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Households That Watch More Online Video Also Rent More DVDs: Research

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 research firm Parks Associates.

The firm’s “All Eyes on Video” report is 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.

Approximately 5.5 million homes would be open to canceling pay TV due in part to the availability of online video, according to the new report. At the same time, one-half of these households are also considering a switch to a new pay-TV provider, indicating 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 a 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 (e.g., TV Everywhere), which highlights an opportunity for traditional pay-TV providers to solidify their base through the deployment of such features. Offline video consumption is also higher. Their median number of DVD rentals from the last six months is 18, compared to 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.” By Parks Associates

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