method 10x10 cable's lost generation (1)

8/9/2019 Method 10x10 Cable's Lost Generation (1)

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10x10

method.com

Cables LostGeneration

John Gilles

VP Engagement, Method

So its war!

At stake is the uture o television and billions o

dollars in revenue. Its the battle to defne the u-

ture landscape o digital communications. So who

wins, who loses and who gets wiped o the map?

Method

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John Gilles, VP Engagement, Method

10x10Method Inc

record, according to Sanord C. Bernstein & Co. Wall Street

analysts are looking or evidence o cord cutting among cable

subscribers in avor o Internet television, but have not ound a

clear trend. In act, it seems that Pay-TV subscribers are a loyal

lot who would rather give up dry cleaning and imported beer

than go without their Mad Men episodes.

So it is not cord cutting that cable has to worry about. Lost in

all the hype over the battle or the living room is the simple act

that young, new subscribers are not replacing older subscribers.As they leave college or their parents homes to start their own

households, the only subscription they want is broadband. Ca-

bles Lost Generation is the frst to be raised on the Internet, and

they are more than happy to entertain themselves with a high-

de Blu-Ray, a PS3, Apples Jesus tablet, or with a uzzy desktop

video pulled o a torrent site. The opportunity or brands and

content owners, thereore, rests with access that is not fxed to

a particular network, device, or context, but encourages multiple

points o consumption, be they fxed or mobile.

They called it the Battle Royale o media and entertain-

ment. This years CES pitted Internet video upstarts like Hulu,

Roku, and Boxee in a cage match against industry stalwarts

such as Comcast and Time Warner. At stake: the hearts and

minds o millions.

It was spun as a victor-versus-vanquished battle. It was either

going to be Internet videos David hoisting alot the head o the

Goliath that is cable TV, or cable mowing down Hulu and the

others like so much other Internet road kill.

At frst glance, it appears that David is a stones throw rom

victory. The ever-crucial 18- to 24-year-old viewer, who spends

$11 billion a year on entertainment, no longer watches TV as we

know it. They are Cables Lost Generation. However, it turns out

that they may not be as lost as we think.

Growth in Pay-TV, which includes cable, DBS such as DirecTV,

and IPTV like Verizon FiOS, has slowed to its lowest rate on

Atthis

YearsCES

Victor-vs-

Vanquished

David-vs-

Goliath


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Hulu

Boxee

Round

vs

Comcast

TimeWarner



10x10Method Inc

According to Boxee CEO, Avner Ronen, the average Boxee

user is not someone who canceled his or her cable subscrip-

tion to move to over-the-top television (OTT)it is someone

who has never had cable in the irst place.


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Ronen says that there is a growing legion o recent college

graduates who have never had cable, do not see the need to

pay or it, and are perectly adept at fnding what they want to

see through alternative channels. The Nielsen numbers back up

Ronen. For at least the past fve years, the young male demo-

graphic has virtually dropped o the map o television, and initial

speculation was that they were too busy playing video games

to watch TV. Now we know the truththese young household-

ers are consuming vast amounts o TV content, just not in the

traditional sense.The inviolable cable industry has good reason to be concerned.

These Internet Natives are a desirable bunch or marketers;

they represent over 30 million people in the US who spend $230

billion a year. Advertisers such as Sony, Xbox, and Anheuser-

Busch have ound this missing demographic using multiple plat-

orms, and other established content owners are also moving in

the same direction. For example, Scripps Networks, the parent

company o the Food Network and HGTV, recently launched

Food2 as an OTT video network aimed directly at the young

and content hungry consumer.

And they are not the only ones. Marketers who study the Nielsen

ratings are looking past cable and broadcast TV to fnd that

hard-to-reach demographic, and they are careully watching OTT

video brands like Revision3s popular Diggnation show. The old

world was built around a handul o media players profting rom

limited choice. In a world that now demands unlimited choice,

the vast availability o real time content rom numerous provid-

ers, next generation media, and a multitude o platorms have

obuscated the landscape. For marketers who want to reach that

18 24 audience, 30-second spots on TV are no longer a saebet. However, this presents a huge opportunity or the savvy

brand owner who knows how to optimize their use o these

alternative channels to attract distinct audiences with

dierent expectations.

o homes in the United States

have internet access

o young adults

pay or Netfix

o annual entertainment spent

in the United States is rom18-24 year olds

This chart illustrates the infuence that

young adults have on the entertainment

industry, particularly in regards to

over-the-top use.

o 18-24 year olds have a

home entertainment system

76

384

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10x10Method Inc

Young

A d u l t s

and

Entertainment

C o n s

u m p t i o n

o United States population

is 18-24 year olds

10

%

%

%

%

%


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We predict that there is an emergent market to curate, distribute,

and monetize content and that it is wide open or game changing in-

novations that deliver these new streams across multiple platorms.

