Canadians abandoning pay TV for OTT services (Study)

Cord-cutters and 'cord nevers' now represent 1.4 million households

About 12.1% of Canadian internet households – an estimated 1.4 million Canadian households – do not use a pay TV service, according to new research from Toronto-based Solutions Research Group (SRG).

That is up from 10.5% in 2013 and 7.3% in 2011, which the company attributes to increased cord-cutting and the rise of “cord nevers” (people who have never subscribed to a pay TV service).

In the latest iteration of its ongoing Digital Life survey, the company said two thirds of Canadian households are now capable of streaming over-the-top (OTT) services such as Netflix and Shomi to their TVs using a dedicated streaming device, a game console or a computer.

Meanwhile, the percentage of online households connecting a dedicated OTT streaming device such as Apple TV, Chromecast or Roku to their TV set has nearly doubled, to 22% from 12% in 2013.

The report said nearly half (47%) of all Canadian online households are now “regular’” OTT users, using either paid or free services such as torrents. About 40% of Canadian households are using subscription OTT services, with Netflix accounting for the majority of users.

In an email interview with Marketing, SRG president Kaan Yigit said the traditional cable bundle – long a household staple – is feeling the pressure of changing consumer habits.

“Clearly as more people use Netflix and now more recently Crave and Shomi, there will be more pressure on the pay TV bundle to deliver value,” he said. “And ultimately all subscription services are competing for the same monthly entertainment budget.

“There is a segment out there for whom $70 per month for a TV subscription is too much for what they perceive as relatively low use now that they are using more of the alternatives.”

He said the upcoming introduction of pick-and-pay would alleviate some of the pressure by providing a cheaper option for cable customers who are contemplating cutting the chord or providing a new option for new households who would be open to an entry-price subscription.

While subscription OTT use is lower in Canada than it is in the U.S. – where approximately 58% of households access services monthly – SRG attributes it the longer-tenure services such as Hulu and Amazon Prime.

The vast majority (83%) of OTT video users are under 50, with an average age of 36.6. Half have children under 18.

While new Canadian start-ups Shomi and Crave have generated brand awareness among Canadians – 76% and 69% respectively – the study said take-up remains low.

Yigit said broadcasters would continue to offer their own SVOD demand services in the next few years (Rogers and Shaw are partners in Shomi, for instance, while Crave is a Bell initiative), and predicted as valuable TV content migrates to OTT platforms, advertisers would have an opportunity to move with them.

TV shows are by far the most desirable programming on OTT services, with one-hour TV/drama series – including Netflix originals like Bloodline and Orange is the New Black – accounting for 52% of the “most recent” viewing in September, far ahead of movies (25%) and sitcoms (7%).

The study also found about 10% of paid TV households have used authenticated TV everywhere (TVE) services, a significant increase from last year, with Bell and Rogers subscribers leading the way.

It said marquee events like the FIFA World Cup and Pan Am Games were likely the leading contributors to TVE adoption. Approximately a quarter of smartphone/tablet users now have a TV channel or provider app.

Asked about the impact of OTT on live events that continue to attract viewers, such as sports, Yigit predicted they would ultimately be delivered to viewers through a hybrid of premium sports brands and direct to consumer a la carte offerings. “We are beginning to hit the ceiling on what the broadcast industry can afford and what carriers can pay the broadcasters,” he said.

The NFL claimed 15.2 million unique viewers for its first ever live stream of a game between the Buffalo Bills and Jacksonville Jaguars via Yahoo last month, and it was reported commissioner Roger Goodell was meeting with Yahoo executives this week to discuss OTT streaming of its Thursday night game.

The fall edition of the Digital Life study is based on 1,000 interviews conducted in September.

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