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What does the next-generation TV bundle look like?

By Guy Bisson | Research Director

September 12, 2016 | 4 min read

We know an awful lot about Netflix customers and what makes them tick. Many things will come as no surprise. They are younger than average, more device savvy, better connected, and highly engaged with content. But one of the most interesting things about Netflix homes—and Subscription Video on Demand (SVoD) homes in general—is that there is already clear evidence that they are building their own entertainment bundles by cherry-picking streaming video and music services.

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In fact, Millennial SVoD households in the US are already taking an average of more than two paid-streaming video services, and a number of European countries show similar levels of uptake. This DIY next-generation entertainment bundle is both good and bad news for the traditional TV industry.

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The good news is two-fold: the next-generation bundle is not about a rejection of paid for TV. Indeed, the cost of multiple streaming services adds up quickly to a monthly spend similar to that of traditional pay TV. Further, there is still clear evidence that in most markets, SVoD customers are actually more likely than average to take both traditional pay TV and premium channel subscriptions.

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So what’s the bad news? Netflix and other SVoD customers are more likely than average to change pay TV providers and have a higher propensity to churn…likely a result of their better access to information and offers through their high connectivity and the ethos of flexibility that the SVoD business model instills.

What’s clear then is that a single SVoD service is not satisfying all the entertainment needs of this most fickle of customers. Content mix and access to exclusive dramas clearly is key here. But another interesting behavioral difference emerges from an examination of the device viewing habits of Netflix, Amazon and HBO streaming customers in the US. HBO streaming customers are far more likely to view content on a daily basis on all devices than either Netflix or Amazon streaming customers. Amazon customers are slightly more likely to view content on Smart TVs, tablets and computers than Netflix customers, but Netflix customers are more likely than Amazon viewers to view on smartphones daily.

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Within these statistics lies a story of the influence of content, age and customer mix that tells us a lot about the three services and their customer bases, as well as, perhaps, an explanation of why next-generation TV viewers will continue to construct their own bundles to get the entertainment service they want.

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The above is written by Guy Bisson of Ampere Analysis.

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