Discovery Study: OTT is HOT…for the Fast-Forward Crowd

Today’s guest post on Discovery Blog is from Pam Pearce, Senior Director of Ad Sales Research, and David Ernst, Vice President of Ad Sales Research, for Discovery Communications.

A growing number of viewers are saying, “I want my OTT.” But so far, it is not for everybody.

The number of people using over-the-top (OTT) or connected devices to watch television is ramping up quickly[1]. Through research, including our October 2012 survey of Discovery Communications’ Influencer Panel outlined here, we are now able to better understand how viewing habits are changing as people adopt these new technologies.

While more than a third of households have an Internet connection for their television, only about 13% of viewers say they have used it to stream content on their TV. This group of “Video Explorers” are evolving into a different type of viewer, one that will prove an important segment for programmers and advertisers as they generally exert a disproportionate influence regarding what programs to watch as well as which brands to buy.

At the same time, OTT devices have opened up a new dimension to television viewing – for some. For the Video Explorers, it has completely changed not only the way they watch TV and video, but also the way they think about television. Just as a few decades ago when the introduction of cable forever changed and broke the mold of TV viewing in the days of three broadcast networks, so too are the various connected options further reshaping the media landscape.

For those Video Explorers, it is all about choice and control. Once the TV set is connected to the Internet, whether via a device such as a Roku or Apple TV or via the “smart” part of their TV, the number of viewing options can instantly expand. The plethora of choices is reprogramming the way that Explorers are watching TV, as they are now completely in control, and expect to be able to choose what they want to watch and control when and how they watch it.

Research conducted among Discovery’s Influencer Panel points to a more measured adoption of OTT going forward among the general population. Gaining a better understanding of Video Explorers will give us an early read on future viewing behaviors across audiences.

‘Explorers’ Are Different

Video Explorers think about television and video viewing in a different way than those who are not connected. First off, their approach to figuring out what to watch has evolved away from mainstream habits. But, perhaps surprisingly, while OTT offerings are important to Explorers, these options currently only make up a fairly small portion of their time spent viewing.

OTT is not the first, second or even third choice when an Explorer sits down to watch. The initial instinct is to either check what is on their DVR or just go directly to the channel that has the program they what to watch. This differs from “non-connecteds” who will first check live TV on their favorite channels to see what might be on.

For most Explorers in our survey, OTT is just another menu choice, supplementing not only TV (live and DVR make up about 55%), but also all of the other sources of content including DVD and VOD. OTT is an addition rather than a replacement, representing yet another aspect of the continued fractionalization of television viewing – and another stage in the transition from live to recorded to on-demand viewing. An important and growing segment of Explorers truly are “streamers,” as 13% of Explorers look to streaming sites to find something to watch first (18% say that streaming is their preferred way to view).

Similarly, our study reveals a large group of non-connecteds who often first “check their favorite channels” as their primary method of finding something to watch, just as many their counterparts did decades ago. As an update to some of these behaviors, now many check program guides (both electronic and print) to find new and favorite programs, again mimicking behavior from earlier days.

OTT Survey Chart 1

OTT Survey Chart 2

Video Explorers Are Searching for Content

Based on the results of our study, the primary motivation for Explorers to use streaming and OTT services is the hunt for content. Two-thirds of these viewers are paying for additional content, with Netflix by far being the most popular additional service. The desire to be cord-free is a less significant contributor to seeking out streaming options. In fact, less than 30% of Explorers say that they are adding streaming services to cut down on costs by avoiding cable fees or other costs.

So, while cord-cutting is in practice among a portion of this audience (especially among younger segments), the majority are adding services, instead of replacing them, to supplement more traditional fare. The result, however, is that about 44% of those who stream admit that these alternatives cut down on their viewing of programs through the cable box. This is potentially a sign of things to come and surely speaks to even more fragmentation of viewing in the future.  Our study points to the fact that quality programming will be more vital than ever as a key to retaining viewers as audiences shift their behavior.

With increased fragmentation, advertisers will need to aggregate audiences to a greater extent to reach audiences across many platforms. The good news here is that most Explorers are not looking to avoid advertising as a motivation for streaming (29% say they are trying to avoid ads). And, just as with DVR adoption, we can expect that those who are the most anti-advertising have already adopted some OTT viewing behavior.

OTT Survey Chart 3

As we look to future behavior among Television Audiences, we can use some of these findings to project some changes. It appears that more viewers will take on some type of OTT or connected Device to supplement their core TV viewing behavior. The rate of adoption, however, will be limited by costs and a clear understanding of the benefits of these services.  And, clearly, the most important benefit, whether OTT or from more traditional sources, is quality content.

Download the full study.

Special thanks to Julia Goorin of Discovery Communications’ Ad Sales Research team, who managed the study.

[1] From Leichtman Research Group, Emerging Video Services VI, 1Q 2012: An estimated 38% of households have a TV connected to the internet, up 24% from just two years ago