TV viewing habits are changing so quickly that there are serious “questions about how UK viewers will be served in the future”, according to Ofcom.
The Ofcom Media Nations report found that younger viewers, in particular, have shifted towards broadcast TV alternatives like YouTube more than ever before. But it is not all bad news; amid wider declines of TV viewing hours, public service broadcasters retained their share, viewers were generally satisfied with the output and leaned into regional content the global giants can't generally muster.
UK TV average daily minutes viewed declined across most ages; in the 16-24 demographic, they have halved since 2010. In contrast, that cohort spent more than an hour a day on YouTube for the first time ever.
16-24s watch 24 minutes less live TV, 14 minutes less recorded TV and 10 minutes less SVOD content per day than the 25-34 segment, whose viewing time is also in decline.
Two-fifths of UK adults said that streaming services are their favourite way to watch TV and films. 38% of subscription video on-demand users said they “can imagine not watching broadcast TV at all in five years’ time”.
A record 47% (13.3m) of UK homes now boast a subscription to either Netflix, Amazon Prime Video, Now TV or Disney Life; a sharp 8% rise upon 2018. Additionally, video subs overtook traditional pay-TV services (such as Sky, Virgin Media, BT and TalkTalk) which totalled 14.3 million in the first quarter of 2019.
The leading SVOD services like Netflix and Amazon Prime TV remain ad-free for now. But most Netflix subscribers say they would leave the service if that was to change – and the US giant still has a massive gulf in its earnings. It recently concerned stakeholders with a plateau in user growth, raising questions over whether the streaming services disrupting the TV ecosystem are able to remain sustainable in their current form. There were 3.5m more paid subscriptions than in 2018.
TV still strong
Traditional TV is not to be written off, however, as it still accounts for 69% (an average of three hours 12 minutes a day) of TV time. The average has dropped by 20 minutes a day in the last two years. It is down 50 minutes a day since 2010.
Furthermore, the five main public service broadcast channels from BBC, ITV, Channel 4 and Channel 5 held their share of viewing (51% 2017, 52% 2018), with three-quarters of viewers claiming to be very or fairly satisfied with output.
Combined, they delivered 32,000 hours of original, homegrown productions in 2018 – 125 times more than the SVODs – a reminder of what could be lost if viewers migrate to the global services.
Among the 18-34 demographic, ITV attracts the most viewing minutes in broadcast TV, ahead of BBC One, Channel 4 and its other competitors. It's no surprise the broadcaster has commissioned a winter series of Love Island to further boost these numbers, despite the risk of tiring out its most popular IP.
Across all demographics, streaming viewing is up seven minutes a day to 26 minutes. YouTube increased by six minutes to 34 minutes a day.
Yih-Choung Teh, strategy and research group director at Ofcom, said: “The way we watch TV is changing faster than ever before. In the space of seven years, streaming services have grown from nothing to reach nearly half of British homes.
“But traditional broadcasters still have a vital role to play, producing the kind of brilliant UK programmes that overseas tech giants struggle to match. We want to sustain that content for future generations, so we’re leading a nationwide debate on the future of public service broadcasting.”
A ThinkBox spokesperson said: “Ofcom’s report shows that TV remains incredibly popular and that UK broadcasters – rapidly growing streaming services themselves - account for the vast majority of video viewing, despite the huge amount of choice we now have. This is in part due to the brilliant British content they make that US services don’t provide.
"What isn’t in Ofcom’s report is the time people spend seeing video advertising. Here broadcasters are even more important, accounting for 95%. TV viewing is changing as it redistributes across live and on demand; but what isn’t changing is how critical TV remains for getting ads seen.”
Julian Aquilina, a research analyst at Enders Analysis, said TV ad sales houses are jointly promoting TV to a new generation of digital-first agencies and buyers. The Drum got a taste of this joint pitch at The Big TV Festival last year.
TV broadcasters are also increasingly attracting online spend. “Online is a growth area for broadcasters too, with online video-on-demand services like All 4 and ITV Hub growing audiences and revenues year after year, and online-friendly investment is going into programmatic buying and more sophisticated targeting.”
Despite a decline in TV ad revenue, “TV advertising is uniquely effective for many brands, which is TV's first line of defence.”
To grow TV advertising’s share, younger viewers must be attracted to the proposition. “Whilst young people are watching plenty of Netflix and Amazon, the programmes are largely what you would find on traditional TV, in fact mainly produced by traditional broadcasters." He pointed to the likes of Love Island or major sporting events. "[Different TV formats] serve different purposes, and it’s very hard to see why young audiences would desert TV completely.”
Questions remain over a Netflix move into advertising, but YouTube has already seized TV ad spend. The broadcast TV ad revenue drop was less in 2018 (-3.9%) than in 2017 (-7.5%) indicating a return to health.
Aquilina concluded: “There are some massive differences between the broadcast and online worlds. TV, rightly, is a tightly controlled environment, with content and advertising regulations and age restrictions. Online still feels much more like the wild west, with its scale and nature proving to be a significant challenge for regulators. Brand safety is key for advertisers, and we have seen many issues over the last couple of years with platforms like YouTube.
Matt Rhodes, head of digital and content strategy at Engine, said advertisers should be aware of the increasing mobile viewing – TV ads on tiny screens with no volume don’t perform as well. Furthermore, audiences are moving to platforms where “opportunities to buy advertising are limited” like Netflix and Amazon, reducing the threat to TV ad spend at the moment.
Younger people are increasingly watching video on mobile, either because it is their preferred device – or because they don’t have control of the household’s primary screen. Research still needs to be done about how access determines to view patterns, said Rhodes. While YouTube hit record viewing minutes, questions remain over whether it is truly a TV platform with a large segment using it as a free music player.
“Will this behaviour continue or as this audience grows and has greater disposable income of their own, will they pay for an easier listening experience for music?”
“Large national events continue to drive significant viewing, and significant opportunities to reach large and broad audiences on broadcast for advertisers. But outside of these events, on ITV viewing time is heavily focused on a small number of properties. 50% of all time spent watching ITV is spent watching just ten different programmes – including Coronation Street, X Factor and I’m a Celebrity!.”
He noted: “There is a limited opportunity for advertisers to reach significant audiences. And with these same audiences complaining that ad breaks in their favourite shows are too frequent and too long, broadcasters can’t just pack more ad time into these popular shows.”
Josh Krichefski, UK chief executive at MediaCom, said the boom in SVOD was initially driven by user convenience – but now they offer top content and watercooler moments. "That isn’t going to change – but what will be interesting is whether the current leaders can maintain their position."
The SVOD space is going to get very busy in 2019, he said. "Audiences will not pay for every single VoD service. They will make a choice on which to keep and which to get rid of. Ultimately, the winner in the race for subscribers will be whoever can consistently produce new and refreshing content. And audiences will take their eyeballs elsewhere if they don’t like what they see.”