The Evolution of On-Demand Media Thesis


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My thesis for the Masters Degree Electronic Media at Kutztown University of Pennsylvania.

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The Evolution of On-Demand Media Thesis

  1. 1. THE EVOLUTION OF ON-DEMAND MEDIA An investigation into online video services and their influence on college students’ television viewing habits ____________________ A Thesis Presented to the Faculty of the Department of Electronic Media Kutztown University of Pennsylvania Kutztown, Pennsylvania ____________________ In Partial Fulfillment of the Requirements for the Degree Master of Science ____________________ by Wim Mulder May, 2010
  2. 2. THE EVOLUTION OF ON-DEMAND MEDIA Abstract Throughout the history of television, various technologies have been introduced that have changed the way viewers consume television programming. A number of studies have been done about the effects of these new technologies on the viewing habits of the people who used them and the television industry as a whole. This study examines the viewing habits of college students and aims to find out how these habits have changed since the introduction of the opportunity to watch streams of full episodes online. To conduct the study, 202 students at Kutztown University of Pennsylvania were asked to fill out a 14-question survey inquiring about their television viewing habits and their reasons for using online services to watch television programming. Although almost 61 percent of the respondents reported viewing some programming online, the use of such services turned out to be fairly limited. Since the overall television consumption of the respondents was relatively low compared to the amount of television programming the average American television viewer watches, the impact of online video services on their viewing habits was difficult to determine. This study did reveal specific reasons for online viewing by college students, including increased flexibility in scheduling. These results are consistent with those of other studies, which show that the viewing habits of Americans are changing from so called “appointment viewing” to an on-demand oriented ii
  3. 3. THE EVOLUTION OF ON-DEMAND MEDIA consumption of television content. The effects of this shift in television consumption habits are transformative and far reaching for the television industry. iii
  4. 4. THE EVOLUTION OF ON-DEMAND MEDIA Acknowledgements Throughout working on this thesis I have been fortunate to have the support of many friends, family, and faculty members. I want to take this opportunity to thank all of those who made this thesis possible. First and foremost, my girlfriend Sarah, who supported me from the beginning and put up with me every time I had to work on my thesis instead of spending time with her.. I am also very thankful to those who participated in conducting the surveys, in particular Professor Jennifer Lanter and Professor David Lambkin who have been very helpful and accommodating. My father, who has managed to keep me focussed on this project. And last but not least, my advisor, Dr. Joseph Chuk, who has given me diligent advice throughout the two years I have worked to put this thesis together. Thank you all. iv
  5. 5. THE EVOLUTION OF ON-DEMAND MEDIA Abstract ......................................................................................................... ii Acknowledgements ....................................................................................... iv List of Tables and Figures ............................................................................. vii 1. Introduction ................................................................................................ 8 Problem statement................................................................................ 9 Definition of Terms .............................................................................. 9 Significance of the Study ..................................................................... 9 Limitations of the Study ...................................................................... 10 2. Literature review ........................................................................................ 11 Viewing Habits..................................................................................... 12 Greater Program Availability ............................................................... 15 Technological Advancements .............................................................. 17 Viewership Shift .................................................................................. 30 The Viewer as a Programmer ............................................................... 32 Streaming Content on Network Websites ............................................ 37 3. Methods...................................................................................................... 45 Sample.................................................................................................. 45 Instrument ............................................................................................ 45 Procedures ........................................................................................... 50 Data Analysis ...................................................................................... 51 4. Results Demographics ...................................................................................... 52 Television Ownership .......................................................................... 53 v
  6. 6. THE EVOLUTION OF ON-DEMAND MEDIA Broadband Access ................................................................................ 53 Hours of Television Consumption ....................................................... 53 Change in Amount of Television Viewed ............................................ 54 Watching Television Online ................................................................. 55 History of Use of Online Video Services ............................................. 55 Reasons for Using Online Video Services ........................................... 56 Watching Television Content Exclusively on the Web ........................ 57 Websites ............................................................................................... 57 Hours of Online Viewing...................................................................... 59 Online Viewing Year Ago .................................................................... 60 5. Discussion College Students versus Average Americans ....................................... 61 Viewing Experience ............................................................................. 62 Market Share of Online Video Services............................................... 62 Added Flexibility and Loyalty ............................................................. 63 Integration of Technologies ................................................................. 64 Trends for the Future ........................................................................... 64 Suggestions for Further Research ........................................................ 65 Appendix A: Pilot Survey ......................................................................... 67 Appendix B: Final Survey ......................................................................... 71 Appendix C: E-mail communications ........................................................ 74 References ................................................................................................. 75 vi
  7. 7. THE EVOLUTION OF ON-DEMAND MEDIA List of Tables and Figures Figure 1: Percentage of DVR Playback and TV Usage by Hour .................. 21 Across Total Day Table 1: Age distribution of survey respondents............................................ 52 Table 2: Television consumption of surveyed students.................................. 54 Table 3: Reasons for using online video services ......................................... 56 Figure 2: Reasons for viewing television content online .............................. 57 Table 4: Use of different online video services.............................................. 58 Figure 3: Use of different online video services ........................................... 59 vii
  8. 8. THE EVOLUTION OF ON-DEMAND MEDIA Chapter 1 Introduction In recent years a shift has taken place in the way people consume media, and in particular television. The so called “appointment viewing”, watching a television show at the time it is broadcasted live on the network, is declining in popularity (Thomas, 2008). With new and emerging technologies like DVR’s, podcasting and streaming media new opportunities open up for consumers to use the media wherever and whenever they want to. People are not bound to the schedules of the networks anymore, they can consume programming at their own convenience. To cater to this demand, the television networks are offering some of their programming on their websites in streaming format, so that viewers that missed the show during its airtime can still watch it (Streisand, 2007). Television has a changing role in the lives of the media consumer. The availability of different on demand media have subtle but substantial implications and effects on the media consumption and viewing habits of the consumer (Holahan, 2006). This research paper will focus on the effects that the availability of online streaming content from television networks have on the viewing habits of college students. 8
  9. 9. THE EVOLUTION OF ON-DEMAND MEDIA Problem Statement What effect does the availability of full streaming episodes on network’s websites have on the viewing habits of college students ? Definition of Terms Full streaming episodes - A full length episode of a TV show in the same form as it was broadcasted on television (with exception of commercial interruptions). Network websites - The online on demand video services offered by broadcast networks on their website Viewing habits - The media consumption patterns of a television viewer (what shows are watched, how many times, is the viewing consistent or just occasional, etc.) College students - Students enrolled at Kutztown University, taking General Education PSY 011 classes or SPE 010 classes. Significance of the Study The streaming of full episodes on network’s websites is a relatively new phenomenon. Not much research has been done in this matter. This study will focus on the effects the availability of these streaming episodes has on the users’ viewing habits. This will give insight in the way the correspondents use media and 9
