In my previous note I discussed how 2017 was another challenging year for schedule based television in the UK, with the SVOD services (Netflix, Amazon, Now TV, etc.) in particular taking a bigger slice of the total video viewing pie, though it was also made clear that: “while TV is evolving, there is every likelihood that more traditional schedule based television will continue to be an important part of the video viewing landscape for many years to come.” With this in mind, it is worth highlighting how, despite a 3.6% downturn in the consolidated (i.e. Live + 7-days catch-up) Individuals 4+ Total TV audience between 2016 and 2017 (from 8.70 to 8.39 million), 2017 was actually an extremely good year for the DTT Platform (comprising Freeview and YouView). Between 2016 and 2017 the consolidated Individuals 4+ DTT Platform audience (covering viewing on both primary and secondary TV sets) actually grew by 2.3% from 3.84 to 3.93 million. As a result, after having been notably stable at around 44.4% a year since 2013 (the first full year after the digital switchover was completed in late 2012), the DTT Platform’s Share of the Individuals 4+ consolidated Total TV audience actually rose significantly to 46.8% (up 2.4 percentage points) in 2017, an increase that has been improved upon in the first quarter of 2018, with an unprecedented Share of 48.0% (versus 43.8% in 2016-Q1, and 46.3% in 2017-Q1). The DTT Platform’s recent performance is even more impressive when looking at Commercial Impacts, with its Adults 16+ Share of Commercial Impacts (SOCI), after growing moderately from 44.5% in 2013 to 45.8% in 2016, rising to 48.8% (up 3 percentage points) in 2017, and then rising again to 50.2% in 2018-Q1 (versus 45.1% in 2016-Q1, and 48.0% in 2017-Q1).
Such a significant bucking of the prevailing trend needs careful consideration, and an initial working hypothesis might be that the aforementioned gains have been driven by the DTT Platform’s naturally older skewing audience, through the combination of an aging population coupled with the fact that younger viewers are watching significantly less schedule based television, while the consumption levels of their older counterparts have remained high. The evidence, however, does not support this view. In fact, although the DTT Platform has (in line with all the other platforms) experienced declining audience levels for the under 55s in recent years, there was a notable levelling-off in 2017 that appears to have been unique to the DTT Platform. As a result, there was a corresponding increase in the DTT Platform’s Share of consolidated Total TV viewing between 2016 and 2017 for all the main under 55 age-bands, with the DTT Platform’s: Children (4-15) Share rising from 29.4% to 31.7% (up 2.3 percentage points), the 16-34 Adults Share rising from 33.7% to 36.5% (up 2.8 percentage points), and the 35-54 Adults Share rising from 36.3% to 38.4% (up 2.1 percentage points). In comparison, the DTT Platform’s 55+ Adults Share had the lowest percentage point increase (up 1.7) from 54.6% to 56.3%. For the commercially high value 16-34 Adults audience, it is also noteworthy that the DTT Platform’s SOCI rose from 35.9% to 39.4% (up 3.5 percentage points) between 2016 and 2017, and then rose again to 41.6% in 2018-Q1 (versus 35.5% in 2016-Q1, and 37.7% in 2017-Q1).
So, what is going on? It is important to make clear from the outset that this is not the result of some recent fundamental change in the TV viewing habits of DTT Platform viewers. Generally speaking the TV viewing habits of people in DTT Only households are very similar to those in households with access to Cable or Satellite, with a comparable decline in the Average Daily Minutes of schedule based television viewing for younger audiences, and a corresponding increase in other TV screen based activities, reflecting a growing appetite for consuming non-schedule based long-form video content (notably SVOD, but also a growing slate of non-linear BVOD [Broadcaster VOD] offerings) on the biggest available screen in the home. What has changed, in fact, is that there has been a significant recent increase in the number of people in DTT Only households as measured by BARB, and even if the average person is spending less time watching schedule based television on any given day, you can still increase the overall TV audience if you increase the number of people that are available to watch.
