With Limelight’s third annual ‘State of Online Video’ research report examining consumer behavior and perceptions around watching online video, several key findings point to answers to the most asked questions: Will cord cutting become a serious threat to cable providers? Can over-the-top (OTT) services be monetized from ad revenue and subscriptions? Will YouTube remain unchallenged as the most popular source of online video? Each of these will be addressed in this blog using data from the report and recent relevant articles in the financial press.
Cord Cutting Will Remain an Insignificant Factor
A recent article in “The Motley Fool” about cable bundles and triple-play pricing deals eloquently makes the case for consumers sticking with their service providers (full disclosure – I was interviewed for the article). Several data points in the research back this up. The first is OTT services are surging in popularity, as evidenced by subscription data comparing a year ago with how many online video services consumers have today.
The other is online video consumption is on the rise, as indicated by the below figures. The number of respondents watching only 1-2 hours of online video per week is steadily decreasing, while the number watching 4-10+ hours per week is increasing.
Why is increased online video consumption good for cable service providers? Because they include the Internet connectivity required to watch online video in their triple-play bundle. As “The Motley Fool” points out, if you price Internet connectivity unbundled, it can cost up to 70% of the triple play service. Add in the cost of a couple of OTT services, and you are back to what you were paying before. Suddenly those hundreds of channels with a single monthly bill and program search capability may not look too bad.
Good News! OTT Services Can be Monetized with Ad Revenue and Subscriptions
Consumers are starting to move away from lower quality free content typically found on YouTube, to higher quality found on OTT services. Notice the shift between YouTube and OTT service responses over the past 6 months.
This data on the increase in the number of OTT services consumers are subscribing to validates paid subscriptions as a path to monetization revenue. On the advertising front, people are becoming more accepting of online ads if it means not having to pay for content. This shift can be seen in the data over the past year.
These insights depict interesting shifts in consumer behaviors identified in the report. If you’re interested in more where this came from, the full report contains much more consumer behavior data related to online video watching, including a Millennials section, video quality, OTT devices usage, and social media video.