Video Habits are Changing

A number of trends are at work in the video entertainment business, including a growing number of younger consumers who have never bought a video entertainment subscription, some who appear to have stopped buying ("cord cutters"), some who are “downsizing” in some ways and many who are adding a habit of online viewing.

All those trends matter, especially when looking at younger consumers, because generational patterns of service, device or app adoption will displace older behavioral patterns over time. During the early days of the U.S. cable TV market, for example, one might have noted the consistent pattern of higher adoption by younger consumers.

Over time, “younger consumers” become “older consumers.”

Buying of video entertainment subscriptions also gradually became universal. Now there are signs younger consumers are not developing the same habits.

According to Nielsen, the number of Internet-only TV homes is growing, up 22.8 percent from the third quarter of 2010 to the third quarter of 2011.

GfK’s research shows that Millennials (ages 13 to 32) are 30 percent less likely to be watching a TV network or channel "live” in the crucial first hour of primetime (8 to 9 p.m. ET/PT, 7 to 8 p.m. CT/MT) than they were four years ago.

This linear viewing now accounts for 57 percent of Millennial TV activity from 8 to 9 p.m., compared to 82 percent in 2008.

Meanwhile, the proportion of Millennials who are watching recorded programs in this time period has nearly doubled, from 15 percent to 28 percent. Another 12 percent are looking at streaming video on their TV sets – something rather uncommon in 2008, GfK says.

Generation X (ages 33 to 46) has made substantial but less dramatic changes in its primetime TV habits. Watching a TV network or channel "live” now accounts for 65 percent of the Gen X audience from 8 to 9, compared to 80 percent four years ago.

Consumption of recorded programming grew 5 percentage points (21 percent to 26 percent), and streaming to a TV accounts for an additional 5 percent of the Gen X audience from 8 to 9 p.m.

None of those trends necessarily mean immediate disruption of the current business model for subscription video. Sooner or later, though, if those trends show continue to grow, business model pressure will lead the business to bend, even if it does not break.