Smartphones are truly becoming ubiquitous across the US — where, according to Nielsen, there are 171.5 million people (71% of the population, including infants and the elderly) that own them. The largest segment of the smartphone-going population is, unsurprisingly, the Millennial generation — offering big implications for the uptake of online and mobile video.
Millennials are one of the largest population segments in the US, totaling about 77 million, on a par with Baby Boomers. They have consistently been shown to be leery when it comes to shelling out for a $100+-on-average pay-TV subscription, and more amenable to the viewing of longer-form content via mobile OTT than other demographics. And, accordingly, these young consumers are the largest segment of smartphone owners. In the second quarter 2014, 85% of Millennials aged 18 to 24 own devices and 86% aged 25 to 34 own them, an increase from 77% and 80%, respectively, over the second quarter 2013.
While age plays a role in smartphone ownership, this technology doesn’t have a gender divide. Men and women in the US own smartphones almost equally, with 70% of men owning these devices and 72% of women as of the second-quarter 2014.
Meanwhile, over-the-top content adoption is beginning to create a device-centric brand identity with consumers in general.
When asked to express their preference for a non-traditional broadcaster to provide them access to video, respondents in a recent Accenture survey selected Google, Apple and Samsung, in that order. The selections were based on the companies’ potential to deliver pay-TV, video on demand and catch-up TV, which are not the current core capabilities of these companies.
“It is no coincidence that the three most popular brands also have the largest market share of phones and tablets,” explained Gavin Mann, Accenture’s global broadcast industry lead. “Consumers clearly value content seamlessly bundled with devices – the reason Amazon dominates the e-book market with Kindle - it provides the best end-to-end experience.”
About 12% of survey respondents plan to purchase a tablet, expanding the market of addressable screens considerably.
“If consumers act on these intentions, it will represent remarkable growth in the addressable market for online video,” said Mann. “This rapid digital expansion is fostering a new era of personalised TV experiences with the number of video-centric connected devices predicted to surpass the world’s population by 2017.”
He added, “These disruptors are clearly bringing a lot of new technology to our century-old television viewing experience. Today’s incumbents have a great opportunity if they can innovate, while successfully leveraging their core strengths. Tomorrow’s high performers will be those that combine art and technology.”
And indeed, communications providers say that they would like to transform their operations and business models to become digital service providers (DSPs): In a CSG International survey from earlier in the year, about 31% of telecoms and 44% of cable organisations believe that enabling content portability is key to becoming a provider of digital lifestyle services, according to new research.
Accordingly, DISH chairman Charlie Ergen, told investors at his company's second quarter earnings call in August that he'd like to get Millennials "started on ESPN," adding: "My concern is that we're missing a whole generation of customers."
DISH Network in March renewed its agreement with the House of Mouse for carrying sports, news and entertainment content from ESPN, ABC and Disney across televisions, computers, smartphones, tablets, gaming consoles and connected devices. But, the expanded deal now also grants DISH the rights to stream cleared linear and video-on-demand (VOD) content from the ABC-owned broadcast stations, ABC Family, Disney Channel, ESPN and ESPN2, as part of what it calls “an Internet delivered, IP-based multichannel offering” — i.e., an OTT service. It plans to launch the offering soon, for under $30 per month.
Speaking at the Code/Media Series: New York conference last week, ESPN president and co-chairman of Disney Media Networks John Skipper said that he believed that these kinds of packages would be perfect for luring Millennials to the pay-TV world.
"We suspect they will trade up," Skipper said. "We want to figure out products to get those people to buy something.”
He added, “Name all the technology companies that became great media companies. I'm not sure you're going to go to Google to watch the Rose Bowl."
Things on the business model front could get messy though sooner rather than later: ESPN is mulling its own OTT strategy for offering online access to live Major League Soccer games, as a way to add revenue without alienating its existing model of working solely with pay-TV operators for distribution.
Cable, IPTV and satellite distribute ESPN's cable channels and provide authentication to the Watch ESPN TV Everywhere app. But while that’s the network’s bread and butter ($6.04 per month per subscriber, according to research firm SNL Kagan), Skipper said that it was also looking to other ways to add revenue by offering access to new programming no found on the linear networks.
"We've just got to think about other business models," Skipper said at an event over the summer in Bristol, Conn., where ESPN is headquartered. "We're not far along on any them, but we do think about how we might capture more money direct from consumers."