  10. 10. THE EVOLUTION OF ON-DEMAND MEDIA what role television plays in their media consumption. It will also give an idea about how networks are using streaming video on their websites and how effective it is and what reasons users have for using services like these. This information could be useful for networks or stations trying to implement streaming video on their website in that it will give an idea about what role services like these play in the media consumption of their viewers and how to target it to their particular audience. Limitations of the study The study will be conducted among a sample of students at Kutztown University taking General Education classes (HPD 110 and SPE 010). The limitation to this are that no general assumptions can be made about how these results relate to other groups. For example, college students might be more technically adept than people outside of this group, making them more likely to use services like these. Also the study will compare media consumption in the past and now, so it will depend on the memory of the subjects used in the study. This will not be fully accurate so this will influence the reliability of the results. 10
  11. 11. THE EVOLUTION OF ON-DEMAND MEDIA Chapter 2 Literature review This literature review will provide a history of television and how viewing habits of television viewers have changed over the years, as new technologies have been introduced. The chapter starts out with a section about viewing habits, dealing first with early television use in the 1940s and then looking at how the viewing habits of American television viewers changed as more programming became available with the advent of more networks becoming established and cable television being introduced. The next section deals with technological advancements in the television industry in the form of the VCR and DVR. Also, the effects on the industry in terms of advertising revenue are discussed as well as the idea that viewers can use these new technologies to be less dependent on the programming schedules that networks dictate. This leads into the next section which is a discussion of the ways people have started to consume television content and how the networks are reacting to it in terms of accommodating the viewers with new options to consume their television content. The Viewer as a Programmer section goes into the different ways consumers now have to get access to television content: through cable on demand services, streaming services on the internet and how people are starting to view television content on mobile devices like cellphones. 11
  12. 12. THE EVOLUTION OF ON-DEMAND MEDIA The last section called Streaming content on network websites, deals with the implementations that different networks have made to provide access to streaminng content for their viewers and how this changes the economics of the television industry. It goes into detail about the benefits of streaming media for television networks. Finally, it discusses the people that are using these streaming services: who are they and what are their reasons for using these services instead of, or in addition to, watching programming on a television set. Viewing Habits Start of Television in the 1940s. Ever since television sets became commercially available in the late 1930s, television as a medium has grown in popularity as a mass medium. When television started to gain ground in the 1940s it was a way to connect people to the rest of the world. Whereas previously people were relying on newspapers and radio to obtain their news, now they could watch the news on their television sets with moving images. This created a completely new media industry. In the early days of television, there weren’t many people familiar with the new medium. And those who did own a television set were usually companies or wealthy individuals. Right after the second World War, few people knew about television, but that quickly changed towards the end of the 1940s. By this time, most Americans had heard of television and wanted to own one. A drop in the price of television sets caused an influx in sales, with television sales averaging 100,000 a week in 1949 (Sassaman, 2006). 12
  13. 13. THE EVOLUTION OF ON-DEMAND MEDIA Between the 1940s and the 2000s, commercial television has had a profound and wide-ranging impact on American society and culture. It influenced the way that people thought about such important social issues as race, gender, and class. It played an important role in the political process, particularly in shaping national election campaigns. TV programs and commercials have also been mentioned as major factors contributing to increased American materialism (a view that places more value on acquiring material possessions than on developing in other ways). Finally, television helped to spread American culture around the world. (Genova, 2006) In the 1950s, television was considered a form of family entertainment. Most American homes had only one TV set, and many families would gather around it in the evening to watch programs together. Recognizing this trend, the networks produced programs that were suitable for a general audience, such as variety shows and family comedies. From the beginning, fictional TV families have often reflected—and sometimes influenced—the real lives of American families (R. Thomas, 2008). Early television use. In the 1940s, only 10 percent of American homes contained TV sets, so the new technology was quite a novelty. Since the networks only broadcast shows for a few hours in the evening, watching TV was a form of entertainment that people often shared with their friends and neighbors. The earliest TV programs were broadcast live from network studios in New York City. Most of the shows featured the same forms of entertainment that 13
  14. 14. THE EVOLUTION OF ON-DEMAND MEDIA were popular before television came along. Playwrights and actors who had become famous through their work in the theater began staging dramas for TV (McDonald, 1990). In 1938, NBC transmitted a number of telecasts from its station in New York City. In that same year was also the first live broadcast of a news event as it was going on. At the time there were few regular television shows as we know them today, and programming changed a lot from day to day. By 1946, network series started taking off. Television programming was often funded and produced by advertisers (Brooks, 1988). Use of television in comparison to other media. Just as radio had caused a drop in newspaper sales figures in the 1930s, television caused a decreased use of radio and newspapers. Television slowly started to dominate the media spectrum. Television was a convenient all-in-one device that could bring entertainment, news, sports, etc. into the home of the viewer (Grolier, 2004). While before World War II mass media consisted mainly of print media, movies, and radio, the advent of the television was a big shift in media consumption. After the war, television ownership exploded to 55 percent in 1956 and 87 percent by 1960. The popularity of television as a medium impacted other forms of media. There was a greater reliance on television to provide news and people turned to television instead of radio, print media, and movie theaters (Bradley, 2009). 14
  15. 15. THE EVOLUTION OF ON-DEMAND MEDIA Paik looked specifically at media use of youth and how it has changed over the years with more and more media options becoming available. He notes that the introduction of new media typically changes the uses of and interactions among existing media (Singer, 2000). A study by Roberts and Foehr looked at the media consumption of youth. The research shows that children from 8 to 18 years old get almost 8 hours of media exposure every day. The distribution between different media varies per age group, but television is most popular among all researched groups. The 15 to 18 year old age group watches over 2.5 hours of television per day. Roberts and Foehr distinguish between media use and media exposure. Where media exposure includes passive use of media (for example having television on in the background), media use is indicating actively using the particular type of media (Roberts & Foehr, 2008). Greater Program Availability The television broadcast networks controlled the evening hours known as "prime time" from the 1940s through the 1970s. In the 1980s, however, the networks began losing control of prime-time television and its audiences. Cable television service spread rapidly during that decade, to reach 60 percent of American households by 1990. In addition, the 1980s saw the rise of national cable TV networks—such as CNN, ESPN, and MTV—that catered to the specific tastes of smaller segments of the viewing audience. Instead of the four or 15
  16. 16. THE EVOLUTION OF ON-DEMAND MEDIA five broadcast channel options that were previously available, American viewers suddenly had up to fifty cable channels from which to choose (Jost, 1994). In the television industry, the competition that had emerged during the 1980s became more intense in 1987 when the new Fox broadcast network introduced several hit programs aimed at younger audiences, like 21 Jump Street, while cable networks continued to grow and draw more viewers away from broadcast offerings. Soon the Big Three networks followed Fox's lead and began focusing on smaller segments of the overall viewing audience. The breaking-up of the mass audience meant that a program could be considered a hit by reaching fewer viewers than ever before. For instance, the ratings that made Seinfeld the top show of 1995 would not even have placed it in the top 25 two decades earlier. This situation encouraged the networks to experiment and take more risks in order to create quality programs that would appeal to the upscale viewers favored by advertisers. Although it took a while for the new broadcast and cable networks to break into the national TV ratings, the availability of multiple channel options had an immediate impact on the Big Three. The decision of networks to focus on smaller segments of the market led to more experimentation and greater diversity of programs. Even though the networks produced some hit shows, they saw their combined share of prime-time audiences decline to around 60 percent in the 1990s. By the 2000s, original cable programming was earning critical acclaim and even winning key ratings periods (Collier & Hillstrom, 2007). 16
  17. 17. THE EVOLUTION OF ON-DEMAND MEDIA Like the rest of the country, the American television industry faced tough economic times in the early 2000s. The networks continued to lose viewers to cable TV, while the Internet and other emerging technologies increasingly competed with television for Americans' time and attention. TV programs became more expensive to produce, while the basic genres started to seem uninteresting and predictable. The answer to these problems came in the form of reality television shows, which became very popular in the early 2000s (Newcomb, 2004, pp. 1481-1483). Technological Advancements Introduction of VCRs. In 1972, the Phillips Corporation introduced the first video cassette recorder (VCR) for TV viewers to use at home. VCRs allowed viewers to record television programs for later viewing. They used magnetic videotape enclosed in a plastic cassette. Competing companies soon offered similar machines that used cassettes of different shapes and sizes (Calem, 2004). The earliest VCRs were large, expensive, and the subject of serious debate. In fact, shortly after home videotaping technology became available, several major Hollywood movie studios joined in a lawsuit against the companies that manufactured the machines. The studios argued that VCRs should be outlawed because their main purpose was making illegal copies of television shows and movies. The studios felt that people who used home VCRs to tape movies were stealing copyrighted material. 17
