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Survey: Consumers Are Doubling -- or Tripling -- Down on Streaming TV

By Danny Vena – Updated Apr 14, 2019 at 4:48PM

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A new study shows streaming video isn't a zero-sum game. That's good news for upstarts as well as established competitors.

While it's becoming ubiquitous, the streaming video industry is still in its infancy. Netflix (NFLX -0.27%) is the undisputed leader in the space, but the competition is coming fast and furious, rushing to play catch-up. In what is probably the worst-kept secret in tech at the moment, Apple (AAPL 2.44%) is holding an event on March 25 that has been publicized with the tagline "It's show time." The company is expected to announce its entry into the streaming TV market. Disney (DIS -2.21%) is hosting an investor day on April 11 at which it will demonstrate the platform for its upcoming Disney+ service and share previews of some of the original content that will debut on its direct-to-consumer service later this year. (AMZN -8.43%) and Hulu are already well-established competitors.

With this growing list of streaming video options, investors are asking themselves which company they should pick to capture the significant audience revenue that still out there. Recent research suggests that's the wrong question to be asking.

Woman wearing headphones and eating popcorn while watching streaming video on a laptop in a dark room.

Image source: Getty Images.

Three's a crowd?

Viewers aren't limiting themselves to just one streaming service, according to Deloitte's 13th annual Digital Media Trends survey. The study of 2,003 consumers was conducted between December 2018 and February 2019 and found that, on average, consumers now subscribe to three streaming services. The survey also revealed that for the first time, a higher percentage of households subscribe to streaming than to pay TV, which is understandable, given that there are now more than 300 streaming video options to choose from.

Netflix has long said there would be multiple winners in the space. In the company's Q4 2017 shareholder letter, Netflix addressed the growing competition:

As this trend becomes increasingly evident, more companies are entering the market for premium video content. ... The market for entertainment time is vast and can support many successful services. In addition, entertainment services are often complementary given their unique content offerings. We believe this is largely why both we and Hulu have been able to succeed and grow. [emphasis mine]

Turns out the company was right. Streaming video viewers are opting for more than one service and customizing the choices to meet their personal tastes. This means that, in addition to the established players, late arrivals like Disney and Apple can still carve out a successful niche by offering consumers something that's currently missing from the mix.

Check out the latest earnings call transcripts for Netflix and other companies we cover.

The biggest draw

Another thing Netflix has long said is that spending on original content is the best use of its finite resources, though some have worried that the company was burning far too much cash to stock its library with original content. The survey supports Netflix's thinking here too.

The survey found that 57% of U.S. streaming consumers said high-quality, original content was the biggest contributor to streaming video growth. Among millennials, that number rose to 71% who subscribed based on original content. This news bodes well for Apple, which has made a significant number of original-content deals over the past year to contribute to its rumored new service. Disney is already among the kings of intellectual property and is creating new programming just for its upcoming service, Disney+.

A young man and woman smiling while sitting on a couch looking at a tablet.

Image source: Getty Images.

Another factor working in Netflix's favor is the company's insistence on remaining commercial free. Among survey respondents, 75% said they would be happier with cable if there were fewer ads, and 44% said "no ads" was the top reason they subscribed to a paid streaming service. It remains to be seen if there will be commercials on Disney's or Apple's service, but this is something they should take note of. Amazon provides both commercial-free programming on Prime and ad-supported content via its IMDb Freedive.

Millennials -- those the survey said were 22 to 35 years old -- are among the most voracious streaming fans. The survey found 37% of U.S. millennials binge-watch shows every week, consuming four hours of content in one sitting. Paid services get more viewing than free services, at 46% and 29%, respectively. And it isn't just television series that are getting the love. Among millennials, 70% reported streaming movies every week, and 40% said they streamed them every day.

Too much is never enough

It wasn't all good news for Netflix. Those surveyed said one of the biggest frustrations was having a program they like disappear from a streaming library, which is happening more frequently as companies pull back content to start their own services. Netflix still relies on licensed programming for a big chunk of its library. And 57% of consumers confessed frustration over shows that have gone missing. This is generally not an issue with original content, but it serves as a learning point for services establishing their operations.

Another complaint had to do with the range of content choices and viewers having difficulty finding what they are looking for. Nearly half (49%) of those surveyed said the sheer volume of content available makes it hard to choose what to watch. Search ease was also on users' minds, as 43% said they give up on the search if they haven't found something within a few minutes, and 48% reported difficulty finding programs across multiple services.

Netflix has attempted to address this pain point by auto-running short trailers for programs when viewers log in to the platform. While ads for specific high-profile shows are shown to all subscribers, ads for other programs are selected based on the consumer's viewing history. Amazon also promotes its programming with ads that run between episodes of television series on the service.

The biggest takeaway from this survey is that this isn't a zero-sum game. Consumers are opting for an average of three streaming services. For Netflix and others to prevail, they only need to be one of the three.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Apple and Walt Disney and has the following options: long January 2021 $85 calls on Walt Disney. The Motley Fool owns shares of and recommends Amazon, Apple, Netflix, and Walt Disney. The Motley Fool has the following options: short January 2020 $155 calls on Apple and long January 2020 $150 calls on Apple. The Motley Fool has a disclosure policy.

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