Parks Associates: Online Video Not Yet a Threat to Pay TV

  • Online Video
Despite the growing amount of video available online, less than 8 percent of U.S. broadband households are considering canceling their pay-TV services in favor of online video, according to Parks Associates’ All Eyes on Video.



These results are in line with previous Parks Associates studies, which do not show an appreciable likelihood of subscriber churn in favor of online video services. A 2008 study reported 11 percent of U.S. broadband households were considering canceling pay-TV services, and in an earlier 2009 survey, the number was 10 percent.



The new study found approximately 5.5 million homes would be open to canceling pay TV due in part to the availability of online video. Half of these households are also considering a switch to a new pay-TV provider, indicating that the primary threats to companies such as Verizon, Comcast, DIRECTV and Cablevision are still their traditional competitors.



The households likely to switch or cancel their services watch 10 hours of online video each week - much higher than typical video consumers. They express strong interest in having online access to pay-TV channels, which highlights an opportunity for traditional pay-TV providers to solidify their base through the deployment of services such as TV Everywhere. Their offline video consumption is also higher, with a median of 18 DVD rentals in the last six months, compared with two rentals among other households.


“The threat of cannibalization is real but misunderstood,” says John Barrett, director of research, Parks Associates. “Nobody is going to rely on online video alone. Households likely to cancel their TV services are going to use a mixture of online video, free-to-air broadcasts and DVDs, including rental services such as Netflix and redbox.”


Barrett also discounted the immediate threat of migration to online video, saying, “Very few households have made the switch, a sign that the alternative is not yet compelling. Just 0.5 percent of broadband households (350,000 homes) had pay TV, cancelled it and now watch five or more hours of online video per week. People who have made the switch to online video are few in number, and they don’t watch much TV anyway.”

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