A newly released SNL Kagan study suggests that the ability to access over-the-top (OTT) video services and apps from mobile devices has reduced the incentive for consumers to pay for dedicated carrier-based mobile video services. In other words, OTT video is encouraging some users to defect from paying for video entertainment services.
Some might argue that is good news for Netflix and Hulu. Others might say the key test will be demand for TV programming, not movies. So far, Netflix has not been a major contestant in that arena, while Hulu has had modest success as a provider of TV programming.
At the same time, providers of adjunct mobile TV, such as TV Everywhere or the Xfinity Mobile App, are starting to view mobile as as a churn reduction tool rather than a source of new revenue.
Those services require a current subscription to a video service, in order to use the mobile apps, so the revenue model really is the traditional TV subscription service, not the streaming feature.
Still, SNL Kagan suggests there has not been especially robust evidence that even the cable TV mobile apps have gotten a huge response.
For now, OTT apps like Hulu Plus and Netflix are resonating more with consumers than are TV Everywhere apps from multichannel operators, the study suggests. As has been the case for video on demand, convincing consumers to pay extra for mobile video access has not been so easy.
“Free” video iPad apps from major content owners including Disney, Viacom and Time Warner that are offered “for no additional charge” for subscribers are doing better than stand-alone mobile apps with a new subscription fee.
As was the case for video on demand, that resistance is shifting distributor emphasis towards advertising to generate revenue. What remains to be seen is how well future streaming services, that require either a separate subscription or “sell through” requirements (you must be a cable TV, telco or satellite video subscriber, first), will fare in the market.
According to a report released by The Diffusion Group (TDG), video-on-demand services provided by video service operators should be, but are not, generating significantly higher viewing and advertising revenue. Total VOD use is small, representing only one percent of all U.S. TV viewing.
By some measures, VOD is doing better. Magna Global has estimated that U.S. homes with VOD, a “category that includes both traditional service provider VOD offerings and over the top services,” will hit 70.1 million homes, about 57 percent of all TV homes at the end of 2016.
TDG attributes that failure as a reflection of VOD’s inadequate advertising support and awkward program guides that limit availability and viewing of ad-supported VOD content. That also suggests the “for fee” VOD has not gotten widespread interest.
VOD in recent years has contributed about $2 billion a year worth of revenue for U.S. video entertainment providers. U.S. cable TV companies alone booked about $98 billion in 2011 revenue. That doesn’t include the sizable revenue earned by satellite and telco providers as well.
The point is that VOD, as a service, has been a modest success, though it has had three decades to make its case.
Whether new forms of commercial video streaming will do better still is an open question. People clearly watch lots of video, especially when it requires “no additional cost.” How well existing content, of the sort provided by video subscription services, might fare if offered as a “streaming only” option is largely an untested thesis.