For the entire industry, at stake is the uture o TV, advertising, andliterally billions o dollars in revenue.

Either way, consumers win big, because whichever side they

choose they are going to get greater convenience, more content,

and better experiences. Most advertisers and industry players

will likely attempt to reach consumers through both TVE and OTT

services. The twin actors o choice and competition will reward

consumers with improved convenience, abundance, and quality

experiences, giving them what they want, wherever they want it.

The opportunities are too many to enumerate. For brands, it is not

so much about picking the winning pony, but fnding those missing

kids. The young, Internet-savvy demographic is highly sought ater,

and when you cannot reach them with 30-second spots, it becomes

that much trickier to get their attention. The good news is that wenow know where Nielsens missing demographic went. The kids are

all rightor now, they are just going over the top.

Disclaimer: Boxee, Cablevision, Comcast, BBC, PBS, Scripps Networks,

and Time Warner Cable are current or recent Method clients.

In a new report by category analyst Colin Dixon, entitled TVE vs.

OTT Are You Ready or a Throwdown? Dixon and his colleagues

heralded CES as the beginning o the battle between OTT and TVE,

but also emphasized that consumers are avidly interested in bothoptions and are willing to vote with their wallets.

A signifcant number o Pay-TV subscribers are telling us they want

TV services over their broadband connections, Dixon told us when

we caught up with him at CES. Theyre willing to pay or mobility

and i they cant get it rom their Pay-TV provider, they will certainly

look elsewhere.

When Time Warner Cable announced its TVE initiative, oering

Pay-TV subscribers ull-episode content on computers, phones, and

even TVs through IP cloud services, it was a reaction to the sudden

availability o premium ull-episode content on new services such as

Hulu, Roku, and Boxee.

Category buster Boxee has led the way to OTT. In line with a recentstudy by Bain & Co. that showed the most recommended company

in any given category grows 2.5 times the category average, Boxee

users are anatical about the service and advocate it, which makes

it the most likely service to be used as a true cable replacement.

Mostly or a younger, early-adopter demographic, the majority o

its members are true Internet Natives who have never had cable.

Meanwhile, grown-up organizations like the BBC and PBS are o-

ering ull episode TV over the top via the iPlayer and the PBS Video

Portal, respectively.

Method Inc



10x10Method Inc

Young

A d u l t s

vs

Gene

ral

P o p u

l a t i o n

o entertainment spending was rom

18-24 year olds, or $11 billion

o entertainment spending

was rom18-34 year olds,

or $46 billion20%

4%

$300 billion

is spent annually on entertainment in the US

$60 billion

by 18-34 year olds, or 20%

$11 billion

by 18-24 year olds, or 4%


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Thisisthe

FirstIssue

next

Method Inc

Cables Lost Generation

By John Gilles, VP Engagement

Unlocking the Infnite Library

Turn Me On, Touch Me Everywhere

Mind the Gap

Parenting 101

Hey, You, Get Onto My Cloud

The Consumer as King(pin)

Wrap It, Pack It, and Stack It

Power to the People

Welcome to the Metaverse

About the Author

John Gilles is an internationally recog-

nized expert on digital media. A pioneer

in hybrid web/TV content experiences,

Gilles is now ocused on developing new

brand experiences across video games,

the Internet, television, virtual worlds

and other media.

About 10x10

2010 marks Methods 10 year anniver-

sary, and we are only looking orward.

Written by our own industry leaders, we

are launching the 10x10 series, which willocus on game changing topics that will

undamentally impact todays brands and

their search or new revenue streams.

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3

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8

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10

Unlockingthe

InfniteLibrary

10x10


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Method

About Method

Method is a brand experience agency with ofcesbased in San Francisco, New York and London. Our

clients are best described as owners o progressive,

era defning brands, and include Google, Comcast,

Nordstrom, Sony, Samsung, Nokia, Microsot, Time

Warner, Intel, and BBC. Collaboratively, we help them

create products, services and businesses that are

smart, beautiul and extendable.

For more inormation visit www.method.com.

Locations

San Francisco

New York

London

Contact

Lindsay Liu

Marketing Manager

[email protected]

646.825.5242

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