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Magid Media Futures: Digital Video, OTT, SVOD, Messaging, Social Networks, Gaming, Esports and VR

CONFIDENTIAL AND PROPRIETARY © 2016 by Frank N. Magid Associates, Inc. Any duplication, reproduction or usage of this document or any portion thereof without the written consent of the firm is prohibited.

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§  Magid is renowned for its work in the media and entertainment industry, with both traditional and emerging players. We help develop and launch new products and services and work with clients to re-imagine their businesses, furthering content, marketing, distribution, advertising sales, programming, promotion, and branding efforts.

Digital Games Print Media Mobile Cable MSOs TV & Cable Networks

About Magid

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Methodology

•  Nationally representative online survey of 2,400 consumers ages 8-64. The sample is matched to the US Census. The study evaluates media attitudes and behaviors of consumers as it relates to devices, video, TV, gaming, social networking and more.

•  This sample represents approximately 200 million Americans

•  Data was collected from July 21 – August 5, 2016 •  A high quality online research panel and data collection firm was

used for recruitment and data collection

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DIGITAL AS PRIMARY ENTERTAINTMENT SOURCE

4

5

Top Platform for Entertainment – Digital Options Overtake TV

32%

44%

4% 6%

2%

29%

46%

6% 5% 3%

33%

39%

8% 7% 8%

28%

40%

10% 7%

9%

24%

39%

13% 10%

8%

25%

37%

14% 12%

6%

Laptop or PC Television Smartphone Video game console Tablet

2011 2012 2013 2014 2015 2016

What is your primary medium for entertainment? Select only one.

Base: Total N=2400. Q1.2 What is your primary medium for entertainment? Select only one.

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37%

25%

14% 12%

6% 6%

21%

31%

20%

16%

5% 6%

20% 21% 18%

22%

13%

5%

Television Laptop or PC Smartphone Video game console

Tablet A connected TV device

Total Millennials Plurals

What is your primary medium for entertainment? Select only one.

Base: Total N=2400. Q1.2 What is your primary medium for entertainment? Select only one.

Digital Devices Exceed TV As Primary Entertainment Source Among Younger Generations

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CORD CUTTING

7

8

1.9% 2.2% 2.7% 2.9%

3.8%

5.7%

Cord-Cutters (18-64)

2011 2012 2013 2014 2015 2016

% of Pay TV Subscribers Extremely Likely To Cancel Pay TV Service in Next 12 Months, And Will Not Switch to Another Pay TV Service

(Among 18-64 Pay TV Subscribers)

Intent To Cord-Cut Continues To Rise

8.7% of 25-34 year-old Pay TV Subscribers say they are very likely to cut

Base: Total ages 18-64 with pay TV service, N=1636. Q10.4. How likely are you to cancel your pay TV service in the next 12 months? Q10.5 If you cancel your current pay TV service in the next 12 months, which of the following are you most likely to do? Based on those ‘extremely likely’ to cancel pay TV N=170

9% of Millennial Pay TV Subscribers say they are very likely to cut

9

20%

20%

29%

32%

36%

39%

45%

75%

I don't watch enough TV to make it worth it

I can watch the TV shows and movies I like on DVD

It's too expensive

I am satisfied with online streaming options on my TV from services like Netflix, Hulu*

I can watch the TV shows and movies I like on the Internet*

I have entertainment options on the Internet*

I am satisfied with what I can receive over-the-air

Combined OTT Reasons*

Reasons for Canceling Pay TV Service (Among very likely cord-cutters)

Combined OTT reasons 2013: 54% 2014: 76% 2015: 77%

Cost reason: 2014: 40% 2015: 30%

OTT Remains Key Driver Of Cutting, Far More Than Cost

Base: Those ‘very likely’ to cancel their pay TV service who will ‘go without pay TV service’ N=56. Q10.6 For which of the following reasons will you go without pay TV service?

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52% Of consumers with a TV set are interested in subscribing to a ‘skinny bundle’. 32% are very interested.

$48: Average fee willing to pay for skinny bundle

Are Skinny Bundles The Future?

Base: Among those with a TV in the HH – Total N=2258; Millennials N=837. Q12.1: How interested are you in subscribing to a skinny bundle or picking and choosing a cable/satellite package with a smaller number of channels at a lower price than a typical cable bundle? Base: Among those interested in a skinny bundle (4-5) and who watch a major channel – Total N=1166; Millennials N=459. Q12.1B: How much would you be willing to spend on this skinny bundle per month? *Skinny bundle defined as picking a cable/satellite package with a smaller number of channels at a lower price than a typical cable bundle.