  18. 18. THE EVOLUTION OF ON-DEMAND MEDIA The basic question that was posed by this case was: Are manufacturers responsible for the potential copyright infringing actions that can be made with their devices. The Supreme Court ruled that a company was not liable for creating a technology that some customers may use for copyright infringing purposes. If a technology has different uses, the public cannot be denied the use of this device just because some people maybe use it to infringe on copyrights. The EFF (Electronic Frontier Foundations) notes the parallel between this particular case and later efforts by the media industry to regulate use of other technologies like the iPod, DVRs, or file sharing software. Without the particular outcome in the Betamax case the entertainment industry would have looked very differently than it does today (Electronic Frontier Foundation, 2005). Opposite to the expectations, the movie studios actually benefitted greatly from the VCR as the sale and rental of motion pictures on video tapes became a major new stream of revenue for them. It was a different story for the television industry. Now that viewers could use the VCR to fast forward through commercials, the networks had to find new ways to keep their advertisers happy (Castonguay, 2006). Effect of VCRs on television viewing. The impact of home VCR use on the broadcast TV networks has not been as positive as it has been on the movie industry. The most frequent use of the VCR draws viewers away from network television to watch movies that played in theaters. Many people also use their VCRs to record television programs for later 18
  19. 19. THE EVOLUTION OF ON-DEMAND MEDIA viewing. When they watch these programs, however, they often use the VCRs fast-forward feature to skip the commercials (Dobrow, 1990). A 1999 study on the influences of VCR use on television viewing by Van den Buick suggests that the time-shifting that is made possible by the VCR leads to more selectivity in what the television viewer watches. It does not necessarily mean that people will watch less television, but rather that the television they do watch is more diversified. They watch a bigger variety of different shows. Because the VCR lifts the restraint of having to sit down to watch a program at the time designated by the broadcaster, it allows the viewer to better manage their time spent watching television (Van den Buick, 1999). VCR Use Patterns. VCR devices had a relatively slow adoption rate, from 36 percent in 1986 to 69.7 percent percent in 1990. By 1997 however, almost 90 percent of American homes were equipped with VCRs (Campbell, 1998). The use of VCR devices varies. Levy (1987) found that while some VCR users use their device to record and play back television programming and skip commercials, others use it as an alternative to network or cable programming viewing rented or purchased videos (Levy, 1987). In a 1999 study conducted by Alali and Conner, VCR use is studied in a college environment. The study mentions that viewing habits of college students are often very different from the general population, due to a demanding school schedule. At the time of the study, the average amount of time the surveyed 19
  20. 20. THE EVOLUTION OF ON-DEMAND MEDIA students watched television was two hours a day, compared to an average of seven hours a day in the general population. Ownership of VCRs was higher in the college students’ household than in the general population (97 percent of the respondents indicated they owned at least one VCR). Sixty-six percent of the respondents indicated using their VCRs up to two hours per week, whereas 23 percent indicated using it two to four hours per week. The motives for using their VCRs leaned heavily towards watching movies (58 percent) and movie ownership (34.3 percent). Another important motive for ownership of a VCR was being able to view taped shows and the added control and convenience (32.3 percent). Twenty percent of the respondents indicated that they used their VCR to skip commercials in regular network or cable programming. The authors of the study indicate that the motives of the surveyed students for using a VCR are similar to those ofthe general public, suggesting that the technology serves the same purposes for both, namely, for entertainment and to have more control over their television viewing experience (Alali & Conner, 1999). DVR usage. Moving beyond VCRs, DVRs, or Digital Video Recorders, are the next generation of recording devices that allow consumers to record television content. The quality of DVR recordings is much higher than VCR recordings, because of 20
  21. 21. THE EVOLUTION OF ON-DEMAND MEDIA Figure 1. Percentage of DVR Playback and TV Usage by Hour Across Total Day. Reprinted from “How DVRs Are Changing the Television Landscape,” by Nielsen the digital nature. While video cassettes deteriorate in quality over time, DVR recordings keep the same quality because of their digital format. All DVRs, whether that be a set top box receiver that includes DVR functionality or a stand alone DVR device like TiVO, are based on the concept of recording on a hard disk, like that found in a computer. Users can set the recording quality of the video lower or higher, which allows them to fit more or fewer recordings on the disk (Strickland, 2007). The first DVR was introduced in 1999 by Dish Network as part of their satellite receivers. Early versions of DVR equipment were limited in their functionality. Since the first versions only had a single built-in tuner, the user could only watch the show that was being recorded. This severely limited the usefulness of these devices for consumers. When dual tuners were introduced 21
  22. 22. THE EVOLUTION OF ON-DEMAND MEDIA later, it became possible to watch one show while recording another (Willis, 1999). The manufacturer that popularized DVRs to a mass market was TiVo, whose brand name has become almost synonymous with the concept of DVRs. The first TiVo device was introduced in January of 1999 at the Consumer Electronics Show. TiVo DVRs distinguish themselves from the competition by their user-friendly software, which is possibly the reason for their big success. The device can automatically record shows, and it also allows the viewer to pause, rewind and fast forward live television as if it were a video tape or a DVD. In order to do this, the device starts recording at the beginning at the show. The user then starts watching a few minutes later, effectively creating a buffer for the user to rewind and fast forward.The TiVo system also incorporates user ratings for television shows. Based on the ratings the television viewer gives to a show, the TiVo system recommends other shows the user might like and can record these shows automatically as well (Tivo, 2009). DVR technology has signified an important shift in the media landscape. DVRs make it easy for consumers to break free from network scheduling, and perhaps more importantly to use fast forwarding to skip the advertising that networks and stations insert into their programming. A study conducted by Information Resources over a time period of eighteen months between 2005 and 2008 found that not all brands are being equally impacted by consumers skipping their ads. According to this study, about 20 percent of all brands included in the study, had a significant negative impact 22
  23. 23. THE EVOLUTION OF ON-DEMAND MEDIA from viewers skipping their ads. Some brands however, actually saw slight increases in sales in DVR households. The study suggests that the impact of ad skipping by DVR users can be compensated by advertisers diversifying their advertising strategies, i.e. investing more in print or other media. The study also mentions that creative advertising generally keeps viewers from skipping commercials (Neck, 2008). DVR users are selective in the types of ads that they choose to watch. Although it is easy to skip all advertising and resume a television show after the commercial break, viewers are not skipping all commercials. An important exception is movie advertising. Movie ads make up a big share of the most popular commercials. According to Adam Fogelson, president of marketing and distribution at Universal Pictures, commercials for motion pictures are not perceived as advertising but more so as “short form-entertainment” (Stanley, 2008). Advertisers and networks are coming up with creative ways to get viewers to watch their ads. One approach is represented by commercials that networks and advertisers create in conjunction with each other. This is becoming a more common approach to draw viewers’ attention. A good example of this type of advertising is a deal between Microsoft and NBC to promote Microsoft’s new search engine called Bing. In a spin on the familiar approach of product placement, a character from one of NBC’s shows promotes the Microsoft product. In this particular example, the ads were tied to comedian Joel McHale’s show Community. Because of the close integration with the familiar show and 23
  24. 24. THE EVOLUTION OF ON-DEMAND MEDIA characters, the ads become less obvious and intrusive for viewers who in turn are less likely to skip over them (Helm, 2009). ABC entered in a similar partnership with telecom provider Sprint, developing eight 45-second advertising spots to pair with their show Desperate Housewives. According to TiVo’s StopWatch system, a tracking system which looks at users’ viewing habits, more than twice as many people watched the integrated commercials, the first of which was broadcast during the season premiere of the show on September 27, 2009, compared to the regular commercials between segments of the show (Steinberg, 2009a). The secret to a well-integrated product promotion is to fit it in with the style and tone of the show it is incorporated into. When FOX offered Microsoft the chance to have the creator of Family Guy make a 30 minute Family Guy special about Windows 7, Microsoft initially reacted enthusiastically. After reading the script, though, they backed out of the partnership because the type of humor in the show didn’t reflect the brand values that Microsoft wanted to portray (Helm, 2009). Although advertisers are finding new ways to make their ads more effective, a January 2010 report from media agency MPG suggests that most commercials are viewed during live broadcast: i.e. not from a DVR. According to the study, conducted in the first 11 weeks of the broadcast season of 2009-2010, only nine percent of all commercial viewing occurred from DVR playback. This pattern is true across the board. Different television genres, networks, and days of the week all have comparable numbers. Although particular shows, like The Office 24
