Video consumption has never been more fragmented. As pay TV subscriptions continue to decline, they are replaced by a number of live and on-demand streaming options that continue to grow by the day. Viewers can use a dizzying array of services to create their own consumption “nirvana.” However, there is bound to be an upper limit on both how many different services a consumer is willing to pay for and how much time she has in the day to consume. This leads some in the industry to believe the growth in content and platforms may not be sustainable over the long term.
Cutting through this cluttered landscape to create a relevant position with consumers requires an understanding of which consumer segments your growth goals depend on and their underlying motivations, preferences and behaviors. Only with this view can industry players make strategic decisions that will ensure competitive advantage and deeper viewer relationships, while remaining relevant and with enough scale to survive an inevitable culling in the Over-the-top (OTT) video space.
For the sixth consecutive year, our survey sought to examine some of the most pressing questions about American consumers and their relationship with video:
We also developed new motivation-based video profiles to identify five distinct consumer groups in a continually changing video space.
Methodology: In October 2018, PwC surveyed a sample of 2,016 people in the US, ages 18-59, with annual household incomes above $40,000. We analyzed our results against similar studies we administered in past years, and ran cluster analysis on 68 attitudinal and motivational statements. Additionally, we conducted consumer and industry insider focus groups.
In 2018, we saw a continuation of the cord-cutting revolution: Total pay-TV subscriptions declined from 73% to 67%, while Netflix usage (76%) surpassed cable and satellite usage (67%) for the first time.
As content options and platforms continue to grow, and consumers have more control over their choices, the pay-TV-consumer relationship appears healthier:
"Today, if you still have cable, it is a choice and you’re choosing it because you’ve evaluated all the options and decided that this is optimal for you. Therefore, you’ve decided to be there versus you have to have this relationship.”
Demographics have long been used to assess and predict consumer video consumption and purchasing behavior. Segmenting customer groups by their motivations, however, offers us new and essential insights into these behaviors.
Our data shows that there is a convergence between older and younger generations: Older consumers are increasingly cutting the cord and accessing more video content online, while younger consumers are showing signs of positive pay-TV relationships:
Motivation-based segmentation also reveals that there is little association between income and spend on video content.
As the disconnect between behavior and demographics grows, we’ve found, perhaps not surprisingly, that people’s video consumption habits correspond closely with their motivations for content as well as their particular interests.
The following are five distinct consumer profiles that emerged in our analysis of the survey data:
Understanding your audience’s motivations and then targeting them allows content providers to stay ahead as the industry shifts. An often-overlooked opportunity, however, lies with technology: finding the gaps in service that technology can fill to reach consumers more effectively.
Improve artificial intelligence (AI) recommendations
Consumers still prefer reviews and recommendations from real people because AI recommendations are falling short:
Consumers are frustrated at how reactive—not predictive—today’s algorithms are:
Eliminate user frustration
Despite the seductive pull of streaming services, 50% of the consumers in our focus group said they would eliminate a provider if the service was overwhelming (too much content) or inconvenient (not enough ways to overcome poor discovery).
This finding underscores how technology can attract or repel consumers. In fact, consumers said ease-of-use is a key reason for engaging with a service frequently, suggesting one way that streaming services may be at a disadvantage compared to pay-TV.
Consider how blockchain can address consumer needs
Consolidating content and payments is one way consumers would like to see the streaming experience improve:
In theory, blockchain technology could fill this key consumer need by simplifying the barriers around intellectual property rights, payments and contractual terms that drive fragmentation today.
This consolidation would need to be implemented carefully to avoid creating greater confusion. Some focus group participants expressed anxiety at the thought of having to choose from even more content in one place. Said one, “Unless you know exactly what you want to watch, that’s more overwhelming.”
Fanatics in particular are interested in having all video content available in one place to accommodate their viewing habits.
“I have something that actually annoys me... when I watch one episode and nix it, and they recommend things based off of it even though I clearly didn’t like it.”
While tapping into technology opportunities will create new markets, content remains the glue of customer relationships for video.
Our research uncovered several content trends to future-proof these relationships.
Indulgists, the biggest spenders, are the most interested in brand-developed content.
Some 20% of consumers are interested in foreign TV shows and films. In a world of ever-shrinking borders, we anticipate this desire for greater breadth and diversity of content will only continue to grow. Meanwhile:
Connoisseurs and Engagers interact with foreign video content the most, in contrast with Traditionalists:
Moving towards custom immersion
We are still a long way from seeing a strong demand for truly immersive content, with just 17% of our respondents saying they would like to see virtual reality replace traditional movies. But Engagers will lead the revolution in this space: 54% say they would like to interact with movies in the future instead of just watching them (vs. 21% overall).
Understanding viewer preferences is essential to remaining relevant in the increasingly crowded video space. Based on the survey, focus group and expert panel, consider the following recommendations:
Technology, Media and Telecommunications Advisory Leader, PwC US
Technology, Media and Telecommunications Partner, PwC US
Technology, Media and Telecommunications Partner, PwC US