL it will be difficult to capture them as a user/subscriber MY PARENTS HOME PAY TV SERVICE BUT NO LONGER DO as they age! I'VE NEVER USED A TRADITIONAL HOME PAY TV SERVICE I CURRENTLY USE A TRADITIONAL HOME PAY TV SERVICE FUTURE USE OF PAY TV

Providers take note: >20 percent of the total WHICH OF THE FOLLOWING STATEMENTS BEST DESCRIBE YOUR population of streamers are likely to downgrade, SERVICE INTENTIONS WITH YOUR TRADITIONAL PAY-TV PROVIDER DURING THE NET SI MONTHS SELECT ONLY ONE. cancel or switch providers in the next six months! 100% Young Millennials show a lesser tendency to 90% downgrade, cancel or switch but remember that they 80% are a lesser tendency to downgrade, cancel or switch, 70% but previously we saw that they are the least likely to 60% be a current user/subscriber. 50% 40% 30% 20% 10% 0% AVS 18 24 25 34 35 44 45 54 55 64 65+

I'M LIKELY TO SWITCH TO I'M LIKELY TO DOWNGRADE ANOTHER TRADITIONAL PAY TV PROVIDER I'LL LIKELY KEEP IT THE SAME

I'M LIKELY TO CANCEL I'M LIKELY TO UPGRADE ALTOGETHER

ANALYSIS: WHY DOWNGRADE/CANCEL? Our survey explored their attitudes towards subscription management features, including: The primary reason for planning to downgrade or cancel Pay TV services among all the total population Consolidated billing and payment across is cost of service, being the top reason for 90 percent subscription services, reducing numerous of future downgraders and 88 percent of future charges to a single invoice thereby facilitating cancelers. the financial management of their video services Availability of alternatives such as Netflix and other subscription services is a significant consideration, A bundled discount across multiple services, and figures more prominently in a decision to cancel which can drive increased adoption of (influences 82 percent of would-be cancelers) than incremental services at a discounted rate and to downgrade (influences 82 percent would-be drives customer loyalty and reduces churn downgraders). Search features across all subscriptions to Both of these factors would seemingly lead to the enhance the user experience. Facilitating conclusion that Pay TV is a poor value, which is search through a single portal drives cited by 61 percent of potential downgraders and 71 viewership and stickiness percent of potential cancelers. Recommendation features across all subscriptions also enhances the user VALUE-ADDED experience, and also stimulates viewership “FEATURES” AND and stickiness BUNDLES

MANAGING SUBSCRIPTIONS AND SERVICES

With the number of streaming service options available increasing, and the viewing time for these services on the rise, it is natural that streamers would value features that assist with managing these services.

WHEN YOU THIN ABOUT YOUR STREAMING WHEN YOU THIN ABOUT YOUR VIDEO STREAMING EPERIENCES HOW VALUABLE WOULD BE HAVING EPERIENCES HOW VALUABLE WOULD BE GETTING A SINGLE BILL FOR ALL MY FEE-BASED STREAMING A DISCOUNT FOR SUBSCRIBING TO MULTIPLE SERVICES NETFLI AMAON HULU ETC. STREAMING SERVICES

87% 89% 82% 76% 76% 79% 79% 74% 73% 70% 71% 69% 67% 65% 66% 65% 63% 59% 59% 59% 56% 51%50% 42%

18 24 25 34 35 44 45 54 55 64 65+ 18 24 25 34 35 44 45 54 55 64 65+

ALL VIDEO STREAMERS WHO RANK A SINGLE BILL VALUABLE OR ALL VIDEO STREAMERS WHO RANK MULTI SERVICE DISCOUNT EXTREMELY VALUABLE VALUABLE OR EXTREMELY VALUABLE

VIDEO STREAMERS WHO SUBSCRIBE TO MORE THAN ONE SERVICE VIDEO STREAMERS WHO SUBSCRIBE TO MORE THAN AND RANK A SINGLE BILL VALUABLE OR EXTREMELY VALUABLE ONE SERVICE AND RANK MULTI SERVICE DISCOUNT VALUABLE OR EXTREMELY VALUABLE

WHEN YOU THIN ABOUT YOUR VIDEO WHEN YOU THIN ABOUT YOUR VIDEO STREAMING STREAMING EPERIENCES HOW VALUABLE EPERIENCES HOW VALUABLE WOULD BE HAVING WOULD BE HAVING A SINGLE POINT OF SEARCH FOR CONTENT RECOMMENDATIONS THAT WOR ACROSS ALL ALL MY STREAMING SERVICES MY STREAMING SERVICES

