The number of consumers watching more than 10 hours per week of over-the-top (OTT) streamed video grew by 50 percent annually, and binge watching viewing grew from 12.2 percent to 18.32 percent. That’s according to a survey (pdf) of 1,086 consumers by Limelight Networks, which also showed strong growth and rapid shifts in consumers’ online video consumption.
Almost 70 percent of consumers subscribe to at least one paid OTT stream video service, such as Netflix or Hulu. And the number of consumers who have have at least one OTT streamed video jumped by 15 percent.
The increase in adoption also means streamed TV consumers will be willing to buy new OTT services that match their tastes as they become available. This is confirmed in the survey by the number of consumers buying more than one streamed service. Consumers with two or more OTT services grew by 36 percent.
It’s not a death knell for cable yet, but the data is notable because of the change in consumer behavior from buying increasingly expensive TV content bundles from cable TV providers to purchasing smaller bites of content from OTT services at lower prices. A few things will have to happen, however, before the majority of consumers cancel their cable TV subscriptions.
Cable TV providers failing consumers
According to Consumer Reports, consumers are unhappy with cable TV services. Most received the consumer watchdog’s lowest ratings, with the exception of Google Fiber and the fiber internet service offered by the City of Chattanooga in Tennessee.
U.S. consumers also often don’t have much choice when selecting high-speed internet providers. And for most, their ISP is their cable TV provider, which has a local monopoly. The cable TV duopoly has failed because of that lack of choice, says Susan Crawford, Harvard Law professor and author of Captive Audience.
If large numbers of consumers watch more streamed video and cancel some of their cable TV bundles, though, you can expect cable TV and internet companies to increase internet prices to replace the lost TV revenues.
A look at the impact of a consumer discontinuing cable TV entirely and moving to streamed television is useful in predicting cable TV companies’ response to mass cancellation of cable TV subscriptions.
According to Nielsen, the average American watches 165 hours of television per month. A typical household of three adults would likely consume about 400 hours of streamed television per month. That amounts to 280 GB of data per month at standard television resolution, 1.2 TB of data at HD television resolution and a whopping 2.8 TB of data at Ultra-HD.
Compare that to streamed OTT TV: Netflix says an hour of streamed television consumes 0.7 GB of data per hour for each standard definition video stream, 3 GB per hour for each HD video stream and 7 GB per hour for each Ultra-HD stream.
Two of the three usage levels exceed Comcast’s new monthly 1 TB data cap. Those consumers would have to pay the $50 per month back to Comcast that they saved by shaving the cord for the increased data consumption by their OTT streamed television services. The newest television resolution, 4K will consume 20-30 GB per hour, which will need entirely new national internet access infrastructure. More internet-ready smart TVs will have to be sold before the internet’s capacity is taxed.
An exodus from cable TV subscriptions won’t happen without help from fiber-optic infrastructure suppliers and the FCC. In the last decade, the cost of running fiber has dropped almost tenfold. Further reductions would bring new entrepreneurial ISPs with the newest fiber-optic technologies, such as Google Fiber and the City of Chattanooga, that will increase speed, create competition and lower cost.
It might take more than local ISP competition to lower costs to the consumer.
South Korea came up with a novel solution. It opened internet access to competition. The move led to faster internet speed, improved quality and lowered costs. South Korea regulates the internet backbone like it’s a monopoly, which makes yearly increases in capacity and operating and capital expenses predictable.