US online pay-TV subscriptions projected to soar this Christmas but providers will struggle to keep them, Paywizard survey reveals

  • 70% of US consumers projected to subscribe to Over-the-Top (OTT) TV services such as Netflix and Hulu this Christmas
  • Growth boosts both big brand and niche players, with 10 pay-TV operators each having 5% uptake
  • Operators likely to struggle with post-Christmas retention, as 45% of first-time subscribers plan to cancel within six months

London, 13 December 2016US television audiences are leading the way in adoption of Over-the-Top (OTT) TV services such as Netflix and Hulu, as the proportion of American consumers currently subscribing (55%) or preparing to subscribe (15%) to paid video-on-demand services this Christmas is projected to soar to 70%, research from subscription, billing and CRM specialist Paywizard reveals.

However, it’s clear that many pay-OTT subscribers consider OTT subscriptions to be an on-again, off-again activity, as 45% of first-time Christmas subscribers intend to cancel within six months – just below the global figure of 50%. US women are far more likely to cancel with 50% of those looking to subscribe ahead of Christmas intending to terminate a subscription versus 40% of men.

As the world’s most valuable pay-TV market and home territory for international giants, which also include HBO and Amazon Prime Instant Video, the US has seen consistent growth in both big brand and niche players. The research shows 10 pay-TV operators each have at least 5% uptake amongst existing subscribers, making the US the leader in terms of competition across the six key markets surveyed for the global study of TV trends during the Christmas season.

Although the survey highlights that planned uptake in the US is slowing from its 2015 level, the US remains a buoyant market, with 55% of consumers – the most in any nation surveyed – already having at least one OTT subscription. This is a sharp rise from the 36% last year. In addition, 26% of US consumers plan to take a service for the first time or add one this Christmas, although this is down from 31% last year – with the US the only territory that showed a decline in planned uptake.

The survey of 6,200 consumers worldwide – including 1,042 Americans – was commissioned by Paywizard and conducted by Research Now. It also reveals 58% of Americans plan to watch more TV than usual this Christmas. Furthermore, in the run-up to the holiday season, 15% of all consumers plan to sign up to a pay-OTT service for the first time, while 11% of existing pay-TV subscribers intend to add an additional service. The survey also shows 87% of US consumers now pay for some form of TV service, including cable, satellite and OTT services.

Paywizard US pay-TV operators

Bhavesh Vaghela, Chief Marketing Officer at Paywizard, says: “The US pay-TV market is the most competitive and innovative in the world, with a rich mix of original, studio and sports content across a wide range of distribution platforms and business models. While growth is now starting to slow, it is clear that the US leads the way in households with multiple pay-TV subscriptions, suggesting there are still great opportunities for providers challenging the big players.”

A range of devices for Christmas
In terms of devices, 43% of all US respondents say they will use at least one type of mobile device for their holiday viewing – down from 48% last year, while viewing traditional and smart TVs and set-top boxes is up. This can be explained by the rise of embedded pay-OTT services in traditional pay-TV packages such as Comcast’s inclusion of Netflix in its XFINITY service.

Mobile device TV viewing has also dropped because watching online services via streaming devices has increased in popularity, with use of gadgets such as Chromecast, Apple TV, Roku and Amazon Fire rising from 15% last year to 19% in 2016 – the highest use in any market surveyed.

Paywizard US device preferences

Smaller players challenging the big brands
With 61% of pay-TV consumers taking its service, Netflix remains the leader in the US but even smaller challengers such as VUDU and Sling TV are successfully carving out their own niches, given the US is a market of 124 million households with high levels of broadband connectivity.

Vaghela notes: “US audiences are potentially at the start of a trend towards an a la carte approach to TV services, moving from a single multi-service operator model to a collection of pay-OTT services with exclusive TV, film studio, sports, kids and niche content. This is still at an early stage but eventually operators will have to find ways to build strong subscriber loyalty through consistently positive customer experiences.”

While content and value for money remain major drivers of OTT pay-TV, subscriber management and customer experience are revealed to be critical factors as well. Those planning on taking a first OTT subscription over Christmas listed as the three main factors that would lead them to keep it:

  • Good value for money (61%)
  • Content they want to watch (39%)
  • Package flexibility (33%)

Vaghela says: “For OTT operators, now is the time to seize opportunities in the US, as the market is still growing and consumers are subscribing to multiple brands. Although there are early signs of saturation, there is still a huge amount to play for – especially among the 30% of consumers who are not yet interested in pay-OTT.  The data shows 66% of these holdouts are over age 45, which suggests that better targeted marketing will be vital to reaching this untapped segment.”