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consumerlabTV ANDVIDEOAn analysis of evolvingconsumer habitsAn Ericsson Consumer Insight Summary ReportAugust 2012
contents                                                               A NEW ERA	                                  3      ...
A NEW ERAWe have entered a new erain television. On-demandpackages delivered viaOver The Top (OTT), cable                 ...
TODAY’s HABITSFigure 1:  raditional TV and video services          T                                                      ...
One TV, many devices                                                               Social TVThe average home entertainment...
Willingness to payCherry picking                                                                                          ...
Figure 6: Willingness to pay for TV and video services – percent that consider service worth paying for. Top 2 answers on ...
CORD cutters           and cord SHAVERS           People who reduce spending on their TV package                          ...
Cord shaving behavior                            Consumers reducing their spending is changingThey raised their rates     ...
Going legal                                                                               The value of convenience        ...
THE FUTUREOne service – any contentToday, consumers have access to a multitude of differenton-demand services as well as l...
Ericsson is the world’s leading provider of communicationstechnology and services. We are enabling the Networked Societywi...
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TV & Video: An Analysis of Consumer Habit


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From the Ericsson ConsumerLab:
We have entered a new era in television. On-demand packages delivered via
Over The Top (OTT), cable or IPTV are being embraced by people around the world.
These new technologies
and services not only improve
people’s viewing experience –
they also change the fundamental ways in which we approach entertainment.

TV & Video: An Analysis of Consumer Habit

  1. 1. consumerlabTV ANDVIDEOAn analysis of evolvingconsumer habitsAn Ericsson Consumer Insight Summary ReportAugust 2012
  2. 2. contents A NEW ERA 3 TODAY’S HABITS 4 WILLINGNESS TO PAY 6 CORD CUTTERS AND CORD SHAVERS 8 GOING LEGAL 10 THE FUTURE 11 METHODOLOGY 11 Ericsson consumerlab the voice of the consumer Ericsson ConsumerLab has more than 15 years’ people. Both quantitative and qualitative methods experience of studying people’s behaviors and are used, and hundreds of hours are spent with values, including the way they act and think about consumers from different cultures. ICT products and services. Ericsson ConsumerLab provides unique insights on market and To be close to the market and consumers, consumer trends. Ericsson ConsumerLab has analysts in most of the regions where Ericsson is present, which gives a Ericsson ConsumerLab gains its knowledge thorough global understanding of the ICT market through a global consumer research program and business models. based on interviews with 100,000 individuals each year, in more than 40 countries and 15 megacities All ConsumerLab reports can be found at: – statistically representing the views of 1.1 billion  ERICSSON CONSUMERLAB TV AND VIDEO
  3. 3. A NEW ERAWe have entered a new erain television. On-demandpackages delivered viaOver The Top (OTT), cable Key findingsor IPTV are being embracedby people around the world. > ocial TV is exploding – S obile devices are an M 62 percent of consumers important part of the TVThese new technologies use social media while experience – 67 percentand services not only improve watching TV. This has use tablets, smartphonespeople’s viewing experience – increased by 18 percentage or laptops in their everydaythey also change the points since 2011. TV viewing, both for videofundamental ways in which consumption and to enable Consumers are notwe approach entertainment. a social media experience cutting their traditional TV while watching TV. subscriptions on a largeAs consumer expectations of scale – in fact only 7 percent V anytime and anywhere T TV change, fresh opportunities have canceled their TV is finally a mass marketare being created. The scene packages since 2011. service – 60 percent ofis now set for any entertainment consumers watch videoor communications provider D quality remains key – H on-demand on a weeklyto take the mantle and offer 41 percent of consumers are basis. New, easy-to-usegame-changing services that willing to pay for HD quality. services trigger mobilecould launch us into a new The importance of high-quality viewing habits.age of entertainment. images increases on devices with bigger screens such as TVs and tablets. ERICSSON CONSUMERLAB TV AND VIDEO  3
