How subscription video on-demand services like Netflix are contributing to the demise of pay-TV

The way viewers are watching TV is rapidly evolving.

Every year, more viewers are ditching their expensive pay-TV subscriptions and opting instead for subscription video on-demand (SVOD) services like Netflix, Hulu, and Amazon Video, as well as premium services from HBO and Showtime. Rising demand for SVOD services, which allow viewers to stream the programming they want anywhere, has led many to question what the future of video entertainment looks like - and whether traditional pay-TV has a place.

In a new report from BI Intelligence, we examine how the growth of SVOD services is coming at the expense of the pay-TV industry. We analyze the state of the pay-TV industry and map out which demographics are more likely to stop buying traditional TV packages. We also discuss the user base, original content offerings, and subscription models of the major subscription streaming services available today, including Netflix, Hulu, and Amazon Video. Finally, we look at how traditional pay-TV companies and premium channels like HBO and Showtime are addressing the shift to digital viewing, as well as the implications of their response for advertisers.

Here are some of the key takeaways:

• Those abandoning pay-TV packages fall into three main groups: cord-nevers, cord-cutters, and cord-shavers. Whereas video streaming services have found favor with younger viewers in particular, an increasing portion of older subscribers also are leaving behind their pay-TV packages. Still, younger viewers watch four times as much video content online than older viewers.
• Netflix is the largest SVOD service and will continue to dominate the industry with an impressive original content lineup and aggressive expansion plans.
• Amazon is trying to compete with Netflix by investing significant resources in original content.
• Hulu is the third-largest SVOD service, but the only one to offer ad-supported membership tiers. Hulu has been the slowest to roll out original and exclusive content, but it has inked numerous deals in the past year to boost its content library.
• Pay-TV companies are responding to the rise of SVOD services by offering subscribers "skinny bundles" and their own streaming services.

In full, the report:

• Illustrates the fall of the traditional TV package and the rise of broadband only cable subscriptions.
• Lays out the different types of viewers that are leaving behind pay-TV: cord-cutters, cord-shavers, and cord-nevers.
• Examines the leading SVOD services including Netflix, Amazon Prime Video, Hulu, and premium channel offerings from HBO and Showtime.
• Explains the various ways that pay-TV companies are responding to the rise of SVOD services, notably skinny bundles and standalone streaming services.
• Considers what the migration to SVOD services means to marketers.

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