94% 82% 77% 74% 77% 78% 74% 73% 71% 73% 66% 67% 63% 60% 60% 60% 60% 53% 52% 49% 50% 46% 32% 17%

18 24 25 34 35 44 45 54 55 64 65+ 18 24 25 34 35 44 45 54 55 64 65+

ALL VIDEO STREAMERS WHO RANK UNIVERSAL SEARCH ALL VIDEO STREAMERS WHO RANK RECOMMENDATIONS VALUABLE OR EXTREMELY VALUABLE VALUABLE OR EXTREMELY VALUABLE

VIDEO STREAMERS WHO SUBSCRIBE TO MORE THAN ONE SERVICE VIDEO STREAMERS WHO SUBSCRIBE TO MORE THAN AND RANK UNIVERSAL SEARCH VALUABLE OR EXTREMELY VALUABLE ONE SERVICE AND RANK RECOMMENDATIONS VALUABLE OR EXTREMELY VALUABLE

VALUE OF STREAMING FEATURES CSG CONCLUSIONS These results illustrate the increasing value respondents place on having access to streaming As the alternatives for subscriber content increases, features. services providers should address current concerns and invest in valued features to ensure they not only The percentage of all respondents that highly valued maintain but enhance the streamer’s experience (top 2 scores) any combination of 1, 2, 3 or all 4 of and stem the planned tide of downgrades and these features: cancellations.

Single bill Focus on the price. Not by an intensifying price Multi-line discount war, but by offering more options for packaging and pricing the specific content that streamers want. Universal search Personalize the bundle.

Universal recommendations Provide a user experience on par with the most popular competitors, making content transportable 46 percent of the streaming population values at least across devices and providing enhanced features like three of these four features. recommendations and search, not only for a single Providers who offer bundles of these features across service but across as many distinct services through multiple, disparate SVOD offers will deliver a superior partnerships wherever possible. customer experience to their subscribers. Offer aggregated billing, discounting and payment options to the all-important subscribers of more than one service or type of content. O M SMIG S O O 24% 22%

18%

14%

OF VIDEO OF VIDEO OF VIDEO OF VIDEO STREAMERS WHO STREAMERS WHO STREAMERS WHO STREAMERS WHO VALUE ONLY VALUE ONLY VALUE ONLY VALUE ALL ONE FEATURE TWO FEATURES THREE FEATURES FOUR FEATURES

ABOUT THIS SURVEY AGE DEMOGRAPHICS Fairly uniform age breakdowns were applied to these survey respondents, and we have named these SURVEY TERMINOLOGY groups as below (reflecting minor adjustments to the Streamer: an individual who streams short-form or demographic boundaries used by Nielsen1): long-form video content, whether premium (paid for) 18-24 years Young Millennials or free, on an internet-connected device 25-34 years Millennials SVOD: Streaming Video on Demand is the act of watching non-broadcast video content on an internet- 35-44 years Generation X connected device 45-54 years Young Baby Boomers ABU: Adult Broadband User, 18 years of age or older 55-64 years Older Baby Boomers AVS: All Video Streamers, or the total population of survey respondents before any demographic 65+ years Silent Generation breakdown is applied

Devices: in this survey, respondents identified their ABOUT CSG usage across five types of internet-connected screens For more than 35 years, CSG has simplified the TVs. In this survey, the term “over the top” or complexity of business, delivering innovative customer “OTT” specifically refers to watching SVOD engagement solutions that help companies acquire, content on a TV monetize, engage and retain customers. Operating across more than 120 countries worldwide, CSG Laptop computers manages billions of critical customer interactions PCs annually, and its award-winning suite of software and services allow companies across dozens of industries to Tablets tackle their biggest business challenges and thrive in an Smartphones ever-changing marketplace. CSG is the trusted partner for driving digital innovation for hundreds of leading Standalone Streaming Services: this term reflects global brands, including AT&T, Charter Communications, premium video service, or those that are available for Comcast, DISH, Eastlink, Formula One, iflix, Maximus, a fee and can be decoupled from traditional Pay TV MTN and Telstra. To learn more, visit our website at (cable or satellite) services (such as Netflix, Hulu, CBS csgi.com and connect with us on LinkedIn, Twitter and All Access) Facebook.

1See “Video on Demand: How Worldwide Viewing Habits Are Changing the Evolving Media Landscape,” Nielsen March 2016