KEY POINTS

  • US consumers are shifting away from traditional pay-TV services. Cord-cutting — the phenomenon of pay-TV subscribers canceling their service — has eroded the pay-TV universe by about 6.5% since its peak in 2012. Traditional TV usage is in free fall — particularly among younger viewers, with usage down nearly 50% among the 18-24 demographic in 2017 compared with 2011.
  • As consumers continue to cut the cord, they migrate toward cheaper streaming options delivered over the internet. Consumer behavior is shifting to streaming as a rising number of alternative services come to market, legacy service bills continue to steepen, and the viewing experience on linear TV degrades by comparison.
  • Streaming video on-demand (SVOD) services are rapidly achieving mainstream adoption among US households. Nearly 60 million households view video on over-the-top (OTT) platforms, with 63.5% penetration among broadband households, up 17% year-over-year (YoY), per comScore. That's compared with 91.3 million subscribers still tethered to legacy pay-TV.
  • To meet the changing demands of the streaming content consumer and prepare for the progressive overhaul in how media is distributed, the video industry has produced new combinations of streaming video programming services. SVOD bundles are a reaction that aims to counteract the problems of media fragmentation, cord-cutting, and high consumer costs. Although these bundles are still evolving, four distinct models have emerged:
    • Skinny bundles, also known as virtual multichannel video programming distributors (vMVPDs), are still low on penetration but address the top pain point among consumers with pay-TV services: price. These bundles offer the same content as pay-TV services but with fewer channels, delivered over the top, and at a lower price.
    • The SVOD aggregator model type — which so far includes Amazon Channels, Amazon's partner SVOD program — facilitates a la carte sign-ups to third-party services through a central user portal. These bundles can drive significant uptake to partner services while retaining users on the core service.
    • SVOD integrations enable SVOD services like Netflix and Hulu to bring their offerings to a traditional operator's service, usually via the operator's device. As connected-TV devices become more ubiquitous in US TV households alongside the rise of SVOD services, integrating streaming services into traditional offerings is improving the value of the host service.
    • Streaming service partnerships combine one or more streaming services under one offering. Providing better value to the consumer improves uptake and helps partners generate [...]