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DECODING THE DEFAULTJ U N E 2 0 1 6

EXCERPT OF FINDINGS

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Viewers have created their own TV bundles

• Use of multiple SVOD subscriptions is becoming the norm

• The average pay TV sub with broadband also uses 2 or more online TV sources

• Connectors and Smart TVs give one click access to a multitude of platforms

In the end: which platforms are used may be less important than which are used first, and most

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Specifically: which TV sources viewers…

USE FIRST

IN WHICH SCENARIOS

WHY ONE OVER OTHERS

USE MOST

The goal of this study: to evaluate how consumers use the different TV sources they have available

Which platforms are emerging as consumers’ default source, and which are usually backups

Which sources account for the greatest proportion of viewers’ time?

Which sources are most likely to be used first in specific situations or environments?

Why do people choose one platform as their default, and what are the biggest unmet needs?

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• Age 16 to 74• Watch at least 5 hours of TV per week• Have broadband at home• U.S. census balanced• Data collection completed in June 2016

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We surveyed 1,217 TV consumers

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TV SourcesWhere consumers get their TV

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We’re beginning to see the TV ecosystem converge around two primary platforms

The vast majority of viewers with broadband still subscribe to pay TV87%

But two-thirds subscribe to an SVOD, up 20 points since last year66%

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This year for the first time, the majority of viewers with broadband have pay TV and at least one SVOD

Have MVPD + SVOD

56%

MVPD only

31%

SVODonly

10%

Neither3%

All Viewers with Broadband

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Netflix makes up the lion’s share of SVOD accounts…

57%

24%13%

TOP THREE SVOD SERVICES AMONG ALL CONSUMERS

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% THAT USE EACH:

31%

7%use Hulu only

17%use Amazon only

54%use Netflix only

46%Also use Hulu and/or Amazon

83%Also use Netflix

93%Also use Netflix

57%

24%

13%

AMONG USERS OF EACH …

…and almost everyone that uses Amazon or Hulu also uses Netflix

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TV TimeHow viewers allocate their total viewing across sources

11

30

42

59

25

14

5

10

15

18

7

7

4

5

4

23

18

13

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Q5: About how much of your TOTAL TELEVISION VIEWING would you say is from each source?

HOW IS YOUR TOTAL TV VIEWING TIME DISTRIBUTED ACROSS SOURCES?

The live TV/Netflix ratio differs dramatically by age: almost equal for Millennials, heavily live TV for older consumers

Age

18-34

Age

35-54

Age

55 + Ç Significantly higher vs. both age groups

È Significantly lower vs. both age groups

ÇÈ

È

È

È

Live TV DVR OtherVOD TVE

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DefaultsWhich TV sources people turn on first

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48%

15% 15%3% 2% 3%

Live TV Netflix DVR VOD TVE Hulu (paid)

Turning to defaults for TV itself, fewer than half say live TV is their first choice—but it’s still higher than any other source

WHAT’S YOUR DEFAULT TV SOURCE?

Among All (Users and Non-users)

Q5A: Think about the different sources you use for TV programs. Which would you say is your “default” source--the one you are most likely to turn to first when you want to watch something?

% DEFAULT

38%

27%

49%

12%

64%

3%

Live TV

Netflix

Age 18-34

The story differs by age: younger viewers are much less likely to default to live TV, more likely to name Netflix

WHICH OF THESE SOURCES IS YOUR DEFAULT SOURCE FOR TV SHOWS?

Q5A: Think about the different sources you use for TV programs. Which would you say is your “default” source--the one you are most likely to turn to first when you want to watch something?

Ç Significantly higher vs. other age groups

È Significantly lower vs. other age groups

Live TV

Ç

Age 35-54

Age 55+

È

Ç

È

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Why tracking usage of platforms isn’t enough:

Q3A: Tell us if you currently use any of the following to watch TV shows. (Please select all that apply)Q5A: Think about the different sources you use for TV programs. Which would you say is your “default” source--the one you are most likely to turn to first when you want to watch something?

AMONG ALL VIEWERS:% who use each source:

Live TV

87% VOD

63%Netflix

57%DVR

54%Hulu

13%

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Some sources are widely used, but not as default sources.

Q3A: Tell us if you currently use any of the following to watch TV shows. (Please select all that apply)Q5A: Which would you say is your “default” source--the one you are most likely to turn to first when you want to watch TV?

Live TV

87% Hulu

13%

55% 3% 27% 32% 26%

AMONG ALL VIEWERS:% who use each source

AMONG USERS OF EACH:% who say it’s their default

VOD

63%Netflix

57%DVR

54%

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ImpactHow does one’s default influence TV purchase behavior?

18Q2I: Specifically, have you added or cut back on any of the following in the past year?

HAVE YOU ADDED OR CUT BACK ONTHE CHANNELS YOU PAY FOR IN THE PAST YEAR?

Among those who have made changes to pay TV package in past year

23%

32%

AddedCut Back

40%

38% 2015

2016

Cord shaving? Fewer pay TV subs say they added channels to their pay TV plan this year…

Ç Significantly higher vs. 2015

È Significantly lower vs. 2015

È

19Q2I: Specifically, have you added or cut back on any of the following in the past year?

HAVE YOU ADDED OR CUT BACK ONTHE CHANNELS YOU PAY FOR IN THE PAST YEAR?

20%

26%

25%

AddedCut Back

32%

43%

59%

Live TVÇ Significantly higher vs. Live TV

DVR

Ç

Default Source is…

Among those who have made changes to pay TV package in past year

…and pay TV subs who default to watching on Netflix are much more likely to have cut back

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ConclusionsThings to remember

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Conclusions

MVPD subscriptions and SVOD go hand in hand

For the first time, the majority of viewers have both an MVPD subscription and an SVOD

Live TV is still the single most common TV default—however…

It’s much lower among key viewer segments. For example: only 38% of Millennials say that live TV is their default, vs. 64% of those age 55 +

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Conclusions

Netflix is primarily a complement to live TV

Even Netflix subscribers are more likely to default to live TV than they are to Netflix. And more viewers say that Netflix is their top backup source, than say it’s their default

But Netflix is gaining ground as a default source with some important audiences

For example:

• Younger viewers: 27% of 18-34 year olds say that Netflix is their default—just 11 points behind linear TV

• Binge viewers: Almost a third (31%) say that Netflix is their default—tied with linear TV

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Conclusions

Viewers use Amazon and Hulu in conjunction with Netflix—not instead of it

Use of Hulu and Amazon is climbing. However, Netflix still accounts for the lion’s share of SVOD subscriptions. And almost all Hulu and Amazon subscribers *also* have Netflix: very few viewers use either of those platforms on their own

These complements to Netflix serve different purposes

• Hulu: Used in conjunction with Netflix because it offers the closest thing to current, linear content

• Amazon: A distant second choice to Netflix, in part because subscribers didn’t necessarily sign up for TV specifically

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