“Skinny bundle” is defined as picking a cable/satellite package with a smaller number of channels at a lower price than a typical cable bundle

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OTT AND DIGITAL VIDEO

11

12

87%

32%

92%

41%

93%

44%

Ever Daily+

2014 2015 2016

Frequency of Viewing Any Type of Video Online on a Computer, Tablet or Smartphone

Daily Online Video Viewing Still On The Rise

Base: Total N=2400. Q34: About how often would you say you watch online video? This is any online video you view on a computer, smartphone, tablet, or TV connected to the Internet.

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53% 64%

53%

26%

59% 70%

64%

37%

70%

84% 80%

41%

72% 86% 83%

43%

Total Millennials Families with kids in HH Boomers

2013 2014 2015 2016

SVOD Subscriptions

Meanwhile, SVOD Subscriptions Have Been Rising Steadily In All Major Demos

Base: Total N=2400. Q28: Do you, or does anyone in your household, subscribe to any of the following? Select all that apply.

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30% 32%

19%

10% 8%

28% 27%

22%

11% 13%

None 1 2 3 4+

2015 2016

# Of SVOD Services Subscribed In A HH

Base: Total N=2400. Q28: Do you, or does anyone in your household, subscribe to any of the following? Select all that apply.

SVOD Market Growing Among Existing Users

2016: Among those who subscribe to at least 1 SVOD service, 63% subscribe to 2 or more

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33% Of ALL video viewing is done on smartphone

or tablet.

46%

19%

14%

20%

Online video on a computer

Video on a smartphone

Video on a tablet

TV connected to the Internet

Among Online Video Viewers

2.5X More online video viewing is being done on TVs connected to the Internet from 2014.

Online Video Viewers Watch One-Third Of All Digital Video On Mobile (Smartphone/Tablet)

Base: Online video viewers, N=2228. Q34.2: In a typical week what percentage of video you watch is viewed online on a computer, smartphone, tablet or a TV connected to the Internet? Must add up to 100%.

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% of device owners who watch full-length TV or movie content on their devices

(Among mobile device owners) 27%

of smartphone users agree “my phone is my TV.”

40%

of Millennial smartphone users agree “my phone is my TV.”

16%

38% 42%

28%

46% 53%

Smartphone Tablet Mobile Devices

2014 2016

Mobile 2016 - Base: Smartphone users, N=2307. Tablet users, N=1843. Smartphone and tablet users, N=1740. Q11.2 Which of the following types of video do you watch regularly (once per week or more) on your tablet? Select all that apply. Q30.2Which of the following types of video do you watch regularly (once per week or more) on your smartphone? Select all that apply.

Smartphones Increasingly Becoming TV Screens – More Full-Length Content Viewed On Mobile Devices

17

22%

18%

20%

30%

17%

22%

31%

33%

Computer connected to TV

Blu-ray player

Internet streaming device

Video game console

2016 2015

Methods Used For Streaming Video To A TV

74% Connect a TV to the

Internet for streaming (+15% from 2015)

50% Millennials

37% Millennials

Video Entertainment 2016 – Base: Total N=1600. Q.20.1 Which of the following do you connect to a TV in order to watch TV shows and movies streaming from the Internet on a TV screen? Select all that apply.

Three Quarters Of Consumers Use A Connected TV – Internet Streaming Devices Are Driving That Growth

18

33%

40%

28%

24%

11%

10%

16%

15%

8%

9%

4%

3%

Smart TV owners

Total

Live TV Streaming to any device* VOD DVR DVD Downloaded/rented online content

In a typical week, what percentage of all your video viewing is done using each of the following?

*Streaming to a PC/laptop, mobile device or TV set. Live TV = ‘live TV shows or movies as they air on broadcast, cable or satellite’

Video Entertainment 2016 - Base: Total, N=1600. Smart TV owners, N=670. Q12.3: Considering all of the following sources you may use to view any type of video content, in a typical week, what percentage of all your video viewing is done using each of the following? MMF 2016 – Base: Those that have a TV in the HH. Q9B: Which of the following do you have in your household? Select all that apply.

