Video Trends Report Q2 2019

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VIDEO TRENDS REPORT Q2 2019

Survey Methodology

Q2 2019 Survey Size INTRODUCTION 5,340 Geographic Regions U.S., Canada TiVo seeks real consumer opinions to uncover key trends relevant to TV providers, digital publishers, advertisers and consumer electronics manufacturers for our survey, which is administered quarterly and examined biannually in this Age of Respondents published report. We share genuine, unbiased perspectives and feedback from viewers to give video service providers 18+ and industry stakeholders insights for improving and enhancing the overall TV-viewing experience for consumers. TiVo has conducted a quarterly consumer survey since 2012, enabling us to monitor, track and identify key trends in viewing This survey was conducted in Q2 2019 by a leading habits, in addition to compiling opinions about video providers, emerging technologies, connected devices, OTT apps and third-party survey service; TiVo analyzed the results. content discovery features, including personalized recommendations and search. TiVo conducts this survey on a quarterly basis and publishes a biannual report evaluating and analyzing TiVo (NASDAQ: TIVO) brings entertainment together, making it easy to find, watch and enjoy. We serve up the best key trends across the TV industry. movies, shows and videos from across live TV, on-demand, streaming services and countless apps, helping people to watch on their terms. For studios, networks and advertisers, TiVo delivers a passionate group of watchers to increase viewership and engagement across all screens. Go to tivo.com and enjoy watching.

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SWIMMING IN A SEA OF CHOICES

Year after year, more and more video content providers and services enter the market, and consumers are drowning in options. Plenty of households still hold tight to traditional cable packages and satellite TV, but often supplement them with additional video services. The Subscription Video on Demand/ Ad-Based Video on Demand (SVOD/AVOD) market is getting crowded: Netflix, HBO NOW, Amazon Prime Video and Hulu have surged in popularity and usage in recent years, and this year Disney, Apple, WarnerMedia and even DC Universe are throwing themselves into the fray. Meanwhile, free video streaming services like YouTube, and social media channels such as Facebook and Snapchat continue to offer even more choices for content consumption. As a result, multi-service usage continues to grow— increasing by 14 percent since 2018.

Number of Services +14% 2019 7.2 YoY 2018 6.3* 2017 ~5 2016 ~4

TOP SERVICE BUNDLES SHOW ONGOING ADOPTION OF VARIOUS BUSINESS MODELS ACROSS PAY TV, SVOD AND AVOD

As the video ecosystem fragments, consumers continue to choose a wide combination of service types in order to unlock the content they value. Here are the most popular video bundles consumers are utilizing today, all of which include some form of free, ad-supported (AVOD) offering (i.e., YouTube, free TV network apps and/or social media video). Netflix YouTube Free Video* Pay TV YouTube Pay TV 29.1% Facebook 24.2% YouTube Pay TV Netflix Snapchat Facebook 40% Facebook YouTube Snapchat Pay TV YouTube Pay TV Free Video* 19.5% Facebook 24.7% 19% YouTube Facebook 22.7% Snapchat Netflix Netflix Pay TV Free Video* Facebook YouTube 17.8% Free Video* YouTube 19.5% Facebook Pay TV 26.7% 21.2%

PAY TV, SVOD AND YOUTUBE DOMINATE DISCOVERY

When asked which services they use to New Movies/TV Series New Episodes Rewatching actively find content, survey respondents you’ve never seen before of series you regularly watch movies/TV shows you’ve already seen showed a clear preference for cable/satellite 40.4% TV, SVOD services like Netflix and Amazon 38.9% Prime Video, and free YouTube videos. 26.9% Nearly 39 percent of respondents indicated they actively use Netflix to find new 25.5% movies or TV series they’ve never seen before. Cable/satellite TV (26.9 percent), 18.5% 18% Amazon Prime Video (25.5 percent) and free YouTube videos (23.6 percent) were close in the race for a distant second place. When it comes to finding new episodes of tried-and-true, regularly-watched series, cable/satellite TV surges ahead of the pack