  4. 4. TODAY’s HABITSFigure 1: raditional TV and video services T Figures 1 and 2 show weekly consumer TV and video used on at least a weekly basis habits. They show that scheduled broadcast TV is stillBase: US, UK, Germany, Spain, Sweden, China AND Taiwan the dominant form of content consumption, despite a 100 slight decrease over recent years. The weekly amount of recorded broadcast TV watching (e.g. DVR) has 90 decreased substantially – from 61 to 45 percent. 80 Consumption of on-demand content, on the other hand, 70 is showing a steady increase. Today almost 60 percent 60 of people use on-demand services on a weekly basis. 50 The content which consumers are most likely to want 40 to pay for is on-demand TV and video content. Available 30 titles need to be up-to-date and relevant to the user’s 20 interests in order to maximize consumption. The biggest barriers to consuming on-demand are: 10 0 Cost 2010 2011 2012 Not finding the content that the user is looking for Scheduled broadcast TV Recorded broadcast TV Not being able to watch the content on the DVD, Blu-ray, etc. Pay-per-view household’s main TV screenFigure 2: On-demand TV and video services Consumers are beginning to move away from purely used on at least a weekly basis linear TV viewing and slide into new on-demandBase: US, UK, Germany, Spain, Sweden, China AND Taiwan behavior. This is rarely a conscious decision. For example, a consumer might purchase a new device 70 (e.g. an Apple TV or a smart TV) with built-in on-demand services which they were previously unaware of. If this 60 new service offers their chosen content in an easy 50 fashion, then they will most likely start to use it and then gradually slip into new viewing behavior patterns. 40 Shortcut users 30 The easy-to-use nature of smart TVs and other new 20 entertainment devices is enabling many consumers to take a ‘shortcut’ straight to more sophisticated 10 behaviors. These consumers previously engaged in less advanced viewing but have progressed without 0 the need to learn extra technical skills. 2010 2011 2012 Short video clips (e.g. YouTube) Some shortcut users engage in more advanced viewing Streamed or downloaded movies and TV shows than high-tech online video pirates who are impeded by an increasing number of complicated issues relating to legality, device dependencies and accessibility.4  ERICSSON CONSUMERLAB TV AND VIDEO
  5. 5. One TV, many devices Social TVThe average home entertainment setup is moving away 62 percent of people use social networking sites andfrom using separate screens in each room. A growing forums while watching TV on a weekly basis and thisnumber of households instead use a large main TV number is growing. Of these people, 40 percent will besupplemented by a number of mobile devices that discussing what they are currently watching on TV overprovide access to services from all over the home. social networks.Tablets in particular have grown to become a populardevice for viewing content in the home, despite the Women are more likely to use social forums whilefact that the technology is relatively new. watching TV. 69 percent of women engage in this behavior, compared to 62 percent of men. However,This is partly due to the favorable conditions for of those, the men are more likely to discuss the thingsmobile viewing within the home. Another reason is that they are currently watching. This may be linked to themany consumers are looking to modernize their TV desire to discuss live sports as they happen.experience, yet are unwilling to invest in more than onenew TV or add set-top boxes to their old TV sets in order Mobiles and laptops are the devices most commonlyto access new services. used to discuss TV content and are now also becoming part of the home TV setup. They not only allow socialThe rise of on-demand services interaction, but also enable internet multitasking during viewing. This phenomenon is not just limited to youngThe increased use of on-demand services is competing people – 30 percent of those aged 45-59 engage inwith linear TV for consumer attention. People once used social TV behavior at least weekly as well. Thislinear TV for most viewing situations. Today its use is is compared to the overall figure of 40 percent.becoming focused on background viewing and live TV. The main drivers for social TV behavior include:On-demand services cater mainly for focused viewingsituations, usually on impulse, but sometimes Not watching aloneplanned. This way of watching is gradually changing Gaining a community feeling – connecting with othersas on-demand services are beginning to enablebackground viewing as well. Validating self against public sample Curiosity of opinions of others Seeking additional information Wanting to influence or interact with content Gratification of being acknowledged by others The need to further analyze and discussFigure 3: Activities engaged in at least once per week while watching TV or video contentBase: US, UK, Germany, Spain, Sweden, China AND Taiwan Browse the internet Talk with others in the same room Eat in front of the TV Use social forums (e.g. Facebook, Twitter) Chat (e.g. MSN, Skype, Facebook chat) 0 20% 40% 60% 80% 100% 2011 2012Figure 4: How often people discuss TV or video on social networks while viewingBase: Use social forums/blogs while watching TV or video at least several times per month (US, UK, GERMANY, SPAIN, SWEDEN, CHINA AND TAIWAN)BASE: CORE MARKETS0 20% 40% 60% 80% 100% At least daily At least weekly Several times per month Monthly or less often Never/I don’t know ERICSSON CONSUMERLAB TV AND VIDEO  5
