OTT Streaming Services Overtake Traditional Pay TV in the UK says Ofcom

There are now more UK subscriptions to paid streaming services Netflix, Amazon Prime Video and Now TV than there are to traditional pay TV services, according to UK communications regulator Ofcom. This marks the first time that subscription video on-demand (SVOD) services have overtaken pay TV in the UK, though Ofcom emphasised that broadcast TV remains popular, and that the shift isn’t a death toll for traditional pay TV.

Ofcom’s Media Nations report, released today, said that according to BARB Establishment Survey data there were 15.4 million subscriptions to Netflix, Amazon Prime Video and NOW TV  in Q1 of this year, compared to 15.1 million subscriptions to pay-TV services. This does however include subscriptions to multiple on-demand services within the same household. Overall, 11.1 million households in the UK have at least one subscription to one of the three SVOD services.

The report says that investment in original content has been a key driver of this growth for SVOD services. Thirty-eight percent of UK Netflix users cited “to watch original series made by the provider” as a reason for signing up to the service.

Ofcom also found that last year pay TV subscription revenues also fell in the UK for the first time after a period of sustained growth, falling by 2.7 percent to £6.4 billion. TV advertising income also fell significantly, declining seven percent year-on-year in real terms to £3.9 billion.

While this may all appear to be grim reading for traditional broadcasters in the UK, Ofcom stressed that this isn’t as bad news as it might seem.

Firstly, while broadcast TV viewing has declined, it still accounts for the vast majority of total TV and audiovisual daily viewing. Time spent watching broadcast TV content fell by 4.2 percent to an average of 3 hours 22 minutes per day last year, but made up 71 percent of total time spent watching video content, compared to 29 percent spent on non-broadcast content like YouTube and SVOD services.

Many traditional broadcasters are themselves also capitalising on changes in viewing habits. While TV ad revenue fell by seven percent last year, this didn’t account for income from subscriptions and ad sales on broadcaster’s digital platforms. Online audiovisual revenues grew 25 percent year-on-year in real terms to £2.26 billion, and around 30 percent of this was from broadcast video-on demand players like All 4 and ITV Hub.

The growth of superfast broadband and increased penetration of connected TVs also means more non-broadcast content is being watched on the big screen. Time spent using a TV set has remained constant in the UK, despite the fall in time spent watching broadcast TV channels. This is good news for traditional broadcasters who can still pitch their ‘living room environment’ to advertisers, even when content is watched on their VOD services.

Ofcom did however point out a few trends which might be of concern to the UK’s traditional broadcasters. As expected, the report shows that younger viewers are driving the change in viewing habits, and the 16-34 age range watches more digital video content than broadcast content. Traditional broadcasters may well have to find either a way to reverse this trend, or to capitalise on it, in order to maintain their long term health.

Ofcom also highlighted a few risks to public service broadcasters in the UK, finding that PSBs are investing less money in UK made content, and that money spent on genres including children’s programming and comedy are at record lows. Ofcom has previously called on British PSBs to collaborate in order to remain competitive in the digital age.

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