(40.4 percent). Viewers turn to free YouTube videos (19.2 percent), Netflix (18.5 percent) Netflix Netflix Netflix HBO GO HBO GO HBO GO HBO NOW HBO NOW HBO NOW

and free ad-supported sites or apps (15.4 TV Antenna TV Antenna TV Antenna Hulu + Live TV Hulu + Live TV Hulu + Live TV Hulu + Live

percent) much less often, but still far more Hulu On Demand Hulu On Demand Hulu On Demand Free sites or apps sites Free or apps sites Free or apps sites Free Cable/Satellite TV Cable/Satellite TV Cable/Satellite TV Cable/Satellite Free YouTube videos YouTube Free videos YouTube Free videos YouTube Free Amazon Prime Video Amazon Prime Video Amazon Prime Video Amazon frequently than other services. shows/movies Rental shows/movies Rental shows/movies Rental

CONSUMER ADOPTION OF vMVPDS SINKS

While SVOD giants continue to report Subscription OTT Services 2018 2019 subscriber increases, Virtual Multichannel We asked consumers which of these subscription OTT services they use currently. Video Programming Distributor (vMVPD) services such as YouTube TV, DIRECTV 12% -28.5% NOW, PlayStation Vue and Sling TV YoY are beginning to stall or are slowly -3% decreasing. Still, nearly one-third of 8.5% YoY respondents states they still don’t use 6.9% 6.7% 6.3% -34.1% any form of SVOD service. YoY -24.7% -6.5% YoY YoY 4.1% 4.4% 3.3% 3.2% 3%

30.5% YouTube TV Hulu + Live TV DIRECTV NOW PlayStation Vue Sling TV don’t use any SVOD services

VIEWERS WATCH LIVE TV THE MOST, BUT OTT IS CLOSE BEHIND

Watch One Hour or More regularly Don't Watch regularly

65.8% 2018 2019 44.8% 39.9% 52.4% 46.8% 27.8% 41.5% 25.4% of respondents watch one hour or more of 19.3% sports across all three platforms 10.3%

Live TV OTT DVRed Live TV OTT DVRed

Live TV accessed from OTT/ Previously recorded/ Live sports/ channel guide subscription services DVRed TV sporting events

Content Genres COMEDY IS THE FAVORITE We asked consumers their preferred content genres.

CONTENT GENRE TV Movies

While consumers continue to view a wide variety of content genres across both TV and Comedy 61.1% Comedy 56.9% movies, comedy tops the charts for both content types (61.1 percent for TV and 56.9 percent for movies), followed closely by drama and action/adventure. Drama 51.5% Action/Adventure 44.7%

TELEVISION SCREENS: NOT JUST FOR SHOWS ANYMORE 41.6% Action/Adventure Drama 45.4% While 79 percent of survey respondents use their TV screens to watch TV shows, and nearly half use them to watch live sports, TV owners also commonly use their screens to stream Crime Drama 40.1% 39.8% YouTube videos (34.1 percent), play video games (26.7 percent), watch personal videos Suspense/Thriller (14.5 percent) and cast video content via the internet (13.5 percent). Only 1.9 percent of Suspense/Thriller 39.7% respondents indicated that they do not own a TV. Science Fiction 33.8% Documentaries 39.5% Crime Drama 33.3% TV Screen Use Crime/Mystery 37.1% Crime/Mystery 30.8% Watch TV shows 79.2% News 34.8% Fantasy 27.8% Watch live sports 48.7% Science Fiction 33% Stream YouTube videos 34.1% Romantic Comedy 26.3% Play games on gaming console 26.7% History 32.5% Documentaries 26.2% Watch personal videos 14.5% Sports 31.9% Comedy Drama 25.2% Cast video content via internet 13.5% Comedy Drama 30.2% Horror 24.9%