Smart TV Adoption Will Accelerate Streaming

Among HHs with TVs – Smart TV Ownership

2016: 39% 2015: 31% 2014: 21% 2013: 15%

19

13%

35%

44%

47%

7%

11%

7%

8%

12%

14%

12%

12%

26%

19%

16%

14%

20%

11%

11%

9%

22%

10%

10%

10%

Live cable or satellite TV

Stream through computer

Stream to connected TV

Stream through console

None Watch this way, but not daily Less than one hour One to two hours Three to four hours Five+

Traditional Live TV Is Still The Most Watched, But A Variety Of Streaming Mediums Are Used As Well

Base: Total N=2400. Q8: On a typical 24-hour day, how many hours do you watch …

On a typical 24-hour day, how many hours do you watch …

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45%

24%

11%

10%

9%

6%

23%

YouTube

Facebook Live

Livestream

Twitch.tv

Periscope

UStream

I don’t ever view livestreaming video

Sources Used To Watch Livestreaming Video

•  77% of 8-64 year olds watch livestreaming video

•  85% of Millennials

Base: Total N=2400. Q36: Which of the following do you ever use to watch livestreaming video? This is any service that you use to view video content that is being produced live to watch on a computer, smartphone, tablet, or TV connected to the Internet. – Top 7 shown

And Livestreaming Is The Next Frontier

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68%

37%

11% 9%

HDTV Smart TV 4K/Ultra HD TV set 3D-TV set

Which of the following do you have in your household?

Base: Total N=2400. Q9B: Which of the following do you have in your household? Select all that apply.

Currently 1 in 10 Report Having A 4K TV In Their Home; Holiday Sales Will Likely Drive This Number Up

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GAMING

22

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PC Most Widely Used Platform By Active Gamers, But Smartphone Is Close Behind

Percentage of Population Playing Weekly+ On Each Platform

37%

38%

43%

46%

Tablet

Console

Smartphone

PC

Base: Total N=2400; Q117: How often do you play games on the following?

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Cross Platform Play

Weekly+ PC Gamer Weekly+ Smartphone Gamer

Weekly+ Console Gamer

Weekly+ Tablet Gamer

Also Plays PC Weekly+ - 75% 76% 78%

Also Plays Smartphone Wkly+ 70% - 77% 79%

Also Plays Console Weekly+ 63% 67% - 72%

Also Plays Tablet Weekly+ 63% 67% 69% -

Base: All gamers. N=1631. Base: Weekly+ Smartphone Gamers. N=1041. Weekly+ Tablet Gamers. N=889. Weekly+ PC Gamers. N=1102. Weekly+ Console Gamers. N=916. Q117: How often do you play games on the following?

Gaming Is Cross-Platform Today; Majority Of Weekly+ Gamers Play Other Major Platforms

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Among Gaming Devices, Consoles Have The Highest Number Of Hours Played

16%

45%

21% 18% 20%

47%

18% 13% 13%

45%

23% 19% 20%

47%

20%

12%

Less than 1 hour per week 1-5 hours per week 5-9 hours per week More than 10 hours per week

PC Smartphone Console Tablet

How many hours per week do you spend playing games on the following? (Among weekly+ gamers of each platform)

Base: Total N=2400. Q118: How many hours per week do you spend playing games on the following?

Console: 41% game for 5+ hours each week

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SMARTPHONE AND TABLET

26

27

12%

29%

44% 57%

66% 67%

2011 2012 2013 2014 2015 2016

2011

2013

2012

2014

Es

t.

31% 44%

61% 71%

82% 85%

2011 2012 2013 2014 2015 2016

Smartphone Owners/Users (Among 8-64 year olds online)

Tablet Owners/Users (Among 8-64 year olds online)

Base: Total N=2400. QI/QJ: Which of the following do you own/use regularly?

Smartphone Penetration is Nearing Saturation; Tablet Growth Is Stagnant

2016: 97% Millennials 2016: 74% Millennials

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56%

55%

50%

47%

42%

31%

29%

25%

57%

56%

63%

64%

41%

38%

36%

33%

Use social networks

Listen to music

Play games

Watch video

Get weather information

Get local news

Get national news

Research products/services to buy online

Smartphone Owners/Users Tablet Owners/Users

On Their Respective Devices, Tablet Users Game and Watch Video More Than Smartphone Users

Which of the following things do you do regularly (at least once per week) on your smartphone/tablet? (Among smartphone and tablet owners/users)

Base: Among smartphone owners/users - Total N=2034; Among table owners/users N=1604. Q170: Which of the following things do you do regularly (at least once per week) on your smartphone? Select all that apply. – Top 8 shown

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51%

49%

7%

15%

13%

23%

19%

13%

9%

53%

47%

11%

14%

10%

23%

19%

13%

9%

Male

Female

8-11

12-17

18-24

25-34

35-44

45-54

55-64

Smartphone Gamers Tablet Gamers

Smartphone Gamers Tablet Gamers

White 64% 64%

Hispanic 16% 16%

Black 11% 12%

College Graduate or Higher Degree 53% 53%

Married 54% 62%

Child(ren) in Household

(asked of adults only) 57% 53%

Income > $75K 44% 45%

Mobile Gamers Are Similar Overall – Tablet or Smartphone

Base: Smartphone Gamers N=1027; Tablet Gamers N=1009. Sc.B: What is your gender? Sc.C: How old are you? Sc.D: Who lives with you in your household? Please select all that apply. Sc.H: Which of the following best describes your racial background? Cl.D: What was the last grade or level of school you completed? Cl.E: What is your approximate annual household income before taxes? This includes the combined salary of all household members who work, income from pension, Social Security, etc. Cl.F: What is your marital status?