  25. 25. THE EVOLUTION OF ON-DEMAND MEDIA and Heroes, sometimes have higher ratios of commercials viewed (24 percent and 23 percent respectively), these are the exceptions to the rule (Crupi, 2010). DVR ownership has seen a steady increase since its introduction. When Nielsen first started measuring DVR ownership in January 2007, ownership was 12.3 percent. In March 2009, that number increased to 30.6 percent. As noted in the report, one of the key factors in adoption of DVR technology is the fact that many television providers are implementing DVR functionality into their set top receivers. In fact, the majority of DVRs are used through one of these set top boxes (95 percent), either cable or satellite. Only 5 percent of households have a stand-alone DVR device (Nielsen, 2009b). An interesting statistic that Nielsen looked at is the impact of DVRs on viewers’ loyalty to programs. Because DVRs allow viewers to watch programs when they want, they have more opportunity to watch their favorite shows. The report found that households that own a DVR watch less live television, but that their viewing frequency when accounting for live viewing plus seven days is higher than households without a DVR. According to the measurements conducted by Nielsen during the 2008 sweep, households without a DVR watched 1.9 broadcasts, versus households with a DVR watching 2.5 broadcasts. The report looked at viewing frequencies of five particular popular television shows. So, while this gives no idea of total viewing time, it does indicate that DVR owners are more likely to watch shows more frequently (Nielsen, 2009b). Nielsen mentions that as DVR ownership goes up, it might have implications for the reruns of television shows networks are broadcasting in 25
  26. 26. THE EVOLUTION OF ON-DEMAND MEDIA summers. Since DVR users are generally more loyal to the television shows they view, it will be less likely that the reruns will be new to them and it is less likely they will be tuning in to these reruns. Another interesting side note that is made in the report is that users viewing more content through DVRs could be less likely to “channel surf” and sample new shows the networks are putting out. Nielsen split up DVR owners into three groups: heavy, medium and light shifters. Users are divided into these groups based on the amount of television they watch time-shifted. Whereas heavy shifters are watching over 30 hours of television time shifted, light shifters are watching an average of almost 6 hours which equals 27 percent of their overall television consumption. Most likely to be watched through time shifting on a DVR is the type prime time programming. A relatively low amount of people are recording daytime programming on their DVRs. For example, the morning hours from 6AM to 12PM account for only 15.8 percent of overall DVR playback. Just over 32 percent (32.1%) of all television programming recorded on a DVR is viewed during the prime time slot (8-11PM) (Nielsen, 2009b). The CW, a joint venture between CBS, UPN and Time Warner, is one of the networks that is feeling a severe impact from viewers using a DVR to view their programming instead of tuning in live. According to Bauder (2008) nearly 17 percent of the CW’s viewership came from DVR audiences. Two years earlier, this was less than 5 percent. When looking at individual shows the changes can be even more dramatic. One week the 18-34 female demographic for the show 90210 26
  27. 27. THE EVOLUTION OF ON-DEMAND MEDIA increased by an additional 79 percent of the live broadcast in a week due to DVR viewing. According to the article, the most time shifted show on television is The Office, with 28 percent of its audience time shifting the show. This is partly due to the tough time slot that The Office is in. The show is competing against popular shows on the other networks like CSI and Grey’s Anatomy (Bauder, 2008). Time shifting has made a significant impact on audience flows in the different time slots during prime time television. The 10PM time slot was having a lot of trouble pulling in audiences at the time of the writing of the article in 2008. Only three of Nielsen’s top 20 prime-time shows were in this particular time slot. This was due to the fact that a lot of DVR users are recording shows in the 8 to 9 PM time slot, then watching them later at the expense of other shows. Late-night programming is also affected negatively by this phenomenon. Bauder mentions that television networks will likely move their top shows up earlier on the night in order to grab a larger audience, although local stations are putting pressure on the networks to keep providing a strong lead in for their late night news programming. Since Nielsen ratings do not always reflect the complete audience of a show, it is a challenge for networks is to get accurate insights into how well shows are doing. For example, when the CW was debuting their show Gossip Girl the success was not reflected in the overnight ratings, but the show had a big pickup in DVR audience. Also, a lot of the younger audience were watching the show online. When The CW stopped streaming the show online, in order to increase the 27
  28. 28. THE EVOLUTION OF ON-DEMAND MEDIA television audience, fans found their way to illegal versions of the episodes on the web, after which the network put the episodes back on their site (Bauder, 2008). This brings up the issue of monetizing video content on network websites. Although audiences are moving to DVRs and the Internet to watch episodes, advertisers are still very much tied to a traditional advertising model based on ratings for television shows. If ratings go down, advertisers expect to pay less for the same slot and in the end the network is missing out on this advertising revenue. Screen Digest, a media consultancy company, reports that the broadcasting industry is set to lose 2 billion dollars in advertising revenue by 2013. In addition the company looked at online advertising revenue. This market is on the rise, but still not nearly as big as television advertising. The projected advertising revenue from long-form network content on the web is 1.45 billion dollars. Most of the advertising revenue from online television programming was generated by the broadcast networks (44 percent), followed by cable networks which are responsible for 22 percent (Atkinson, 2009). With online television programming, the viewer is expected to be more engaged with the advertising and the viewing experience. As of April 2010, Hulu claims to have only 25 percent of the ad-load of that of a traditional television show broadcast on a network schedule. To increase effectiveness of commercials, Hulu sometimes opts to present multiple advertising options to the user. The user gets to pick the commercial they want to view, which makes the ad more effective The advertising is sold based on a CPM (Cost Per Thousand) basis. This means 28
  29. 29. THE EVOLUTION OF ON-DEMAND MEDIA that the advertiser is only paying for actual impressions of the ads, not an estimated audience like with television advertising (Hulu, 2010a). Nielsen began measuring playback of television episodes in 2000, and according to Nielsen the DVR is having a significant impact on the ratings of television shows. The shows that see the biggest lift in ratings from the use of DVRs are the shows that are in the competitive prime-time television time slot. The DVR is also having a big effect on viewers’ loyalty to their favorite television shows. Quoted in the article is CBS research chief David Poltrack, saying that the people owning DVRs watch shows at a much higher rate than the general population (Levin, 2006). Difference in technology and use of DVRs One of the most popular uses of the DVR is to time-shift television. Although this was already possible with VCRs, it became much easier with digital recording: Fast forwarding and rewinding the footage is much easier and faster and the quality of the video does not deteriorate over time as with VHS tapes. In addition to digital recording capabilities, the DVR offers a variety of functions to make television viewing more convenient for the viewer. With a built-in television guide you can easily set up recordings without having to set a timer. You can set a so-called Season Pass to record all shows in a certain season, and some models even allow for scheduling recordings over the Internet (Baig, 2005). 29
  30. 30. THE EVOLUTION OF ON-DEMAND MEDIA Viewership Shift Use of traditional television. Television viewing is still a very popular activity. Nielsen’s Three Screen Report for the third quarter of 2009 contains statistics about the use of different types of media. The report estimates that the average American is watching 31 hours of television per week. The report also notes that 99 percent of video consumed in America is viewed on a traditional television. Although the reach of television viewing, the number of households with a television, has slightly increased (+0.4 percent) when comparing Quarter 3 of 2009 to Quarter 3 of 2008, the amount of time spent watching television has declined slightly (28 minutes). All demographic groups that are represented in the study spend the majority of their time watching television, as opposed to watching time shifted content on a DVR, using the Internet, watching video on the Internet or watching video on a mobile phone. The demographic group that is watching television the most is the 65+ age group (Nielsen, 2009a). Although traditional television viewing still is heavily represented in the media consumption of American consumers, a shift to different media is starting to take place. The use of online video is steadily increasing. Comparing the third quarter of 2008 to the third quarter of 2009, viewers watched 53 minutes more video online. Online video viewing is most popular among young adults, aged 18 to 24 years old). This is the only demographic group that spends more time watching online video than time-shifted video from a DVR (Nielsen, 2009b). 30
  31. 31. THE EVOLUTION OF ON-DEMAND MEDIA Network innovations. The television industry depends on two major sources of revenue: content or television programming and distribution of that content. Now that much of the distribution is happening through other parties or in other places the traditional model that television networks have been using for years is threatened. The fact that appointment viewing, watching a television show at a time designated by the network, is becoming a thing of the past has a number of implications for the networks. It means, for example, that the networks can no longer dictate when the viewer consumes their programming. This in turn has an influence on advertising, a major source of income for networks. Certain parts of the day are worth more in terms of advertising revenue than others. So, if a consumer can watch programming at any time of the day, the advertising in that particular show might be worth less (Ai InSite, 2010). Looking at the content side of the networks’ revenue model, the value of content for the network is important. However, with many people now owning a DVR and availability of episodes online being as high as it is, the value that can be generated from syndication deals and reruns is diminishing. There is less incentive for television viewers to tune into reruns or syndicated programming when they can watch them at their own convenience at a time they like. Seeing that the distribution side of the network’s business is diminishing, the networks are forced to focus more on what the viewer sees, that is, the content. Arrango found that the majority of content that networks were broadcasting in 31