FREE CONTENT (POPULARITY AND USAGE OF AVOD) IS STILL IN ITS INFANCY

As more and more free video platforms and high-quality content become available, ADOPTION OF LINEAR AVOD SERVICES IS GROWING consumers are watching more of it. Survey respondents indicated they spend the most time watching SVOD services, but free video from social media platforms such as Facebook As consumers grow tired of paying for subscription services, linear AVOD services are on the and Snapchat garner the most individual views per week, and follow close behind SVOD in rise. Pluto TV (+4.5 percent), Tubi TV (23.9 percent) and Philo TV (14.3 percent) all gained time spent. viewers year over year. +4.5% YoY +23.9% YoY 2018 Average Views Average Time 18.5% 17.7% 16.2% 2019 per week in minutes per view 13% AVOD 0.7 17.3

vMVPD 2.3 61.2 Pluto TV Tubi TV SVOD 2.4 80.4

Three-quarters of survey respondents watch free streaming content from YouTube. At 63.8 ADOPTION OF TV NETWORK SITES AND APPS IS percent, Facebook is not far behind. DECLINING SLOWLY Across the board, fewer people have TV network apps downloaded onto their mobile devices YouTube 75.1% in 2019 than in 2018. More than 65 percent of respondents don’t use TV network sites or apps Facebook 63.8% to view content at all. Free video* 41% 10.4% Snapchat 29.1% 2018 9.1% 8.5% 7.8% 7.7% 7.3% 2019 Roku Channel 24.2% 6.1% 5.3% 4.8% 4.9% Crackle 20.76% +41.7% YoY ABC A&E CNN Cartoon Network CBC *from network sites or apps

CORD-CUTTING SHOWS SIGNS OF SLOWING CUTTING THE CORD 12.2% of consumers still plan to cut the cord in the next STILL A CONCERN DESPITE ONGOING SATISFACTION WITH PAY TV six months, down from 18.8 percent in 2018. 2018 2019 Bombarded by service options and beset by content fatigue, many consumers are putting the brakes on cord-cutting and Plan to Cut the Cord holding onto their tried-and-true pay TV. to a non-pay-TV/live-TV service More than 80 percent of survey respondents still have cable/satellite service, and the numbers indicating that they are 18.8% 12.2% -6.6% “very satisfied” with this service increased 9.4 percent year over year. Meanwhile, numbers of customers “very satisfied” YoY with vMPVD services such as Sling TV, DIRECTV NOW and YouTube TV decreased by 37 percent since 2018. While the number of respondents indicating they are “very satisfied” with free broadcast TV from antenna dropped by 44.2 percent, it is PRICE CAUSES CORD-CUTTING possible that this decline is due to decreasing awareness that free TV is even available via antenna. Educating increasingly cost-conscious consumers about the “antenna option” may reap rewards. 85.2 percent of cord-cutters cut pay TV because it was too expensive.

83.3% 2018 2019 Very Satisfied 2018 2019 Use/subscribe to cable/satellite Price/Pay TV is Too Expensive service 80.2% 85.2% 35.4% 35.2% 33.5% 34.5% To Use (Only) an Internet Streaming Service (Netflix, Hulu, Amazon Prime Video, etc.) 26.8% 27.6% 24.5% 24.2% 38.8% 49.4% 17.4% To Use (Only) an Antenna 13.5% for basic TV channels 16.7% 24.4% Linear TV service SVOD AVOD vMPVD Free broadcast TV (cable/satellite) from antenna

THE FREEDOM OF À LA CARTE IS STILL CAUSING SOME TREPIDATION Interested While à la carte channel packaging may seem like an attractive option for some, the act of selecting each individual channel in selecting only the channels may, in fact, be a daunting task for others. you want to watch 70.9% 69.9% MAJOR NETWORKS ARE STILL THE MOST WANTED BY THE MOST VIEWERS

ABC 57.9% CBS 51.4% A&E 48.3% Discovery Channel 48.3% FOX 46.7% NBC 45.2% 2018 2019 HBO 44.4% History 42.2% FX 38.6% AMC 37.5% Food Network 36.3% Comedy Central 35.7% Animal Planet 33.9% TNT 32.8% The Weather Channel 32.4%

