VOD Services Register Uptick, While Premium Cable Dips

by , Jan 20, 2014, 1:22 PM
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Despite the many challenges facing Netflix and other video-on-demand services, they continue to grow in popularity at the expense of premium cable services.
 
In fact, over the past two years, there has been a 6% point overall decline in U.S. households subscribing to HBO, Showtime, and other premium TV channels, while households subscribing to SVOD services grew 4 points.
 
That’s according to a new report from NPD Group, which shows that if SVOD services can maintain their current growth rate, they are on track to top premium-TV channels in the not-too-distant future.
 
As of last August, 32% of U.S. households were subscribed to premium-TV channels -- compared to 27% of U.S. households that subscribed to SVOD services.
 
Netflix remains the clear leader among SVOD services, according to NPD, yet Hulu Plus and Amazon Prime are reaping the biggest growth benefits in the category, as consumers tack on secondary SVOD services.
 
Depending on consumer viewing habits, SVOD services can offer cost benefits over premium TV channels.
 
Yet in light of last week’s court ruling against the FCC and its defense of “Net neutrality,” Netflix and other streaming services could be forced to raise the price of subscriptions -- thus making them less attractive alternatives to cable channels. In the meantime, however, SVOD services are eating cable’s lunch.
 
“As SVOD services have gained momentum, it’s clear that some consumers are trimming their premium-TV subscriptions,” Russ Crupnick, senior vice president of industry analysis for The NPD Group, explained in the new report. “As SVOD increasingly strives to become a channel itself, viewers might consider it to be an adequate substitution for other premium channels, or perhaps they are switching to economize on their time and money spent.”
 
Overall, digital-video transactions rose 3 share points since 2012 -- reaching 70% of all home-video transactions in 2013, according to NPD.
 
NPD counts home-video transactions as purchases and individual paid rentals, not including free on-demand movies and TV shows included with a pay TV subscription.
 
In 2013, SVOD made up 71% of all digital-video transactions, and it continued to grow more rapidly than all other digital acquisition types.

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