  32. 32. THE EVOLUTION OF ON-DEMAND MEDIA 2008 was produced internally, 79 percent compared to only 58 percent in 2006 (Arango, 2008). Although advertisers still prefer to advertise alongside professionally produced content as found on network websites, rather than user-generated content on YouTube and similar websites, the advertising income earned from digital distribution of episodes online has been negligible in the bigger picture of the networks. According to Jeff Zucker, CEO of NBC, it is unlikely that their income from content online will ever match that of broadcast. By investing in online video sites like Fancast and Hulu, networks are trying to get back some control of online distribution (Lapan, 2009). The Viewer As a Programmer On-demand services from cable companies. Several cable companies are offering on-demand services to their customers. In order to receive these on-demand services, customers need to have a digital cable subscription. The content gets streamed to a set-top box through the coaxial cable that brings television into the homes. The fees for these services depend on the cable provider the customer uses and what type of content they are watching. Most cable companies offer some free on-demand content, but there is premium content available, for which consumers have to pay extra. Digital cable subscriptions are getting more common, and are taking an increasingly higher share of the overall number of subscriptions. As of June 2009 the penetration of digital cable subscriptions was 65.8 percent of the overall number of cable subscriptions. With the majority of households being connected 32
  33. 33. THE EVOLUTION OF ON-DEMAND MEDIA to digital cable, on demand services are becoming available to more consumers (National Cable & Telecommunications Association, 2009). According to research by Nielsen done in 2009, the use of on-demand video services is still relatively small compared to DVR usage and especially live television viewing, but it is steadily increasing (Nielsen, 2009a). In a study done by Rentrak, video-on-demand services showed to be gaining popularity. According to statistics from Rentrak gathered from studies in 2004 and 2005, 47 percent of the households owning VOD capable set top boxes used them to access on demand content (Killam-Williams, 2005). Portable media devices. Ownership of portable media devices like the popular iPod from Apple is becoming more and more common, especially in younger age groups like teens. According to a study by Ipsos, one in five Americans owns a portable media player of some kind and, in the teen age group (12 to 17 years old), the ownership of portable media player is at 54 percent. The study does not specify whether the media players these people own are capable of playing video content, but it does mention that the owners’ interest in consuming video content on their players is high (39 percent - music videos; 33 percent - TV shows; 32 percent - full length motion pictures) (Ipsos, 2006). In 2005, Apple was one of the first brands to introduce a portable media player capable of playing video content. Since Apple is such a big player in the portable media player market, with a market share of around 70 percent, they have the power to create a big demand for new services like television episode 33
  34. 34. THE EVOLUTION OF ON-DEMAND MEDIA downloads. In conjunction with the introduction of the first video capable iPod, Apple opened up a video section in its iTunes store where consumers are able to download full television episodes priced at $1.99. This is a very competitive price point in comparison to cable video-on-demand services, where you have to pay a fee every time you watch an episode. Once a television episode is downloaded from iTunes, the consumer owns this video and can watch it as many times as he/ she wants (DeWitt, 2008). At this point all major television networks are putting content on iTunes for consumers to download, in addition to a number of cable networks and specialized content providers like NBA, Nascar and DC Comics (Apple, 2010). File sharing. Another option to obtain television content online is downloading it illegally through online distribution methods like Bittorrent. Users of Bittorrent websites capture television content on their computers and make it available online without the permission of the content creators or television network. One of the most popular websites aggregating Bittorrent files of television content is called EZTV. In September 2009 alone, the site has received 15 million visits. Downloading television content through Bittorrent is especially popular with people who are fans of US television shows but live outside of the United States . Because of contracts with television networks in their own countries, their favorite television series might be months or sometimes years behind on the schedule in the United States. There are often no legal alternatives to watch the most recent episodes of television shows (Ernesto, 2009). 34
  35. 35. THE EVOLUTION OF ON-DEMAND MEDIA Availability of streaming episodes. In reaction to the flurry of illegal sharing of network television content on the Internet, networks have started to offer the options for television viewers to watch their shows online. Because networks are missing out on any advertising revenue that might be gained from these shows if they are offered illegally online, it is worthwhile for television networks to invest in their own solutions to get consumers to stop downloading content illegally and go through the network website to view television content. At first, mostly short clips of television shows were provided to viewers, but full streaming episodes have become common. And it has proven to be a big hit among consumers, Fox alone served approximately 150 million streams in August of 2009 (Nielsen, 2009a) . In October of 2007, News Corp. (owner of Fox) and NBC joined forces to create the biggest offering of full streaming episodes (legally) available on the net: Hulu. In August of 2009, Hulu served up 392,545,000 streams of video content, meaning individual requests for content. This does not equal fully watched episodes but rather the number of video streams that were fully or partially downloaded from Hulu’s servers. Meanwhile, many other networks besides Fox and NBC have joined Hulu (Grover, 2009). The line up of networks, as of the broadcast season of 2009-2010, is as follows: A&E, ABC, Bravo, CNBC, Comedy Central, Fox, FX, History Channel, MyTV, National Geographic, NBC, PBS, SPEED, Starz, USA, and WB. The biggest name missing from this list is CBS. Although they do offer full streaming 35
  36. 36. THE EVOLUTION OF ON-DEMAND MEDIA episodes, they are not part of Hulu. Instead, CBS has opted to offer their content only through their own website (Hulu, 2010b). As of November 2009, CBS is in discussion with Hulu to offer their content on the site. Main objections from CBS executives to including their programming on Hulu is that CBS would have to sign an exclusive contract to Hulu and relay 30 percent of the ad revenues on their content back to Hulu. Another deal breaker for CBS was that Hulu did not allow CBS’s online video outlet to stream Hulu programming on their site (Grover, 2009). Integration of television and online services. A trend that is apparent when looking at consumer electronics being marketed at the time of this writing, is that different media are getting integrated into a single device. With regards to television, this means that there are televisions being produced that allow the viewer to watch content that is streamed from the internet on their television. These technologies can be integrated into the television itself, but there are also set-top boxes available that make it possible for existing televisions to display online content. The type of content that can be accessed depends on the software that is integrated into the device. For example, an Apple device called the Apple TV allows access to all content that is available on the Apple iTunes service. Other manufacturers like Roku, offer access to a variety of internet video sources like Amazon, MLB, NBA and Netflix (Tarr, 2009). 36
  37. 37. THE EVOLUTION OF ON-DEMAND MEDIA Streaming Content on Network Websites Possibilities of the technique. The most prominent software that is being used by networks and other television streaming websites is Adobe Flash. Since the Adobe Flash player is almost standard on any computer (adoption rates are close to 99 percent), there is no barrier to entry for consumers. Adobe Flash is used for rich media Internet applications like video services or games, and has become the standard for applications like these. The advantage of streaming video over services like iTunes is that the service is browser-based. Consumers need no additional software or hardware to get the content, so they can do it right from their browser (Adobe, 2010). Although the Adobe Flash player is available on most computers, broadband Internet access is still an additional requirement. The bandwidth that streaming video needs is higher than what dial-up connections can provide. As of March 2009, broadband adoption in the United States was at a level of 63 percent for homes. Although this is a fairly high adoption rate, it is still low in comparison with television. In addition to that, the adoption rate of broadband is flattening. Although there was a surge in broadband adoption over the past years, the market is starting to get saturated (Pew, 2009). Availability of streaming episodes on network websites. Almost all television networks are offering streamed episodes on their websites. Many networks have their own services for streaming episodes on their websites, but there are also aggregating websites where users can view video 37
