Several things must happen before clearly-growing interest in over-the-top video entertainment really can disrupt current video subscription services. Broadband access has to be very widespread, and fast enough to provide a decent end user experience. The cost of such access has to be reasonable, if there is any significant shift of TV viewing to online delivery.
People will want the ability to watch such programming on their TV screens, not just tablets, PCs and smart phones. Doing so must be very easy. Finally, the programs people want to watch must be affordable, as well.
That is largely a matter of network and program owners willingness to license that programming so users can buy and watch what they want. Users have to become used to the idea that watching over the top video is something they habitually do, know how to do, and like to do.
You might argue most of the foundation elements are getting into place, with the big stumbling block being the issue of licensing rights. “Apple TV,” for example, could be important in a number of ways.
But it likely would be “revolutionary” only if it made over the top video both easy and also featured new ways of buying programming, especially the ability to buy programs a la carte, on demand. So far, programmers largely have been unwilling to do so, though there is some creeping willingness, by some, to consider “channel” licensing, with other conditions.
Some 38 percent of all U.S. households have at least one television set connected to the Internet using a video game system, a Blu-ray player, an Apple TV or Roku set-top box or the TV set itself, up from 30 percent last year (April 2010 to April 2011), and 24 percent two years ago (April 2009 to April 2010) , according to Leichtman Research Group.
Perhaps most significantly, 1.6 percent of households said they used to subscribe to a multi-channel video service in the past year and do not currently subscribe.
Yet, just 0.1 percent of the sample dropped service in the past year, do not plan to subscribe again in the next six months, and say that they don’t subscribe because of Netflix or because they can watch all that they want on the Internet or in other ways. That continues to suggest that online-delivered video is ancillary and complementary to video subscription services, LRG says.
Of course, those findings, which are consistent with most other recent studies in showing slight amounts of actual “video cord cutting,” also do indicate that the amount of “alternative” viewing is growing.
Over time, those new habits will create a new base of potential customers for any new Internet-based video services, even if at present, few consumers have switched from video subscription services to Netflex or any other online delivery system.
Video game systems are the key connected devices, as 28 percent of all households have a video game system connected to the Internet, LRG reports. Just four percent of all households are connected solely using an Internet-enabled TV set, and Apple TV or Roku set-tops are the only connected devices in one percent of all households.
Overall, 13 percent of all adults surveyed report they watch video from the Internet using a connected device at least weekly, compared to 10 percent a year ago, and five percent two years ago.
Use of connected devices remains skewed towards Netflix subscribers, with 35 percent of Netflix subscribers watching video from the Internet using a connected device on a weekly basis,, compared to five percent doing so weekly for respondents who are not Netflix subscribers.
Video service providers also are keeping close watch of changing habits in other areas as well, especially mobile and tablet video viewing.
Among all mobile phone owners, 19 percent say they watch video on their phones weekly, compared to 15 percent last year, and six percent three years ago, LRG says.
About nine percent of all adults watch video on an iPad or tablet computer weekly, compared to two percent last year. The LRG findings are based on a survey of 1,251 households nationwide.
The big issue right now is not so much that there is a big threat to video cord cutting, but that a growing number of people know how to consumer online video, do it regularly, and that a growing percentage of people in newly-formed households are buying video subscription services at a lower rate than people in established households.
You might argue that a latent audience for online alternatives is being created. Overall, 16 percent of all adults use Netflix’s “Watch Instantly” feature weekly, compared to 12 percent in 2010, and four percent in 2009, according to Leichtman Research Group.
Some 79 percent of Netflix Watch Instantly customers use it to watch movies and television shows on a TV set, and 59 percent of this group get Netflix via a video game system.
Some seven percent of Netflix subscribers are likely to switch from their multi-channel video provider in the next six months, compared to 12 percent of non-Netflix subscribers, Leichtman reports. You might have suspected the percentages would be reversed. But you might argue that Netflix customes value television more than non-subscribers.
But 13 percent of Netflix subscribers would consider reducing spending on their multi-channel video service because of Netflix, compared to 21 percent in 2010.