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Cable Technology Feature Article

June 03, 2013

Original Content Comes to the Fore in the Zero-TV World

By Tara Seals, TMCnet Contributor

Zero-TV households—a term coined by Nielsen to describe consumers that eschew cable and satellite TV service and don't even use an antenna to get free signals over the air—represent a rich pasture for online streamers and advertisers, bolstered now more than ever by increasing consumer acceptance of original online TV content.

According to Nielsen, the traditional definition of a TV home is evolving: there are five million zero-TV residences in the United States (4 percent), up from two million in 2007. Nearly half of these homes – 48 percent -- watch long-form TV shows via online subscription services like Netflix, Hulu (News - Alert) Plus or Amazon Prime. More than two-thirds of these residents say they have gone multiplatform, too, watching video on a range of devices that includes computers, gaming consoles, connected TVs, smartphones and tablets.

That’s an entertainment strategy that’s only poised to become more prevalent as those services ramp up on original fare. Americans are increasingly comfortable with watching long-form content online or via mobile devices, as evidenced by the early results from Netflix’s launch of Arrested Development over Memorial Day weekend.

Increasing Online TV Acceptance

Video analytics company Procera tracked the show’s impact on Web traffic patterns, and, despite mixed critical reviews, discovered that consumers heartily embraced the Web-only premiere. "The launch was a success and did have a noticeable effect on network traffic," said Cam Cullen, vice president of global marketing at Procera, in a blog.

A full 36 percent of all devices on one cable ISP network Sunday watched at least part of one episode of Arrested Development, which Procera called "a staggering number that indicated a huge success."

Arrested Development represented as much as 10 percent of all Netflix traffic on Memorial Weekend Sunday (averaging 2 to 7 percent of total Netflix traffic on various networks), while the number of subscribers logging into Netflix spiked 8 percent.

Overall, peak Sunday Internet traffic was 10 percent higher than the prior Sunday on some ISP networks. "Arrested Development was a significant contributor to that traffic jump," Procera noted.

Also, most notably, the streaming giant’s tactic of encouraging binge viewing by releasing all of the season’s episodes at once is resonating with consumers: 10 percent of Netflix viewers made it all the way to the 15th and final episode of the season on Sunday or Monday.

In contrast, for Netflix's other original content hit, the Kevin Spacey-anchored House of Cards, Procera noted just 0.5 percent of subscribers made it to the 13th and last episode of the political drama.

"From our perspective, Arrested Development had about three times the subscriber viewing that we saw from House of Cards," Cullen said. And House of Cards, let’s not forget, has been attributed with being a major factor in Netflix’s addition of two million subscribers in the first quarter of 2013, to reach an all-time high of 29.17 million, beating out HBO (28.7 million subscribers) for the first time.

Right now, researchers aren’t sure if the zero-TV phenomenon will persist as the young people that are perpetrating it get older and have families. "You do have to sit back and say, is it a life stage? You're younger, you don't quite have the economic means. Does this mean you'll never get that traditional pipeline to content?” said Dounia Turrill, senior vice president of insights at Nielsen, speaking to the LA Times. "That's a longitudinal look that we need to be aware of and we'll keep an eye on.”

And, even though pay-TV subscription costs are slowly ticking ever upward past the $100 per month mark (SNL Kagan estimated that cable prices increased 3.3 percent in 2012), the fact remains that in 2012, 100.4 million homes received video from cable, satellite or telco operators. That represents 84.7 percent of all households, which is down from the peak of 87.3 percent in early 2010 but still a resounding (and largely loyal) majority.

So what’s the takeaway? For one, there will increasingly be an audience for quality original online programming. And that means that advertising dollars will follow the curve.

The Advertising Element

It appears that advertisers are following consumers online, with eMarketer (News - Alert) estimating that video ad spending in the U.S. will grow 41.4 percent this year, to reach $4.1 billion. Going forward, U.S. digital video ad spending will nearly double in only four years, climbing from $4.14 billion this year to $8.04 billion in 2016.

Even better, the ads have been shown to bolster engagement.  A May 2013 survey of U.S. advertising agency executives conducted by online video ad platform BrightRoll found that an overwhelming majority of respondents (75 percent) said online video ads were equally or more effective than traditional TV, a 17-percent increase from 2012. Nine out of ten also thought online video ads had equal or greater impact than display ads.

"Video has emerged from the shadow of digital media options and planted itself at the centre of the advertising ecosystem," said Tod Sacerdoti, CEO and founder of BrightRoll. "This year's survey underscores digital video's leadership position with proven effectiveness to reach audiences at scale, clearer success metrics to measure ROI and continued technological advancements to meet advertisers' campaign goals."

eMarketer said that CPM for mid-tier sites and placements in 2013 will be approximately $25 and reach nearly $33 for premium destinations.

Meanwhile, mobile video has begun to accumulate scale, and has turned out to be one of the few types of mobile content which reliably earns money and drives premium ad rates, according to BI Intelligence, Business Insider's research arm.

BI found that video on smartphones reached 41 million people by the end of last year. Additionally, as of January 2013, 41 percent of smartphone owners watch video on mobile, as opposed to 22 percent as recently as April 2012. The mobile video ad market meanwhile has ballooned to $520 million, or 13 percent of all video ad revenue earned.

The bottom line? Advertisers and streamers have a big opportunity as consumers are becoming ever more multiplatform, and ever more comfortable with viewing television outside of the living-room screen and outside of the cable hegemony—all spurred along by the release of quality original OTT content.

"Evolving the definition of the traditional television household is really critical at this juncture with the proliferation of content that is delivered to the home in different ways," Turrill said.

Edited by Rachel Ramsey

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