The different types of people living in the UK’s television households are technically known as the BARB Universes, and between 2016 and 2017 there was a substantial increase in the BARB panel estimated DTT Only Universes, particularly for the younger age-bands. Between 2016 and 2017 the number of Children (4-15) in DTT Only homes grew by 13.5% (up 334K), while the number of 16-34 Adults grew by 12.5% (up 571K), and the number of 35-54 Adults grew by 8.1% (up 438K), with DTT Only 55+ Adults, despite the UK’s aging population, growing by a proportionally more modest 5.7% (up 514k). In fact, between 2016 and 2017 the proportion of 55+ Adults making up DTT Only households actually fell from 41.8% to 40.7%. While natural underlying population changes (the UK’s population is growing as well as aging) will undoubtedly have contributed to these results, the DTT Only Universe increases for the younger age-bands over such a short period of time are far too substantial for this to be the only causal factor. One possible explanation is that when BARB changed the way it estimates the total number of TV homes at the start of 2016, this may have inadvertently benefitted DTT Only over Cable and Satellite homes, but (notwithstanding that BARB would in any case be extremely unlikely to inadvertently introduce any systematic bias) a closer analysis of the corresponding monthly Universe changes rules this out.
So, what then are we looking at? It is hard to escape the conclusion that what we are seeing here is the UK’s equivalent of the cord-cutting phenomenon that has been affecting US pay-TV operators for a number of years, but which (until recently at least) has been far less of an issue in the UK market. The cord-cutting phenomenon involves consumers switching from higher cost pay-TV to lower cost free/pay-lite TV services, usually in conjunction with an OTT service like Netflix, Amazon or Now TV, and the DTT Platform has certainly evolved into an attractive proposition for consumers (notably cash strapped younger ones) looking to save money. Not only has there been a proliferation in the number of Freeview based (free-to-air) DTT channels, they can also be readily supplemented with a range of streamed pay-TV channels from one of the YouView based DTT/IPTV hybrid services being offered by BT and TalkTalk. Perhaps more importantly for younger viewers, however, is the fact that the broadcaster’s online players, as well as a range of SVOD and other online video apps (e.g. YouTube), are now routinely included in the software of DTT enabled set-top-boxes and Smart TVs. The lure of decent free TV and Catch-up on a big screen, coupled with a handy Netflix (to which you probably already subscribe) button on your remote, is practically the definition of what cord-cutting is all about.
However, if cord-cutting really is a significant contributory factor in the notable growth of the number of younger viewers in DTT Only homes between 2016 and 2017, we would also expect to see a significant decline in the number of younger viewers in Sky and Virgin Media homes over the same period. It is certainly the case that between 2016 and 2017 (according to the BARB panel Universe estimates) the number of Children (4-15) in Sky and Virgin homes (combined) fell by 3.9% (down 236K), while the number of 16-34 Adults and 35-54 Adults also fell by an even more notable 8.5% (down 801K) and 5.4% (down 589K) respectively. By contrast, the number of 55+ Adults in Sky and Virgin homes actually rose (albeit marginally) by 0.4% (up 38K). While this is compelling evidence, the BARB panel Universes are in fact calculated on a monthly basis, thus allowing for an even more robust statistical analysis, which shows a highly statistically significant negative correlation between the Universes in Sky and Virgin versus DTT Only homes for each of the aforementioned younger age-bands over the Jan-2016 to Dec-2017 period. Only for 55+ Adults is no statistically significant relationship detected. Correlation, of course, isn’t causality, but considering all the evidence combined, it seems highly likely that a substantial proportion of the recent growth in DTT platform viewing has been the result of cord-cutting.
Sky and Virgin are of course fighting back (with Sky’s recent deal with Netflix being a good example), but the DTT Platform remains an attractive option and is also continually improving its offering, so it will be interesting to see how the situation develops, and this is all ultimately good news for consumers and the television industry as a whole. Competition doesn’t only drive down prices, but also drives up quality and creates an environment where all players must innovate to succeed. The golden age of television isn’t a thing of the past, but is happening right now.
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