  38. 38. THE EVOLUTION OF ON-DEMAND MEDIA content from a number of different television networks. As discussed above, Hulu is an example of one of these types of sites. According to Nielsen, Hulu was the most used access point to network video content in the third quarter of 2009 (Nielsen, 2009a). Although YouTube is still providing access to much more video content than Hulu, Hulu has the upper hand when it comes to the offering of long-form content. In financial terms, Hulu is also doing a lot better financially than Google’s YouTube. While YouTube generated no gross profit in 2008, Hulu had an estimated 12 million dollar gross profit (Lyons, 2009). Content differences among network websites. Although most television networks offer all of their most popular shows on their websites, there are networks that choose to offer only clips of episodes or only certain shows for online viewing. A common strategy among all networks is to offer only a limited number of full episodes for each show. Since many distributors are selling season DVDs of television series, an easily accessible full archive of television episodes would cut into revenues of these products. There are exceptions to the rule, though. For example, the television show South Park on the Comedy Central cable network has a website that offers all the episodes ever created for viewing in full length at no charge (O'Leary, 2009). Since Hulu is starting to be a dominating player in the market most broadcast networks in addition to many cable networks are offering at least some content through the Hulu website. The online video field is competitive, and so Hulu has been protective of having its content distributed to other sites on the 38
  39. 39. THE EVOLUTION OF ON-DEMAND MEDIA web. As noted earlier, competitor website, owned by rival network CBS, was asked by Hulu to pull their content from the website. Whereas Hulu is more or less an aggregator for different network video content, networks are also offering incentives for people to go to their own sites. After all, if a user goes to the network site to view programming instead of to Hulu, the network is able to get more advertising return. Some television shows have a unique web presence by which, in addition to the full episodes of the show that is broadcasted on television, users can view web-exclusive content that is not available on Hulu. Examples of this are NBC’s shows 30 Rock and The Office (Steinberg, 2009b). Advantages for the networks The incentive for television networks to offer their content online lies mainly in the fact that they need to regain viewers who have gone to other avenues to watch television content. By offering their own solution for viewing their content online, television networks can earn advertising revenue on their content. With content available on-demand on the web, viewers have the flexibility of consuming it whenever they like. Audiences for certain shows have gone up substantially since they have been offered for viewing on the web. By having content available for consumers at any time of the day, it then becomes more flexible for viewers to consume the content at any time of the day they like. This in turn gives viewers an extra opportunity to watch a show, because they do not have to adapt to the broadcast schedule to watch it. 39
  40. 40. THE EVOLUTION OF ON-DEMAND MEDIA Although online video advertising still only makes a fraction of the revenue that is being generated in television advertising, it is a growing market. Unlike in television, where viewers are getting more and more options to skip commercials, the viewer of online television episodes has to watch the ads in order to watch the rest of the show. The advantage of online advertising is that it can be much more targeted to the individual than a television ad could ever be. Since some basic demographic information about the user can be traced through the internet connection, it offers advertisers the opportunity to target ads, for example, to a specific geographic area (Raz, 2009). This is why advertisers are willing to, proportionally, pay more for an online ad than an ad broadcasted on television. The cost of one impression online is more than one estimated impression on television, but it is highly more likely that the viewer is actually paying attention to the ad. The demand for ads on sites like Hulu far outweighs the spots that are available to advertisers. Online viewers are much more likely to take action after seeing an ad than television viewers, particularly because the ad can be more targeted to the individual viewer. (Streisand, 2007) Online audiences tend to be younger, giving advertisers access to the very desirable target group of the 18-34 year-old crowd. Another benefit of using advertising in Internet video content is that the statistics that can be gathered are much more specific than could ever be gained from television. Advertisers can find out information about exactly how many people saw their ad, what the demographics of those people was, and how many people clicked through to find 40
  41. 41. THE EVOLUTION OF ON-DEMAND MEDIA out more information about their product. This can be very valuable information for advertisers to measure the efficiency of their campaigns and make adjustments accordingly (Fung, 2005). Who is using it and why Watching television online is no longer an activity that’s only done by a minority of people. Retrevo, a consumer electronics brand, conducted a survey about the respondents’ viewing habits and the conclusion was that over 50 percent of the people were using online services to watch television. Watching television content online does not necessarily mean that it has to be viewed on a computer. As noted before, more and more television companies are releasing televisions with streaming video technology built into the device. The study looked at the use of online media to watch television by people under 25 and found that this group was more likely than the average respondents of the study to watch most of their television content online. The study notes that men are almost twice as likely as women to watch most of television programming online (17 percent of men versus 9 percent of women). In fact, 26 percent of the respondents either cancelled their cable or satellite subscription or considered canceling it. With an increasing amount of content being available online, television is becoming a more easily dispensable expense: There are cheaper alternatives. The study suggests some possible reasons for why people are switching to online services as opposed to watching programming on their television set. 41
  42. 42. THE EVOLUTION OF ON-DEMAND MEDIA Saving money is an important incentive, especially in economically tough times (Retrevo, 2010). NBC Universal examined the use of full episodes available online. Among the aspects studied were the number of users, time of use, reasons for using online services to watch television content, reasons for missing episodes on television, retention rates and the age / sex of the respondents. NBC found that 40 percent of online users are aware that full episodes are available to watch online. Specific statistics on three major networks (NBC, ABC and CBS) indicate that ABC has the biggest awareness (44 percent). In comparison, 64 percent of online users are aware of being able to download music from iTunes. In examining the type of video content that users have looked at over the past six months, the study identifies that the most popular type of content is movie trailers. According to the report, 19 percent of online users has streamed a television episode in the past 6 months. Most people hear about the option of viewing content online through advertisements on the television channel (NBC Universal Strategic Research, 2007). Not only is the amount of people watching full episodes online increasing, according to the statistics presented by NBC the number of episodes these people watch is on the rise as well. Twenty-one percent of the respondents have watched more than six episodes in the past month. People watching an episode usually watch the full episode (66 percent says they always do; 26 percent says they usually do). The time and place of use is mostly at night and at home, although 42
  43. 43. THE EVOLUTION OF ON-DEMAND MEDIA there is a spike during lunch hour. The study suggests that this is possibly due to people catching up on their shows at work. The most common reason for watching television episodes online is that the viewer missed the show in its original broadcast schedule (87 percent). Other reasons the study suggest are watching a show that the viewer has not seen before (browsing for new interesting content) or watching an episode that the viewer has already seen before. The profile of the online viewer is mostly male (56 percent) and in the age group 35 to 49. Surprisingly, representation of this age group is higher than in the 18-34 age group. The percentages are 37 percent in the 18 to 34 year old age group, compared to 42 percent in the 35 to 49 old year age group (NBC Universal Strategic Research, 2007). Taking a broader perspective, Arbitron researched what is the most essential media for Americans today. In the survey, conducted among 1753 respondents, 42 percent picked the Internet as the medium they can’t do without, compared to 37 percent that chose television. A similar survey was conducted in 2002 yielded very different results: Seventy-two percent of the respondents back then indicated they could do without the internet (Arbitron, 2010). According to the latest comScore Video Matrix Report at this writing, the amount of television that users view online is increasing. The results from the report indicate a shift from watching a large amount of short-form content, like that on YouTube, to watching more long-form content as on sites like Hulu. ComScore indicates that, comparing January 2010 to February 2010, Hulu’s 43
  44. 44. THE EVOLUTION OF ON-DEMAND MEDIA market share went from 2.9 percent to 3.2 percent of all videos viewed online. The total audience for online video is estimated at 174 million people, equal to 83.1 percent of the total U.S. online audience (comScore, 2010). The present study was conducted to see how members of a particular audience segment, college students, are making use of online media to watch television shows. Chapter 3 will discuss the methods that were used to conduct the study. 44
  45. 45. THE EVOLUTION OF ON-DEMAND MEDIA Chapter 3 Methods Sample The study was conducted among college students at Kutztown University enrolled in general education classes. This was done in order to ensure a fairly homogeneous sample with regards to age, education, and to guarantee that different majors would be represented in the sample. Also, the surveying of the students would be easier, because the surveys can be distributed and returned quickly. The requirements that were set for the survey were that the students were enrolled at Kutztown University in a bachelors degree program, this ruled out most of the older students. In order to make sure that the sample would not be skewed towards a certain academic program the surveys will be conducted in a general education class. HPD 110 and SPE 010 were selected as classes to conduct surveys in. These are fairly large classes and have a variety of different majors, but a fairly consistent age group. The students taking these classes are mostly freshmen. Instrument To study the viewing habits of the students a paper survey will be used. In order to ensure the consistency of the sample, it was decided to conduct the survey in class rather than put the survey online. This makes the results more reliable, 45
  46. 46. THE EVOLUTION OF ON-DEMAND MEDIA since it is known who filled out the surveys, whereas an online survey can be filled out by anyone. The survey consisted of 14 questions, and included questions about the media consumption patterns of the participant, their use of streaming video services on the network websites, how they use these services and how these services have changed their media consumption. The main purpose of the survey was to find out about the subject’s viewing habits regarding online television programming and how they may have changed. Also, the survey was aimed at acquiring information about what some of the motivations are for students to use online video services to consume television content. The questions on the survey were as follows: 1. Do you own a television set? This question was put in the survey to find out whether ownership of a television makes a big difference in online viewing of television content. 2. Do you have broadband internet? Possible answers were A. DSL, B. cable, C. school network, D. no broadband or E. Don’t know. The goal of this question was to figure out if people with a broadband connection watch more online content than people without broadband access. 3. How many hours of television do you watch in a week on average? This question was intended to get a good idea of the average student’s television consumption this question was included in the survey. The distribution for the answers in this question were changed based on results from the pilot survey. The 46
  47. 47. THE EVOLUTION OF ON-DEMAND MEDIA original answers had more variance, but the pilot resulted in a distribution that was heavily leaning towards one answer. The available answers for the respondents were A. Less than 3 hours, B. Between 3 and 7 hours, C. Between 7 and 10 hours, D. Between 10 and 15 hours, E. More than 15 hours 4. Have you watched more or less television in the past year than the year before? This question was intended to test the hypothesis that traditional television had gone down over the past year because of the availability of streaming episodes. 5. Do you use online video services like Hulu or television network websites to watch television programming? Since this survey was mainly aimed at obtaining information about online viewing question 5 was included as a way to separate the respondents that use online video services from those who don’t. Respondents who filled out they did not use online video services were asked to indicate why they did not use these services and instructed to skip to the end of the survey where they were asked to provide their demographic information (gender and age) 6. How long have you been using services like this? This question seeks to answer both how much experience users have with these services and when online video services started to gain traction within the sample group. Answers were based on research into when networks started putting full episodes of their television shows on their websites. Available answers are: A. Since 2009, B. Since 2008, C. Since 2007, D. Since before 2007 47
  48. 48. THE EVOLUTION OF ON-DEMAND MEDIA 7. What are your main reasons for using services like these? This is one of the most important questions in the survey. The goal of the question is to see what people are using services like this for, what the most common reasons are, and how the availability of online episodes influences the viewing habits of the respondent. The available answers were based on common recurring reasons for use of online video services found in the literature review in addition to feedback gained from the pilot survey. Available answers were: A. Having to watch fewer commercials, B. Getting better video quality, C. Discovering new television shows, D. Being able to view episodes at any time of the day, E. Catching up on episodes I haven’t seen, F. Watching an episode that I missed, G. Watching an episode again after it was broadcast. 8. Do you watch any television programming exclusively on the web? This question was intended to determine if the respondents were using online video services occasionally, if doing so represents a change in viewing habits or a complete shift from traditional television to alternative web services. Available answers to this questions were: A. Yes, all of it (for people that watch all the television they view online), B. Yes, some on traditional television and some online (for people that switch between traditional television and web services, but view one or more of the television shows they follow exclusively online), C. No, I use both traditional television ad internet (for people that switch between viewing their shows on traditional television and watching them on video streaming sites) 48
  49. 49. THE EVOLUTION OF ON-DEMAND MEDIA 9. What websites do you use to view television content ? This question was included in the survey to determine the most popular video streaming site among the sample group. Respondents were given the opportunity to fill in their own additions to the provided list of sites. The available answers were: A. Hulu, B. Network websites, C., D. YouTube, E. Fancast, F. Other. Another fact that can be determined from this question is if respondents are primarily directly using the network websites, or if they are going through third party sites like Hulu or even Youtube. 10. How many hours of television content do you watch online in a week on average? This question was included to see how many hours respondents watched online in comparison to the amount of traditional television viewing they did. The distribution of the provided answers was based on feedback from the pilot survey. Provided answers were: A. Less than 2 hours, B. Between 2 and 4 hours, C. Between 5 and 7 hours, D. Between 8 and 10 hours, E. More than 10 hours 11. How many hours of television did you watch online in a week on average a year ago? In order to determine if there is an up- or downward trend in the amount of television content viewed online this second data point was added to be able to compare online viewing behavior at the time of the survey with that of a year ago. 12. What is your preferred viewing method ? This question was included to discover if users prefer to watch television online or traditional television and has an open line to provide an explanation for the answer they chose. 49
  50. 50. THE EVOLUTION OF ON-DEMAND MEDIA 13. Gender 14. Age These questions were included to see if significant relationships could be found between gender or age and particular types of viewing habits. Distribution of age was based on the class surveyed and adjusted based on returned surveys from the pilot survey. Procedures The survey for the study was submitted for approval to the Department of Electronic Media and approval was given in November of 2009. A pilot survey was then conducted by the researcher in two Introduction to Electronic Media classes to determine whether any changes needed to be made in the survey with regards to language or distribution of the answers. After analysis of the results, some minor adjustments were made in the age distribution and the instruction text for the survey. For a copy of the pilot survey, refer to Appendix A. In the pilot version of the survey no instructions were provided to skip to the demographics questions at the end of the survey, causing some uncompleted surveys where the answers to these questions were missing. In the final version that was administered an instruction was added to skip to the last two questions of the survey if the respondent did not have to fill out the online viewing section. For a copy of the final survey, refer to Appendix B. In order to find classes in which to conduct the surveys, the researcher contacted the department head of the Speech department, Mr. Robert Smith, through e-mail. Through a department communication, the professors teaching SPE 010 were contacted and arrangements were made to conduct and 50
  51. 51. THE EVOLUTION OF ON-DEMAND MEDIA arrangements were made with professors that were interested in participating, to conduct the surveys. For the HPD 110 classes, the professor was contacted directly. The written communication that was used is included in Appendix C, After corrections were made, the survey was conducted with a total of 202 students. In the time frame between November and March, five Introduction to Speech (SPE 010) classes and two Health (HPD 110) classes participated in the survey. The surveys were conducted by the researcher in the classroom. A short introduction as well as instructions for filling out the survey were given to the students. After the surveys were completed they were collected by the researcher and processed into an Excel spreadsheet. Data analysis After all survey results were gathered, all the data was entered into the Statistical Package for the Social Sciences (SPSS) for analysis. All independent variables (TV ownership, broadband internet access, gender and age) were cross tabulated to find relationships between the variables. A Chi-square test was run to calculate the significance of these relationships. Results were rendered in a table giving percentages and were also presented in chart form. 51
  52. 52. THE EVOLUTION OF ON-DEMAND MEDIA Chapter 4 Results Reported percentage values in this chapter have been rounded up or down to one decimal. Any value of .5 percentage points was rounded up, anything under this value rounded down. In each survey question, percentages provided are related to the number of students who responded to that particular question. Demographics Of the 201 respondents who answered Question 13, 84 were male (41.6 percent) and 115 were female (57 percent). The distribution in age groups of the 201 respondents who answered Question 14, is indicated in Table 1. Table 1. Age distribution of survey respondents Age group Number of respondents Percentage 18 or under 37 18.3% 19 to 20 108 53.5% 21 to 22 38 18.8% 23 to 24 8 4% Above 24 10 5% Total respondents 201 100% 52
  53. 53. THE EVOLUTION OF ON-DEMAND MEDIA Television Ownership Of the 202 respondents who answered Question 1, 186 (92 percent) indicated they own a television set, and 16 (7.9 percent) did now own a television set. Broadband Access For convenience, the results for the distribution of broadband Internet were split into three groups: those who have broadband access, those who don’t, and respondents who did not know whether they had access to broadband Internet. Question 2 was answered by all 202 respondents, and indicated that a majority of 190 respondents have broadband access (94 percent). There were three respondents who did not have broadband, representing 1.5 percent, and nine respondents (4.5 percent) did not know whether they had broadband access. Hours of Television Consumption In Question 3, students were asked to indicate the number of hours they watched television per week. Table 2 is based on the responses to Question 3. The number of respondents that replied to this question was 202. The surveyed students watch a relatively low amount of television: 87.6 percent (177 respondents) watch television 10 hours or less per week. This percentage is based on the combined responses to the first three options for this question. 53