BUT VIEWERS ARE WILLING TO PAY FOR NICHE/PREMIUM CHANNELS

Survey respondents indicated they are willing to pay the most for channels with exclusive premium content like HBO, Starz and FINDING THE RIGHT NUMBER OF Cinemax, and channels that cater to particular sports interests or sports conferences, such as the NFL Network, NHL Network CHANNELS and SEC Network. Total demand for niche/premium channels may be lower, but viewers are loyal and willing to pay more for the content they want. American consumers want more channels, and are willing to pay more than Canadian consumers. Overall, survey Willing to pay for Willing to pay for respondents indicated they want an average of 20.6 Popular Channels Niche/Premium Channels channels and are willing to pay $31.15 to access them.

NBC $1.46 SEC Network $2.07 CBS $1.52 Ovation TV $2.12 Average Number Average Price of Channels History $1.58 Adult Swim $2.12 customers are willing to desired pay for those channels Discovery Channel $1.64 NHL Network $2.24 FX $1.69 Revolt $2.38 U.S. 21.3 $33.30 ABC $1.70 NFL Network $2.39 $1.71 AXS TV $2.50 AMC Canada 18.4 $23.65 FOX $1.72 Starz $2.58 A&E $1.78 Cinemax $2.61 Total 20.6 $31.15 HBO $2.85 HBO $2.85

SMART TVS AND STREAMING DEVICES ARE BEING WIDELY ADOPTED

The Top Six Streaming Device Options 22% ranked by popularity of respondents access pay TV with a streaming device +20.1% YoY +11.7% We looked at year-over-year usage numbers and saw that smart TVs YoY 27.6% -14.2% -22.9% remain the most popular of the streaming device options, but they’ve seen YoY YoY 21.26% 20.1% little increase or decrease in use. Meanwhile, Roku Streaming Stick, Roku 17.7% 10.8% streaming players and Amazon Fire TV Stick are gaining ground, while 1 2 3 4 5 6 10.3% Google Chromecast and Apple TV are on the decline. Smart TVs Roku Gaming Amazon Google Apple TV Streaming Stick Consoles Fire Stick Chromecast and players (e.g., Xbox, PlayStation, etc.)

Have replaced one or more pay-TV/live-TV 12.8% 34.9% STBs with a streaming device still don’t own a streaming device Have not replaced any pay-TV/live-TV 40.6% STBs with a streaming device Over one-third of survey respondents indicated they still don’t own a streaming Actively use a streaming device 11.8% device. The numbers from 2018 were similar, suggesting overall streaming device to access pay TV/live TV adoption has faltered in the face of content fatigue and option overload. Do not have pay TV/live TV 31.3%

COMPLEXITY OF CHOICE WILL ONLY GET WORSE

Every year, consumers are presented with a widening array of content and technology options. While keeping up with the latest and greatest options may be a discouraging task for some, consumers in general are becoming more amenable to adopting next-generation devices and services that add value to their lives. As such, efficient and innovative content aggregation and personalization capabilities that open the door to an agnostic range of technology touchpoints will be crucial for consumers struggling to navigate through the rocks and shoals in the ever-rising content ocean.

INNOVATION WILL IMPROVE THE EXPERIENCE NEARLY 1/4 OF CONSUMERS WANT A NEW GUIDE FORMAT; OVER HALF WANT MULTI-PLATFORM SEARCH

When it comes to channel guides, 23 percent of survey respondents indicated they would like their channel guide in a new format — categorized into groups of movies and TV shows. Nearly half (44.6 percent) said that they did not want their guide to change — they’ll stick with their current guide, thankyouverymuch. Meanwhile, 32.4 percent of consumers want the best of both worlds — both the old guide and the new.

As the number of content and video service options increases year after year, more than half of consumers want the ability to search for TV shows and movies across different platforms. Yet, consumers still suffer from option overload and device fatigue, and casting a wider search does not make the sheer number of choices any less overwhelming.

