Subscription video on demand (SVOD) services continue their onward march in the UK market. Now nearly a quarter of UK households claim to subscribe to one of the three main SVOD suppliers. Netflix is by some margin the market leader, and its growth continues easily to outpace the other services. While Netflix is the big success story of the past three years, findings from the Establishment Survey do not support some of the more dramatic rhetoric emanating from Netflix HQ: SVOD appears to be complementing rather than replacing traditional linear TV.
SVOD is on a roll. Adoption continues to grow at a rapid rate. 24% of UK households subscribed to Netflix, Amazon Video or Sky’s Now TV in Q4 2015, compared to 14% in Q1 2014. Amazon Video and Now TV are both seeing growth, although Netflix continues its dominance. The number of households with the Netflix service grew by 1.4m between Q4 2014 and Q4 2015, compared to an increase of 0.5m households for Amazon Video and 0.3m households for Now TV.
The impending death of traditional TV?
The picture we glean from the Establishment Survey does not support the more evangelical rhetoric about the evolution of SVOD heralding the end to mainstream TV as we know it. The Establishment Survey focuses on claimed uptake of SVOD and so does not tell us about the viewing habits of SVOD homes. But it does tell us about the types of households that subscribe, and we can draw some inferences about how viewers see their purchase of an SVOD service.
The data suggest that SVOD appeals to households who already consume a great deal of TV. The chart below shows that 55% of SVOD households are large (three or more occupants) compared with 35% of the overall household population.
SVOD homes also skew younger and more up-market than the average: 40% of the occupants of SVOD homes are aged 24 or under, compared to 30% in the population as a whole; 64% of SVOD homes have an ABC1 social grade, compared to the national average of 51%.
The bias towards homes which already have pay TV services is clear when we look at the penetration of SVOD services by primary platform. Netflix and Amazon Video homes are significantly more likely to be cable or Sky subscription homes than average; this is not true for Now TV, which is marketed at terrestrial viewers. Penetration in cable and YouView homes is particularly high because of the deals Virgin Media, BT and TalkTalk have made with Netflix; 30% of cable homes and 31% of YouView homes take Netflix compared to 13% of terrestrial only households. One factor that contributes to this disparity is the lower broadband take-up rate in terrestrial only households. Broadband take-up in YouView, Sky and cable households is well over 90%, while in terrestrial-only homes it is only 71%. Homes need broadband to use SVOD.
The overlap between SVOD services and very similar traditional services is particularly stark when we compare SVOD penetration in pay TV households which have Sky Movies; a service which is usually thought of as a direct competitor to Netflix and Amazon Video. In reality, it is less a competitor than a companion: SVOD penetration goes up from 35% in cable homes to 43% within cable homes that already have a Sky Movies subscription.
The picture is clear: SVOD homes are not swapping out their traditional TV for SVOD, they are using SVOD services to get even more of what they already have.
The data from the Establishment Survey show that SVOD services are significantly more popular in larger households with children. However, it does not support the commonly expressed view that an entire generation of young people has more or less abandoned traditional TV in favour of binge viewing on Netflix or Amazon Video. The next chart shows the proportion of the population within different age bands which has access to SVOD services. SVOD take-up is highest amongst children and young adults, but it is still the case that less than 50% of 16-24 year-olds have access to an SVOD service. And for all the hype that children are glued to Netflix, the reality is that only three in ten children live in a household that subscribes to this service.
The take-up figures in the age group chart appear overall to be slightly higher than the take-up figures by platform; this is because the platform figures are by household, and the age group figures are for individuals. SVOD is skewed towards larger households; since there are more people in SVOD homes, SVOD take-up by individuals is higher than it is by household.
Not all SVOD services are created equal
The Establishment Survey data underline Netflix’s dominance among SVOD services when we look at the proportion of users who use only one service. A much higher proportion of Amazon Video and Now TV households also have Netflix than the other way round. 82% of Netflix households subscribe to only one SVOD service, compared with 49% for Now TV and 54% for Amazon Video.
This points to a higher level of service satisfaction with Netflix. It may also be the case that the bundling of Amazon Video with Amazon Prime means that some Amazon users are less directly committed to the service, since their primary motivation is the other benefits of Amazon Prime rather than the video service.