  54. 54. THE EVOLUTION OF ON-DEMAND MEDIA Table 2. Television consumption of surveyed students Hours of television viewing Number of respondents Percentage Less than 3 hours 44 21.8 % Between 3 and 7 hours 92 45.5 % Between 7 and 10 hours 41 20.3 % Between 10 and 15 hours 16 7.9 % More than 15 hours 9 4.5 % Total respondents 202 100 % Change in Amount of Television Viewed To see the change in viewing habits over the past year, the students participating in the survey were asked in Question 4 to compare their time watching television at the time of the survey to a year ago. There were 201 respondents to this question. A majority of 119 students (59.2 percent) have watched less television over the past year. A common reason referred to in the comment section of the question was that the students had a busy schedule. Of the 143 students that filled out the comment section of this question, 101 students indicated time constraints as being the most important reason they were not watching as much television. Many students spent more time doing school work (97 respondents), working at a job (17 respondents) or spending time with friends (5 respondents). 54
  55. 55. THE EVOLUTION OF ON-DEMAND MEDIA Of all respondents to this question, 22 (11 percent) answered that they watched more television over the past year, and 60 said the amount of television they viewed remained about the same (29.9 percent). Watching Television Online In response to Question 5, Do you use online video services... to watch television programming?, most students indicated that they did make use of these services. This question was answered by 202 students. A majority of 123 students (60.9 percent) watched television programming on online video sites, and 78 students (38.6 percent) indicated not using these services. The total number of respondents that indicated a reason for not watching television programming online in the comments field of Question 5 was 64. Among the most common reasons for not using these types of services were that the respondents were not interested in watching television on a computer either because they preferred the viewing experience on a regular television (26 respondents), or because they did not spend much time watch television programming in the first place (16 respondents). Another 10 respondents indicated that they did not have time , 9 respondents indicated not knowing how to get access to the content as the reason to not use online video services. History of Use of Online Video Services In Question 6, respondents were asked how long they have been using online video services. A total of 123 students answered this question. Use of online video services has only recently started to gain traction with most of the respondents of the survey. Most students answered that they have been viewing 55
  56. 56. THE EVOLUTION OF ON-DEMAND MEDIA online episodes of television programming since either 2009 or 2008, at 44.7 percent (55 respondents) and 35 percent (43 respondents) respectively. Reasons for Using Online Video Services A total of 124 students responded to Question 7, in which they were asked to give the reasons they use online video services to watch television programming. This was a check-all-that-apply question, so multiple answers were possible. Table 3 reports the responses on all individual values for Question 7. Figure 2 gives a graphical representation of what the respondents answered to Question 7. Table 3. Reasons for using online video services Reason Number of respondents Percentage Having to watch fewer commercials 55 44.7 % Getting better video quality than 9 7.3 % traditional television Discovering new television shows that 36 29.3 % I haven’t seen before Being able to view episodes any time 98 79.7 % of the day, on my own schedule Catching up on older episodes that I 89 72.4 % haven't seen before Watching an episode that I missed on 92 74.8 % television Watching an episode again after it was 39 31.7 % broadcasted on television Other 3 2.4 % 56
  57. 57. THE EVOLUTION OF ON-DEMAND MEDIA Figure 2. Reasons for viewing television content online 100 80 60 40 20 0 Number of respondents Having to watch fewer commercials Getting better video quality than traditional television Discovering new television shows that I haven’t seen before Being able to watch shows any time of day, on my own schedule Catching up on older episodes that I haven’t seen before Watching an episode that I missed on television Watching an episode again after it was broadcasted on television Other Watching Television Content Exclusively on the Web A total of 124 respondents answered Question 8. Based on the responses to this question, a very limited amount of respondents are watching television content exclusively on the Internet (9 respondents or 7.3 percent). Most respondents use both television and the Internet to watch their shows (72 respondents or 58.4 percent), and 43 respondents (35 percent) indicated that they watch some of their television shows exclusively online. Websites In Question 9, students were asked what websites they used to watch full episodes online. Question 9 was answered by 124 respondents. This was a check- all-that-apply question, so respondents could choose multiple possible answers. The most popular outlets to obtain full episodes of television shows are Hulu (78 57
  58. 58. THE EVOLUTION OF ON-DEMAND MEDIA respondents or 63.4 percent), YouTube (68 respondents or 53.7 percent), and network websites (65 respondents or 52.8 percent). Table 4 gives an overview of the responses to Question 9, and Figure 3 provides a graphical representation of the relative popularity of the different video services. Table 4. Use of different online video services Site Number of respondents Percentage Hulu 78 63.4% Network websites (FOX, 65 52.8% NBC, CBS, ABC, etc.) 6 4.9% YouTube 66 53.7% Fancast 8 6.5% Other 30 24.4% Noteworthy in this row is YouTube, since the site is not targeted at being a portal for full episodes of television shows and does not usually have current episodes of television shows. Based on the comment section for this question, popular alternative to the options provided in the question were Netflix (5 respondents) and iTunes (2 respondents). 58
  59. 59. THE EVOLUTION OF ON-DEMAND MEDIA Figure 3. Use of different online video services 80 60 40 20 0 Number of respondents Hulu Network websites Youtube Fancast Others Hours of Online Viewing A total of 125 students answered Question 10 about the weekly amount of television content watched online. As with the amount of traditional television viewing, the amount of online viewing was also relatively low among the students who were surveyed: 88.6 percent of the respondents (109) to this question report watching four hours of television programming or less online per week (this is a combined percentage from values A and B). A majority of 79 of the students that answered this question was in the lowest target (63.2 percent) of less than two hours of online television programming viewing per week. Thirty students (24 percent) watch between two and four hours per week. Very few students watch more than 4 hours of television programming online. The combined percentage of all possible answers above 4 hours is 12 percent (15 respondents). 59
  60. 60. THE EVOLUTION OF ON-DEMAND MEDIA Online Viewing Year Ago In Question 11, respondents were asked to indicated their usage of online video services a year ago. The question was answered by 125 respondents. The most common amount of television watched online was Less than 2 hours, which represented 52 percent (65 respondents). Between 2 and 4 hours accounted for almost 26 percent (32 respondents). Fifteen respondents (12 %) indicated that they did not watch television online the previous year. 60
  61. 61. THE EVOLUTION OF ON-DEMAND MEDIA Chapter 5 Discussion College Students versus Average Americans This study particularly looked at the viewing habits of college students at Kutztown University. What is interesting about the particular situation of college students is that they have a lot less time available to watch television, due to their busy academic schedules. This clearly showed in the survey results, their television consumption was dramatically lower than that of the average American. Whereas the average American watches 31 hours of television per week (Nielsen, 2009a), almost all respondents to the survey (87.6 percent) indicated watching under 10 hours of television a week. This has some major implications for the effects of new technologies on their viewing habits. Since the overall consumption of television content is low, it proved hard to measure the increase in the use of new technology like video streaming of full episodes. Use of Online Episodes Because of their demanding schedules, college students are a particular group that could potentially benefit greatly from on-demand technologies like streaming television online. This shows in the results of the survey: Almost 61 percent of all the surveyed students indicated that they use online video services to watch television programming, and increased flexibility in schedule is the most 61
  62. 62. THE EVOLUTION OF ON-DEMAND MEDIA common reason given by the respondents to use online video services (79.7 percent). Taking into account the busy academic schedules, jobs, and social activities of students, it is understandable that they do not have a lot of spare time to watch television. The main purpose for watching programs online is to catch up on missed (74.8 percent) or older episodes (72.4 percent) of a television show. Most students use online services in addition to their existing television consumption, that is to say they do not watch content exclusively online. Viewing Experience The majority of the respondents (58.4 percent) that used online video services use both television and the Internet to watch television . In fact, most students (74.8 percent) still prefer to watch television on a traditional television set though. The big benefit of a traditional television set is that it offers a superior viewing experience to that on a computer. A computer is usually located at a desk, making it a less comfortable situation than sitting on the couch watching TV. In addition to that it’s difficult for a number of people to watch television programming together on a computer. Watching television together with other people is inherently a more social experience. Market Share of Online Video Services The survey clearly showed that Hulu was a dominant player (63.4 percent of the 124 respondents to Question 9) in the online video-on-demand market among the surveyed students. This corresponds with the trends that came through 62