Pay-TV On-Demand Is In Demand

Despite adoption and usage of OTT services, more than half of all on-demand video consumption is taking place on pay-TV providers' services. Based on the Video Advertising Bureau's (VAB) analysis of Nielsen data, 54% of all VoD video consumption is conducted via cable platforms in the US. This compares with just 35% done via OTT services.

Nor is this viewership limited to older demographics. Seventy percent of Gen Z respondents (aged 15-20) picked pay-TV as their provider of choice for viewing VoD, compared with 31% who picked OTT providers; and 73% of Millennials (aged 21-34) picked pay-TV, compared with 31% who picked their OTT provider. (Note: Respondents were allowed to select more than one provider.)

Based on VAB analysis of data from The Nielsen Co. , comScore Inc. , Rentrak Corp. (Nasdaq: RENT), GfK AG and other measurement companies, the VAB study found that convenience was the single most important driver for VoD usage. It also found that the number of titles offered by pay-TV providers had grown steadily and was now substantially higher than the number offered by OTT providers. The average number of titles offered per month by pay-TV providers was 37,750, compared with 8,803 from Netflix Inc. (Nasdaq: NFLX) and 17,218 from Amazon.com Inc. (Nasdaq: AMZN) Interestingly, the number of Netflix titles has actually come down -- it was 9,635 last year.

The amount of time spent with pay-TV VoD has also increased over the past three years, and now stands at 10.1 hours per month. And again, it's the younger audiences that are guzzling VoD: the highest usage of pay-TV VoD is by Millennials.

VoD is, however, eating into live viewing. Average minutes viewed per telecast tuned (essentially the length of time any single piece of content was viewed without changing channels or ending a VoD session) is 24 minutes for VoD and 16 minutes for live TV. I think that is at least somewhat affected by TV viewing behavior -- it is both faster and far more natural to flip channels than to start and end VoD sessions.

While this research does not show us how OTT has affected pay-TV VoD usage over time, the very fact that pay-TV VoD usage is growing would suggest that it offers pay-TV providers an important line of defense against the onslaught of OTT providers. The data on Millennial and Gen Z usage is particularly important, given that those are the groups seen as most at risk of cord-cutting.

It does seem, though, that both forms of on-demand are growing at the expense of live viewing. Over time that might mean significant changes in both the business of pay-TV and network architecture for content delivery.

— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation