Ofcom has today published their annual Media Nations 2018 report and revealed that subscriptions to popular broadband based video streaming platforms (e.g. Netflix, NOW TV and Amazon) have for the first time overtaken those of traditional Pay TV in the UK. On top of that Pay TV revenues also declined for first time.
According to BARB Establishment Survey data, the number of traditional Pay TV subscriptions (e.g. Sky UK, Virgin MediaTV, BT TV and TalkTalk TV) in the UK for Q1 2018 totalled 15.1 million, whereas the total number of subscriptions to video streaming platforms was slightly higher at 15.4 million. However, this figure includes subscriptions to multiple on-demand services within one household: 11.1 million households (39.4%) have at least one of either Netflix, Amazon or NOW TV.
More than a third of Netflix (38%) subscribers cite “to watch original series made by the provider” as a reason for signing up (up from 30% in Q1 2017). Overall online audiovisual revenues grew by 28% year-on-year in real terms, to £2.26bn in 2017. Meanwhile, following a period of sustained growth, in 2017 traditional Pay TV subscription revenues dropped by 2.7% in real terms year-on-year to £6.4bn.
The growth in connected devices, coupled with more people having access to “superfast broadband” (24Mbps+) ISP speeds (available to 95% of UK premises and rising to 98% by the end of 2020), has helped fuel the growth in online and video-on-demand (VoD) alternatives. But traditional TV sets themselves have also grown faster than any other device as a way of accessing VoD, with 67% of all VoD viewing in 2017 via a TV set.
Among those with a TV set in their household, some 52% of households in H1 2018 had a broadband-connected smart TV or a TV connected to the internet via another device such as a set-top box, games console, laptop or streaming media stick through which they can access video-on-demand services.
Perhaps unsurprisingly the amount of time spent watching traditional broadcast television on a TV set has continued to decline and, in 2017, stood at an average of 3 hours 22 minutes a day, down nine minutes (4.2%) on 2016, and 38 minutes (15.7%) since 2012. Meanwhile TV advertising income fell by 7% to £3.9bn.
Sharon White, Ofcom’s CEO, said:
“Today’s research finds that what we watch and how we watch it are changing rapidly, which has profound implications for UK television.
We have seen a decline in revenues for pay TV, a fall in spending on new programmes by our public service broadcasters, and the growth of global video streaming giants. These challenges cannot be underestimated.
But UK broadcasters have a history of adapting to change. By making the best British programmes and working together to reach people who are turning away from TV, our broadcasters can compete in the digital age.”
As with video streaming, music streaming services, like Apple Music, Amazon Prime and Spotify, continue to soar in popularity. For the first time, music industry revenues from online streaming subscriptions exceeded physical sales in 2017. Total retail music sales grew by 6% in real terms between 2016 and 2017 driven by a 38% increase in online streaming service subscriptions to £577m.
In contrast, overall sales of physical music formats fell to £470m. The shift away from music ownership towards streaming was reflected by a 25% drop in sales of music downloads. Meanwhile almost a quarter (23%) of all adults listen to music via streaming services each week, increasing to over half (51%) of those aged 15-24.
However we can’t help but wonder how much longer streaming (particularly video) platforms will continue to grow. Back in 2016 we wrote an article that warned of how fragmentation in TV content licensing, which can ultimately result in consumers signing up to more than one streaming service in order to get all the content they want, may eventually reach an impasse due to rising prices (here).
Premium TV services can be expensive and one of the reasons why streaming has become so popular is because the platforms are generally a lot cheap, although that rational changes if you have to adopt several of them. Couple that to annual price hikes and sooner or later the pendulum could swing back in favour of traditional Pay TV models or worse, piracy.
“Today’s research finds that what we watch and how we watch it are changing rapidly, which has profound implications for UK television.
We have seen a decline in revenues for pay TV, a fall in spending on new programmes by our public service broadcasters, and the growth of global video streaming giants. These challenges cannot be underestimated.
But UK broadcasters have a history of adapting to change. By making the best British programmes and working together to reach people who are turning away from TV, our broadcasters can compete in the digital age.”
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