Data-Driven Insights - Marketing Strategy
|Posted on 26 April, 2017 at 5:20|
More than 90,000 New Zealanders could quit their Sky subscriptions this year, according to new data that shows the country’s telecommunications and online video content industries are at a tipping point.
Exclusive research provided to Newsroom reveals nearly half of New Zealanders now watch video online, and predicts that skyrocketing demand for video content is beginning to drive demand for cheaper and faster internet here.
Trace Research Ltd’s Andrew Zhu said the data shows Asian consumers are leading the charge in demand for ultra high definition content. He said this content requires 4K televisions and predicted increasing sales of the high tech TVs.
The research puts weight behind recent manoeuvring of Internet Service Providers (ISPs) trying to position themselves as content providers, too.
Spark now gives customers free Netflix with their broadband despite already having its own on-demand viewing service; Trustpower is giving away free 4K televisions to new customers, and Vodafone and Sky haven’t yet given up on plans to merge despite getting the thumbs down from the Commerce Commission.
The data, compiled from an online survey of more than a thousand consumers in February, shows how rapidly consumer behaviour is changing - and how the traditional telco and media models need to adapt to catch up.
Some of the key findings included:
● Nearly half of people watch video online; led by millennials who watch nearly 80 percent of their video content online
● Only 6.8 percent of households have 4K capable TVs, but 15 percent of Asian families do
● A further 17 percent said they would likely buy a 4K TV in the next year
● Sky subscriptions are falling, with just 37.5 percent of households found to have the service.
● Of those Sky subscribers, 16 percent planned to cancel their subscriptions this year
● YouTube is the most accessed video streaming site, with 70.2 percent of viewers using it followed by Netflix at 32.4 percent
● 51.8 percent use TVNZ OnDemand, but only 26.2 use competitor ThreeNow
● Households have an average of eight video-capable devices, and people watch an average of three hours video each day
● Internet TV is the most popular way of viewing online content with 35.6 percent of viewers
● TV series are the most popular type of content, with 42 per cent of viewers choosing to watch them
Zhu said the implications of the survey’s findings were “huge”. It painted two industries on the cusp of “transformation” and vying for market share.
“Companies are trying to position themselves not only as ISPs but also as content providers."
“They are all trying to align themselves with media companies. The higher bandwidth video content means consumers need to download more data which means unlimited data consumption will be an issue."
“More people will consume more data and in the past looking at data allowance, that went to unlimited so what’s next? Speed. High definition content needs speed.”
Zhu said the data was gathered for a commercial client - but was primarily looking at the awareness of, and demand for, 4K.
Trace Research Ltd’s Andrew Zhu says the data shows Asian consumers are leading the charge in demand for ultra high definition content. Photo: Trace Research
“4K awareness is increasing,” he said. “Mainly with millennials, but it is the people aged 30- to 39 years old who have the highest adoption rate.” As survey respondents signalled intent to purchase the devices in the next year, up to 30,000 of the televisions could be sold in New Zealand. The devices were most popular with Asian demographics and new immigrants, said Zhu.
He expected demand for ultra high definition content to also increase, which would drive demand for faster internet and more bandwidth.
“The biggest barrier for many to adopt 4K TV is their bandwidth.” He said New Zealand had the infrastructure to supply faster internet, but unlimited data plans were not as affordable as international markets where 4K content was already widely adopted.
Trustpower was one company capitalising on this, he said. The company offered a promotion where customers received a free high quality 4K television to join the power and internet provider. The same could be said for Spark, which has recently offered free Netflix to internet customers - despite having its own on-demand viewing service Lightbox.
Lightbox was launched as “New Zealand’s version of Netflix” in 2014 before the actual Netflix and other international competitors became legally available here. It has failed to become a market-leading on-demand service, according to the Trace research. Only a quarter of Spark customers surveyed accessed Lightbox in the last year, despite receiving it free with their Spark services. Only 7.4 percent of Vodafone customers accessed it. However, Netflix was popular, independent of which ISP consumers signed up with.
Zhu said it was important to note that the Spark-Netflix partnership happened after the Trace research was conducted. However, Netflix was used by 70.1 percent of Vodafone customers and 68.4 percent of Spark customers questioned in the February survey. When it came to the competition between market leaders Spark and Vodafone, Zhu said survey results had some interesting implications for the two telcos.
“Spark has made a very smart move [partnering with Netflix]. Lightbox hasn’t proven to be successful which might suggest why they are offering Netflix.” The diminishing popularity of Sky, which used to have its services in about half of all New Zealand households, was also interesting, said Zhu.
“If I was Vodafone I would be relieved that the Commerce Commission declined their merger. This data shows Vodafone would be silly to partner with Sky. They would have to spend more money turning Sky’s digital media to a more online viewing platform.” The data showed that Sky was in 37.5 percent of the households of survey respondents, with 16.5 percent of those planning to cancel the service this year. If extrapolated to the New Zealand population, this could amount to 90,000 lost subscribers – a trend in line with Sky’s own reporting of customer losses of 45,000 subscribers in the six months to May 2016.
“Based on findings from this research, the proposed merger might not give Vodafone any advantage because video streaming has become the new trend and none of Sky’s video streaming service has a high penetration rate.” Developments in the ISP and online content sectors were rapid, which meant it was a critical time for companies to act, said Zhu. “The sectors are moving really fast, Netflix could have potentially secured Spark’s place in the online video space which could be very, very good for them.
“Vodafone is different, it needs to move to video streaming and having a partner that is going to facilitate that.” Some of the potential areas for expansion could be in partnerships with YouTube or on platforms that allowed viewers to interact with content more, for example by leaving comments and sharing on social media.
The research was based on an online survey distributed to New Zealand residents through a consumer research panel between February 12 and 17. It is based on a sample size of 1003 valid responses of adults aged 18 years or over, and made up of 48.7 percent males and 51.3 percent females. Demographic weightings were applied using 2013 census population and household distributions and the margin of error is +/-3 percent at a 95 percent confidence level.