  6. 6. Willingness to payCherry picking Over The Top valueToday, cable and satellite TV are perceived by many Subscription-based OTT services are often perceivedconsumers as being expensive, especially in the US as reasonably priced or even cheap when comparedwhere monthly subscriptions can cost USD 200 or to traditional TV packages. This is partly because theymore. One of the primary reasons for this perception is offer choice and flexibility. The value gained throughthat people simply do not use most of their channels. OTT services increases the perception that traditional TV subscriptions are expensive. Some services forConsumers do not only view their TV consumption in example, offer unlimited access to TV programs andterms of price. Rather, they think of it in terms of time movies for just USD 7 per month. .99budgeting. They view their leisure time as limited andvaluable and would be happy to pay in order to watch Service interruptionsexactly what they want, when they want. Interruptions to linear broadcast can result in consumers giving up the service either partly orToday many consumers are still willing to pay the altogether. Many people that manage without TVhigh cost of cable in order to access a handful of for a while quickly realize that they do not needtheir favorite channels and live events, and to get their traditional TV setup.internet access. Ideally, these people would like to‘cherry pick’ a limited number of channels and liveevents for their package and pay accordingly.Figures 5 and 6 show that the importance andwillingness to pay for individualized and on-demand REASONS TO STAYcontent has increased a lot. There are still several strong drivers for people to keep their TV subscriptions. These include: ive viewing – the experience of watching L sports and big events as they happen asy background and relaxation viewing – E hassle-free entertainment and no need to make decisions ollective viewing experience – watching CFigure 5: How important are different TV and video services? the same thing as most others do, so it can Top 2 answers on a 7-point scale be discussed when meeting in person 80Base: US, UK, Germany, Spain, Sweden, China AND Taiwan nline socialization – many online social TV O 70 discussions require you to see the content as it is being broadcasted in order to participate 60 50 40 30 20 10 0 Standard quality (SD) Excellent quality (HD) Usability: super simple interface Personalized TV/video content The wireless home Free from ads/commercials On-demand, time shift A lot of TV channels Theatrical releases direct on TV Extreme quality (4K, 4xHD) Internet on the TV Interactive TV 2010 2011 20126  ERICSSON CONSUMERLAB TV AND VIDEO
  7. 7. Figure 6: Willingness to pay for TV and video services – percent that consider service worth paying for. Top 2 answers on a 7-point scaleBase: US, UK, Germany, Spain, Sweden, China AND Taiwan353025201510 5 0 On-demand, time shift Excellent quality (HD) Theatrical releases direct on TV Extreme quality (4xHD, 4K) Free from ads/commercials Personalized TV/video content Standard quality (SD) The wireless home A lot of TV channels Internet on the TV Interactive TV Usability: super simple interface 2011 2012High definition – high importance Mobile phone focusFigures 5 and 6 show that HD quality is important Paying extra to view content on mobile phones is notfor the overall TV experience – especially for viewers popular among consumers. This is partly because ofwith larger screens. This importance is growing and the smaller screen size, and partly because consumersthere is a high willingness among consumers to pay expect their purchased content to be available on allfor such services. platforms. Consumers prefer to use mobile phones for activities with little or no associated costs.Mobile viewing OTT drives mobile video habitsOut of the home, mobile video viewing is an emergingbehavior. Consumption is still limited and sporadic, Consuming OTT content through home TVs driveswith no distinct usage patterns having been formed. mobile viewing. A user discovers an OTT service through their TV and develops viewing habits basedTV and video content viewing on mobile devices mainly around that service. Eventually they discover that thehappens in the home. Out-of-the-home mobile viewing service is also accessible on mobile devices. Theyis limited in absolute numbers. However, the share of realize that the service is platform independent andout-of-the-home