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WHAT’S TV WORTH?A P R I L 2 0 1 6

EXCERPT OF FINDINGS

2• Prior to 2015, the age range for this study was 16-64. On slides with trending to 2014 or earlier, the data is for viewers age 16-64 2

• 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 March 2016

We surveyed 1,502 TV consumers…

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SCREENS AND CONNECTORS

ONLINE CHANNEL OR MCN

MVPD

SVOD

The New Normal: The average viewer combines multiple TV sources to make their own TV package

Live VODTV Everywhere

DVR

ELECTRONIC SELL THROUGH

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“What’s TV Worth” tracks how consumers choose, use, and allocate their time across these options

USAGE

DEFAULT

VALUE

DEVICES

CHOICE

Which TV platforms consumers are using, independently and together

The screens viewers watch on, and the devices they use to connect their TVs to the internet

Which sources viewers use as their “default” – the first thing they turn on when they want to watch

Which TV platforms, and which specific brands, consumers perceive to be most valuable

Which features and attributes drive viewers to use certain TV sources over others

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Executive SummaryOverview of Key Findings

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SVOD is emerging as the dominant model for consuming TV

67%prefer streaming

68%

37%

14%

use at least one SVOD, up from 47% in 2015

use 2 or more SVODs – twice as many as last year (19%)

use 3 or more, up from 2% last year

More users are adopting SVOD platforms, and many are using more

than one

Rising Usage

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SVOD is emerging as the dominant model for consuming TV

67%prefer streaming

68% use at least one SVOD, up from 47% in 2015

37%subscribe to 2 or more SVODs – twice as many as last year (19%)

14% subscribe to 3 or more, up from 2% last year

More users are adopting SVOD platforms, and many are using more

than one

43%

49%

61%

46%

60%

67%

PayTV

AmazonPrime

Netflixstreaming

2016

2015Pay TV

Rising Usage High Perceived Value

% RATE “GOOD” OR “EXCELLENT” VALUE

Perceptions of major SVOD platforms continue to rise, while pay TV is flat

Ç

Ç

Ç Significantly higher than 2015

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72%

70%

42%

36%

TV Set

Computer

Tablet

Smartphone

For the first time, more online viewing happens on TV sets than any other device

WHICH DEVICES HAVE YOU USED TO WATCH ONLINE TV SHOWS?

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Traditional linear viewing continues to drift farther from the hub of the TV universe

43%

35%

27%

All viewers

Netflix subs

Age 18-24

2016: % WHO DEFAULT TO LIVE TV

Live TV’s position as the default source for TV continues to fall

Among viewers Age 16-64

55%

43%

32%

2014

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State of the CordTrends in MVPD usage

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WHICH OF THE FOLLOWING BEST DESCRIBES YOU?

As in past years, those with no pay TV are split roughly evenly between cord cutters and cord nevers

6%

5%

Subscriber: Currently have a cable, satellite, or telco TV subscription

Q2A. Do you currently have any of the following television services in your home? Q2B. Have you ever had a cable, satellite, or fiber optic TV subscription in your name?

Among 16-74 year olds

89%Cord Cutter: Don’t have pay TV now, but did in the past

Cord Never: Don’t have pay TV now, and never have

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7% 7% 7%

24% 22% 22%

39% 41% 42%

30% 30% 29%

2016 2015 2014

Q2J1: One year from now, how likely are you to still have at least some service from [PROVIDER FROM Q2A]?

…and fewer than 10 percent say they definitely plan to cut their pay TV service

HOW LIKELY ARE YOU TO HAVE A PAY TV SUBSCRIPTION A YEAR FROM NOW?

69%

Among 16-64 year olds with a Pay TV subscription

Definitely or

Probably will

Definitely Will still have my subscription

Probably Will

Might or might not

Definitely/ProbablyWon’t

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Use of Online SourcesThe evolution, televised

14Q3A: Have you ever watched TV programs or movies from an online source, on any device?