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MOBILE PAYERS

30

31

Virtual Good Spending, Tablet Vs. Smartphone

33%

19%

43%

32%

51%

39%

Tablet Smartphone

Tablet and smartphone virtual goods market (Among regular gamers on each device)

2014 2015 2016 2014 2015 2016

MMF Base: Those who own/use a tablet and play games regularly 2016 N=1009; Q7.21 Have you ever bought digital or virtual goods in games on your tablet? Base: Those who own a smartphone and play games regularly 2016 N=1027; Q184 Have you ever bought digital or virtual goods in games on your smartphone?

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Virtual Good Spending, Mobile

$4.586B $5.645B

Mobile

Mobile virtual goods market ($mm)

2015 2016

Is the average digital/virtual good smartphone spend among those who

buy in the past 12 months

$80

Is the average digital/virtual good tablet spend among those who buy in

the past 12 months

$70 MMF Base: Those who own/use a tablet and play games regularly 2016 N=1009; Q7.21 Have you ever bought digital or virtual goods in games on your tablet? Q7.22 About how much did you spend in total on digital or virtual goods in games on your tablet in the last 12 months? N=481. Base: Those who own a smartphone and play games regularly 2016 N=1027; Q184 Have you ever bought digital or virtual goods in games on your smartphone? Base: Those who bought digital or virtual goods on their smartphones, N=375; Q185 About how much did you spend in total on digital or virtual goods in games on your smartphone in the last 12 months

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ESPORTS

33

34

41%

53%

7%

Yes No Not sure

Over 40% Have Heard Of Esports; Viewership On The Rise, Reaching 26% This Year

Have you ever heard of esports? Esports is also known as competitive gaming or professional gaming.

Base: Total N=2400. Q123: Have you ever heard of esports? Esports is also known as competitive gaming or professional gaming. Q123.2: Do you ever watch esports, full matches or clips, in the following ways? Select all that apply.

Those that have watched an esports event or programming:

2016: 26% 2015: 18% 2014: 12% 2013: 9%

35

50%

50%

7%

10%

13%

18%

17%

18%

17%

65%

35%

5%

12%

17%

26%

20%

12%

8%

Male

Female

8-11

12-17

18-24

25-34

35-44

45-54

55-64

Total

Heard of Esports

Total Heard of Esports

White 62% 64%

Hispanic 17% 17%

Black 13% 12%

College Graduate or Higher Degree 51% 55%

Married 50% 54%

Child(ren) in Household (asked of adults only)

47% 56%

Income > $75K 39% 43%

Those Aware Of Esports Skew Male, 18-44, And Having Children In HH

Base: Total N=2400; Heard of Esports, N=972. Sc.B: What is your gender? Sc.C: How old are you? Sc.D: Who lives with you in your household? Please select all that apply. Sc.H: Which of the following best describes your racial background? Cl.D: What was the last grade or level of school you completed? Cl.E: What is your approximate annual household income before taxes? This includes the combined salary of all household members who work, income from pension, Social Security, etc. Cl.F: What is your marital status?

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50%

50%

7%

10%

13%

18%

17%

18%

17%

72%

28%

5%

13%

14%

33%

25%

7%

4%

Male

Female

8-11

12-17

18-24

25-34

35-44

45-54

55-64

Total

Esports Viewers

Total Esports Viewers

White 62% 65%

Hispanic 17% 17%

Black 13% 12%

College Graduate or Higher Degree 51% 65%

Married 50% 65%

Child(ren) in Household (asked of adults only)

47% 68%

Income > $75K 39% 56%

Base: Total N=2400; Esports Viewers N=621. Sc.B: What is your gender? Sc.C: How old are you? Sc.D: Who lives with you in your household? Please select all that apply. Sc.H: Which of the following best describes your racial background? Cl.D: What was the last grade or level of school you completed? Cl.E: What is your approximate annual household income before taxes? This includes the combined salary of all household members who work, income from pension, Social Security, etc. Cl.F: What is your marital status?