viewing conducted specifically on can easily be migrated onto mobile devices. This issmartphones has increased by 5 percentage points not only a huge opportunity for OTT players but alsoto almost 50 percent in just one year. Consumers now for traditional TV providers, as long as the consumerexpect to be able to view content which they have paid experience remains very simple and mobile accessfor on any device. Situations suitable for mobile viewing is included in the overall service.include protracted periods of inactivity where a stableconnection is available, such as long train journeys.There are several barriers to mobile viewing. Theseinclude the fact that limited away from home usageperiods are more suited for activities such as socialnetworking and playing games.Other barriers include: The way I use Netflix Poor connectivity outside of my home is that Limited battery capacity I take it with me on the Limited data in phone plan go on my iPad and use it Some content not available on public networks when I go see my children Poor viewing experience due to screen size in different practices.” Consumers prefer to relax at home while viewing Female, 44, Chicago ERICSSON CONSUMERLAB TV AND VIDEO  7
  8. 8. CORD cutters and cord SHAVERS People who reduce spending on their TV package Figure 7: Global subscription changes, 2011-2012 ALL MARKETS or cancel it altogether are known as cord shavers and cord cutters, respectively. 7 Figure 7 shows that globally, 22 percent have increased 8 22 their TV spending while only 15 percent have reduced or eliminated it. TV subscription spending in China increases There are large regional differences. Figure 8 shows BASE: ALL MARKETS data for China and the US. In the US, there are more % people who have reduced or canceled their packages ALL MARKETS US than people who have increased their spending. China shows the opposite trend, with almost 40 percent 7 12 7 having increased their TV subscriptions. 14 8 22 Market maturity and economic factors play an US important part in these differences. Cable has been % available in the US for many years. People are now I/w looking for ways to reduce their TV spending and realizing that they do not need hundreds of channels. BASE: Figure 8: Regional subscription changes, 2011-2012 – US and China I/w ALL MARKETS cable has become more widely available due In China, ALL MARKETS CHINA US to economic growth and people are just discovering % 12 7 5 the choice it offers. 7 5 14 8 2 2US 38 It is important to note that on-demand services are 7 12 not the cause of people reducing their spending – US CHINA 14 they merely enable them to do so. 2 % % 2 I/we have increased it I/we ha US I/we have reduced it I/we ha BASE: % ALL MARKETS CHINA have increased it I/we I/we have not changed at all % 67 I/we 5 5 reduced it have I/we have eliminated it completelyRKETS CHINA 38 5 5 REASONS FOR REDUCING SPENDING Respondents CHINA saying they have reduced % or eliminated TV subscription: 38 42% CHINA 56% US 21%, China 10%, Brazil 15%, Chile 15%, Wanting to % Germany 11%, Italy 22%, 52 Mexico 18%, South Korea 11%, save money Spain 17%, Sweden 18%, Taiwan 12%, UK 15% Not watching enough TV Respondents saying they have increased their TV subscription: Using free 12% US 12%, China 38%, internet No suitable Brazil 35%, Chile 37%, services package Germany 15%, Italy 12%, Mexico 24%, South Korea 28%, 16% Base: Have canceled or reduced their TV subscription the past year Spain 15%, Sweden 12%, Taiwan 22%, UK 14% 8  ERICSSON CONSUMERLAB TV AND VIDEO
  9. 9. Cord shaving behavior Consumers reducing their spending is changingThey raised their rates overall viewing patterns and leading to moreand I was like ‘you’re focused viewing of single content titles. People will, for example, watch several episodes of the samegoing to raise your rates TV series or program instead of zapping betweenand I don’t even watch it different types of content. Increased on-demand usage could potentially even out TV viewer numbersnow? I’m going to drop throughout the day. Historically, the figures created ait down!’” curve that had a small peak in the morning, followed by a huge peak in the evening.Male, 33, USA As on-demand consumption increases, we are likely to see a stretching of the morning and evening curves through activities such as watching TV during commuting. Prime time viewing can in the same fashion be stretched later into the evening, as people watch an extra episode of their favorite show before bed. Content discovery Consumers are moving from a supply-based navigation that is set by TV schedules to an ideas-based navigation set by their own desires. Choices are evaluated beforehand based on recommendations from friends and online reviews, as opposed to trial and error viewing. Choosing content has itself become an activity, with people making playlists, or surfing sites such as IMDb (Internet Movie Database) to plan their viewing schedule. ERICSSON CONSUMERLAB TV AND VIDEO  9