80 percent of viewers watch from at least one online source – the highest since we began tracking

74% 78% 80%

2014 2015 2016

WATCH TV OR MOVIES FROM AT LEAST ONE ONLINE SOURCE:

Among 16-64 year olds

2016

15

68%

37%

30%

20%

16%

13%

Q3A: Have you ever watched TV programs or movies from an online source, on any device?

WHICH OF THE FOLLOWING HAVE YOU USED TO WATCH TV SHOWS OR MOVIES ON IN THE PAST SIX MONTHS?

Online streaming subscriptione.g. Netflix, Amazon Prime, Hulu

TV network site or app

Free aggregator e.g. Crackle, free content from Hulu

MVPD site or app

Online shows and movies bought/paid for individually

“Unofficial” sitese.g. Putlocker, uTorrent, Pirate Bay

Among 16-74 year olds

The most common online source: SVOD subscriptions

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Online streaming subscriptione.g. Netflix, Amazon Prime, Hulu Plus

TV network site or app

Free aggregator e.g. Crackle, free version of Hulu

MVPD site or app

Online shows and movies bought/paid for individually

“Unofficial” sitese.g. Putlocker, uTorrent, Pirate Bay

68%

37%

30%

20%

16%

13%

47%

41%

33%

24%

19%

14%2016

2015

Q3A: Have you ever watched TV programs or movies from an online source, on any device?

WHICH OF THE FOLLOWING HAVE YOU USED TO WATCH TV SHOWS OR MOVIES ON IN THE PAST SIX MONTHS?

Ç

Ç

Among 16-74 year olds

SVOD usage has shot up since 2015

Ç

Ç Significantly higher than 2015

17

18%

28%

62%

11%18%

50%

9%15%

43%

g 2014 g 2015 g 2016

Q3B. Do you currently have a Netflix subscription specifically, for either its online streaming service or its DVD by mail service? Q3D: Which of the following other online streaming subscription services does your household subscribe to?

Significantly higher

DO YOU CURRENTLY USE…?

Among 16-64 year olds

Use of Netflix, Amazon, and paid Hulu subscriptions continue to grow

*

*Hulu 2014-15 data shows penetration of Hulu Plus; 2016 data is based on Hulu Limited/No Commercials subscription

Ç

Ç

Ç

Ç

Ç Significantly higher than 2015

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Default TV SourcesThe TV bundles consumers create on their own

19Q4F. 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?

WHAT’S YOUR DEFAULT SOURCE FOR TV?

Among 16-64 year olds

43%

17%

19%

45%

19%

16%

55%

18%

11%

Live TV from

MVPD

2016

2015

2014

Shows on your DVR

2016

2015

2014

2016

2015

2014

In 2016, more viewers default to watching on Netflix than to watching shows on a DVR

20Q4F. 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” SOURCE FOR TV SHOWS: AMONG MILLENNIALS

32%

12%

31%

34%

14%

23%

43%

17%

19%

Live TV from

MVPD

2016

2015

2014

Shows on your DVR

2016

2015

2014

2016

2015

2014

Among Millennials, Netflix as the default source has jumped since 2015 (now tied with live TV)

Ç Significantly higher than 2015

Ç

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TakeawaysThings to remember

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Takeaways

As a category, SVOD continues to add users (including default users)

Led by strong growth for Netflix, Amazon, and Hulu—along with inroads from standalone services—SVOD subscriptions have jumped more than 20 points in the past year.

Consumers have internalized that online TV is worth paying for

Netflix is seen as a better value than free-with-ads platforms. And the percentage using the free version of Hulu is just half what it was two years ago.

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2

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Takeaways

Use of multiple SVODs is becoming commonplace

The number of people who say they use two or more SVODs has doubled in a year. And the number of people who only use one has declined.

The vast majority of viewers still have pay TV

Cord cutters are rare, the numbers are not climbing, and single-digits say they’ll drop pay TV in the coming year.

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4

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Takeaways

But retaining share of mind is a different story

• Those who change their MVPD service are more likely to cut back channels than to add them

• The number of consumers who “default” to live TV is at its lowest since we started tracking.

• It’s lower still among younger viewers

• Netflix is gaining momentum as a default source of TV

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