Esports Viewers Skew Male, 25-44, Having Children In HH, And Higher Income

37

34%

28%

21%

19%

18%

36%

Streaming online through an internet site or app which is not from a publisher (e.g. Twitch.tv)

Live, in person

On a TV channel provided by a paid television service (e.g. ESPN, TNT, etc.)

Streaming online through an internet site or app from a publisher (e.g. LoLEsports.com)

Streaming within the app/game itself

No, I never watch esports

Majority Of Those Aware Of Esports Have Watched It; Streaming Online Is Top Format

Do you ever watch esports, full matches or clips, in the following ways? (Among those that have heard of esports)

Base: Among those that have heard of esports before N=972. Q123.2: Do you ever watch esports, full matches or clips, in the following ways? Select all that apply.

64% of those aware watch

esports

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74%

34%

23%

23%

22%

22%

18%

17%

13%

13%

YouTube

Twitch

Major League Gaming (MLG)

Dailymotion

Ustream

ESL Gaming

LoLesports

Hitbox.tv

GosuGamers

Azubu.tv

Which of the following websites/apps have you used to watch Esports? (Among those that watch Esports content)

Base: Among those that watch esports content – Total N=621. Q123.6: Which of the following websites/apps have you used to watch esports? Select all that apply.

Considering Overall Content Consumption, YouTube Dominates Esports Video Content

Note: “Content” can include live streams, recaps, highlights, etc.

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VIRTUAL REALITY

39

40

VR’s Potential For Success Is High, Nearly A Quarter Showing Strong Interest

Base: Total N=2400. Q152: How interested are you in virtual reality?

24%

13%

22%

19%

23%

Total

Very interested-5

4

3

2

Not at all interested-1

Interest in a virtual reality experience

41

34%

31%

27%

21%

17%

10%

8%

5%

38%

Samsung VR Gear

PlayStation VR

Oculus Rift

Google Cardboard

Microsoft HoloLens

Valve/HTC Vive

Razer OSVR

MergeVR

None of the above

Samsung and PlayStation Lead VR Device Awareness

Which of the following virtual reality products have you heard of?

Base: Total N=2400. Q151.1: Which of the following virtual reality products have you heard of? Select all that apply.

42

40%

37%

35%

24%

9%

10%

Microsoft

Sony

Apple

GoPro

Nikon

None of the above

Various Brands Have The Potential To Succeed In The VR Space If you were to buy a virtual reality viewing device, which of the following brands would you prefer it

come from? (Among those that are at least somewhat interested in VR, select up to two)

Base: Among those that are at least somewhat interested in a VR experience N=1531. Q152.2: If you were to buy a virtual reality viewing device, which of the following brands would you prefer it come from? Select up to two of the following.

43

36%

31%

27%

25%

21%

3%

2%

2%

11%

GoPro

Sony

Microsoft

Apple

Nikon

Xiaomi

DJI

Drift

None of the above

Other Than GoPro, The Big Consumer Electronic Brands Will Be The Winners With 360 Cameras

If you were to buy a virtual reality capture device (360 camera), which of the following brands would you prefer it come from?

(Among those that are at least somewhat interested in VR, select up to two)

Base: Among those that are at least somewhat interested in a VR experience N=1531. Q152.3: If you were to buy a virtual reality capture device (360 camera), which of the following brands would you prefer it come from? Select up to two of the following.

44

49%

38%

35%

33%

32%

31%

28%

27%

Movies

Console/PC games

Virtual Travel

TV Shows

Music videos

Sports

Smartphone/tablet games

Live Events

Traditional Media, Games, and Virtual Travel Lead Primary Use Cases For VR

Base: Among those that are at least somewhat interested in a VR experience N=1531. Q153: What kind of content would you be interested in experiencing through virtual reality? Select all that apply.

What kind of content would you be interested in experiencing through virtual reality? (Among those that are at least somewhat interested in VR)

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Secondary VR Use Cases What kind of content would you be interested in experiencing through virtual reality?

(Among those that are at least somewhat interested in VR)

Base: Among those that are at least somewhat interested in a VR experience N=1531. Q153: What kind of content would you be interested in experiencing through virtual reality? Select all that apply.

24%

23%

21%

20%

18%

17%

15%

15%

15%

11%

Social Networking

Video calls

Vehicular / Adventure Simulations

Live / recorded video games Board games

News

Short-form video clips

Esports

Training for jobs and other activities

Event Replays

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Thank You For Your Attention Mike Vorhaus President, Magid Advisors 818-231-9110 mvorhaus@magid.com Paul Silverman Director of Research 212-515-4490 psilverman@magid.com Andrew Hare Director, Research and Strategy 212-515-4538 ahare@magid.com Thomas Schankler Analyst 212-515-4526 tschankler@magid.com

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