Desire Multi-Platform Search Functionality

50.7%

2019

RECOMMENDATIONS AWARENESS DIPS ~90% PERCEIVE RECOMMENDATIONS AS ALWAYS OR SOMEWHAT ACCURATE

The number of survey respondents indicating they are aware that their pay-TV or live-TV RECOMMENDATIONS ACCURACY PERCEPTION provider makes personalized recommendations decreased by 23.7 percent since 2018. It’s possible that technology improvements have rendered recommendations less noticeable, Only 22.3 percent of survey respondents believed recommendations from their blending seamlessly with the user experience. It’s also possible content and device fatigue pay-TV providers are “always accurate.” That said, 67.3 percent of respondents felt is making consumers more skeptical of and less patient with platform performance. recommendations are “sometimes accurate,” reflecting a 22.1 percent increase since 2018. Given the flood of new, fragmented video content available to consumers, the increase in “sometimes accurate” perceptions is actually quite significant and positive news for service Aware their pay-TV/live-TV provider makes personalized recommendations providers. Results were similar for OTT recommendation perceptions: 22.2 percent felt that recommendations were “always accurate,” while 69.7 percent felt recommendations were “sometimes accurate.”

26.6% 20.3% Perception of Accuracy Pay TV/Live TV OTT 2018 2019 67.3% +22.1% Sometimes accurate YoY 69.7%

22.3% Always accurate 22.2%

4.8% Never accurate 4.3%

MANY TRUST TEXT SEARCH … SOME USE IT

Text search usage is higher among surveyed pay-TV viewers (43.7 percent) than those who use OTT/internet video service (37.6 percent). Though less than half of survey respondents say they use text search, the vast majority of those who do use it trust the results. Perceived accuracy of text search results is slightly higher among OTT/internet video service users – 88.3 percent feel that the results of their text searches are accurate, versus 86.6 percent of pay-TV viewers.

Believe Text Search Results Are Accurate Use Text Search

Pay TV/Live TV 86.6% 43.7% 37.6%

Pay TV/ OTT OTT 88.3% Live TV

VOICE SEARCH USE INCREASES AMONG PAY-TV/LIVE-TV VIEWERS

While voice search decreased across the board among PERCEIVED ACCURACY INCREASES; SKEPTICISM DECLINES streaming device owners, survey results showed a nearly While most survey respondents still don’t use voice search, those who have tried it are having better user experiences. The 10 percent increase in voice search use among pay-TV/ number of survey respondents indicating they felt uncomfortable talking into a device decreased by 7.8 percent. The number live-TV viewers. of respondents indicating trying voice search, but their device didn’t recognize what was asked, decreased by 13.9 percent, while the number who tried it, but received incorrect results, dropped by 23.3 percent. Voice search technology is improving Voice Search Use and consumers are using and trusting it more.

35.7% Amazon Fire TV Don’t Use Voice Search 2018 2019 29.5% +9.9% Pay TV/Live TV YoY 35.7% Apple TV 17.2% Not comfortable talking into a device 29.5% -7.8% YoY Google Chromecast 14.7%

Roku Devices 35.7% Tried it, but device didn’t 18% recognize what I asked 15.5% -13.9% Gaming Consoles 13.4% YoY (Xbox, PlayStation, etc.) Tried it, but the results 15% were wrong 11.5% -23.3% YoY

CHALLENGES AND OPPORTUNITIES

As the worlds of traditional TV and digital video continue colliding, blurring and evolving, service providers face both significant challenges and lucrative opportunities. Across the board, viewers know and think less about the tools at their disposal. To be heard and trusted amidst the noise, service providers must stand out and prove their worth.

Whether it’s voice search, category recommendations or TV guide design, trends indicate that consumers are not looking for something new to replace their current technology and tools. What they want are innovations to complement what they already have — simple, elegant tools that help viewers navigate through the content chaos, with entry points they can trust. Service providers can build that trust by crafting better user experiences, educating their customer base and honing their message.

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