Streaming video-on-demand services are now in 50% of U.S. TV homes, according to a new analysis of Nielsen data by Brian Wieser of Pivotal Research, up from 43% a year ago.
While some analysts believe services like Netflix and Hulu are killing traditional TV, Wieser says the most-recent increase in SVOD penetration is having only a modestly downward affect on traditional TV viewing.
Looking at the data from Oct. 1, 2015 through Feb. 21 2016, Wieser says that not every network is down because of the availability of SVOD services. Viewing of CBS’ broadcast network and Time Warner’s ad supported cable networks are up. And they’re up more in SVOD homes than in those without SVOD services.
TV ratings have been dropping because the spread of digital viewing choices. In addition to streaming over-the-top services, viewers have DVRs to delay viewing, online sources such as YouTube and even video-on-demand from cable operators.
As ratings decline, some advertisers have been looking to follow the audience to digital video sources. At the same time, the increase in OTT choices appears to be fueling concerns about cord cutting, which would cut into TV networks affiliate fees.
“Ultimately we do not believe the growth of SVOD services meaningfully impacts advertisers’ spending at the medium level, but we do see ongoing risks to affiliate fees which can be offset by license fees from the SVOD providers,” Wieser says in a research note.
Wieser says that the number of VOD homes is up 17%, with Netflix now in 45% of households, Amazon Prime in 21% and Hulu in 10%, up from 38%, 15% and 7% respectively.
Live plus seven ratings are up 1.6% in homes accessing SVOD services, while viewing is stable in homes without them. Viewing is up only if consumption on Internet-connected devices is included. Viewing on Internet-connected devices accounted for 7% of all viewing.
And Wieser notes that different network groups ratings were affected differently in SVOD homes versus non-SVOD homes. Looking at total day 18 to 49 ratings, DBS was up 13.2% in SVOD homes and up 8.5% in non-SVOD homes. Time Warner was up 2.8% in SVOD homes and down 0.4% in non-SVOD homes. Viacom was down 3.7% in SVOD home and up 7.1% in non-SVOD homes.
From an investment point of view, “we continue to view companies focused on video and television favorably, and see the most upside vs. yesterday’s trading levels at Viacom and Time Warner,” Wieser said. “While Time Warner stands out solely for its relative risk-adjusted growth potential vs. peers, Viacom is a somewhat more challenging stock to own, of course. Although it has governance, management and related perception issues at this time for investors with sufficiently long time horizons and risk tolerance, it provides the greatest potential upside relative to where the stock currently trades.”