  10. 10. Going legal The value of convenience As discussed on page 4, the emergence of easy to use legal services has made internet videoFigures 9 and 10 show the usage levels of on-demand piracy less attractive. This is because:content sources in the Spanish and US marketsrespectively, over two years. Illegal content downloading Files take time to findmakes up a large part of Spain’s overall on-demand Downloading takes a long timeviewing, whereas in the US it makes up a muchlower proportion. Files require managing There is a risk of downloading corrupt filesThe level of legislation and enforcement explains some ofthese differences. However, there are other more important There is a risk of downloading virusesdifferences. In the US for example, there are a wide variety Files take up storage spaceof advanced legal on-demand services available. In Spain,legal on-demand services typically offer less fresh content There are no subtitlesand in some cases are not as easy to use. There is a fear of legal repercussionsFigure 9: On-demand services used in Spain 60 BASE: Use on-demand services (streaming or downloading video) several times a month or more, Spain 50 40 30 20 10 0 Jazztella Orange TV Movistar Imagenio TV/cable File sharing Other Videoclub operator Activity per location/main activity 2011 2012 on-demand serviceFigure 10: On-demand services used in US 60 BASE: Use on-demand services (streaming or downloading video) several times a month or more, US 50 40 30 20 10 0 Netflix Hulu TV Network Operator Amazon Apple iTunes File sharing Other homepage on-demand Instant Video Activity per location/main activity 2011 2012Legal alternativesThe data in figures 9 and 10 suggests that those who turnto piracy do so because their chosen content is simply not Finding Netflix was likeavailable through legal sources. Legal services are easyto use and offer safe, quality-guaranteed content. Most a godsend! Netflix letspeople prefer paid-for means, as long as they offer a wide me be me!”selection of new and old content, are attractively priced Female, 35, Chicagoand are easy to view through the screen of their choice.10  ERICSSON CONSUMERLAB TV AND VIDEO
  11. 11. THE FUTUREOne service – any contentToday, consumers have access to a multitude of differenton-demand services as well as linear TV channels.These sources offer a good service, yet consumers arestruggling to merge them together. People are eagerlylooking for an aggregated service which can bring allcontent into one experience.There is an opportunity for current aggregators frommany different service areas to take this new role,whether it be a social networking brand, an existingon-demand service or a traditional TV provider. Whoevertakes this mantle will need to expand their business tosupport all ways that consumers watch TV. These include: On-demand Live TV Premiers Background viewingThis ideal aggregated TV and video service wouldneed to help consumers discover new content in areliable and inspiring way, integrating social aspectsand recommendations. An example of this is the waythat many online music aggregators currently helpsubscribers to discover new artists.MethodologyScreening requirements: Have broadbandaccess and watch TV/Video at least weekly STOCKHOLM (MAY 2012) 4 domestic interviews – 3 people reduced spending CHICAGO (MAY 2012) – 1 canceled their package 10 qualitative, in-home interviews – 7 people reduced spending – 3 canceled their package Qualitative: 14 in-home interviews (10 in Chicago, 4 in Sweden) Quantitative: 12,000 online interviews (1,000 per country) in US, UK, China, Spain, Sweden, Brazil, Taiwan, South Korea, Germany, Mexico, Chile, Italy ERICSSON CONSUMERLAB TV AND VIDEO  11
  12. 12. Ericsson is the world’s leading provider of communicationstechnology and services. We are enabling the Networked Societywith efficient real-time solutions that allow us all to study, work andlive our lives more freely, in sustainable societies around the world.Our offering comprises services, software and infrastructure withinInformation and Communications Technology for telecom operatorsand other industries. Today more than 40 percent of the world’smobile traffic goes through Ericsson networks and we supportcustomers’ networks servicing more than 2.5 billion subscribers.We operate in 180 countries and employ more than 100,000 people.Founded in 1876, Ericsson is headquartered in Stockholm, Sweden.In 2011 the company had revenues of SEK 226.9 billion (USD35.0 billion). Ericsson is listed on NASDAQ OMX, Stockholm andNASDAQ, New York stock exchanges.The content of this document is subject to revision withoutnotice due to continued progress in methodology, design andmanufacturing. Ericsson shall have no liability for any error ordamage of any kind resulting from the use of this document.EricssonSE-126 25 Stockholm, SwedenTelephone +46 10 719 00 00Fax +46 8 18 40 85 EAB-12:043280 © Ericsson AB 2012