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TV & SVOD: cutting the cord, or supplementing the hoard?

Netflix and Amazon have bared their teeth once again, leaving traditional medias such as TV chewing on renewed predictions of an existential crisis.

Indeed, with Amazon poised to roll out its new Amazon Channels offering – which will allow subscribers to purchase a ‘pick-n-mix’ of TV stations including ITV, Discovery and Eurosport for up to £9.49 individually a month – and Netflix intensifying its production of original TV series and films with the new big-budget, Brad Pitt-fronted War Games, the word on the street is that the UK could finally succumb to the same streaming revolution seen in the USA.

Free to choose

Yet there is a fundamental difference between the two nations, one that shapes differing attitudes towards the role of subscription video-on-demand (SVOD) services: free-to-air TV.

In the US, the free-to-air infrastructure is simply not powerful enough to cover the more sparsely distributed population. For a majority of viewers, it’s a choice between expensive long-term cable pay-TV contracts or, increasingly, cutting the cord and turning to Netflix or Amazon.

The UK is a very different place. Both pay-TV and SVOD packages are regarded as a supplement to an extensive selection of quality free TV channels, available through the likes of Freeview and Freesat. Viewers have access to a greater channel choice without having to pay through the nose, and consequently less incentive to move away from traditional TV.

The stats back this up, with research from Thinkbox and BARB exposing the fact that SVOD services account for just 4.1% of the average UK adult’s video day, compared to the 75% attributable to TV. For people aged 15-24, online video (including SVOD, but not broadcaster VOD) takes up a lowly 8% portion of the media day, in contrast to TV’s 26%.

TV dominates the average video day

An unsustainable model

Another reason to take prophecies of linear TV’s demise and SVOD’s rise with a pinch of salt is the demand for original and exclusive content. In order for Netflix and Amazon to provide an attractive proposition for TV viewers, they need to be able to offer products that cannot be found through linear means.

Shows and films such as War Games, House of Cards, The Grand Tour, Man in the High Castle and Stranger Things have been produced to entice subscribers, but they come at a huge – in all likelihood unsustainable – cost. The big SVOD players consequently remain reliant on license deals with, you guessed it, traditional TV broadcasters; the likes of whom are in a position to squeeze what they regard as disruptive upstarts as they become bigger.

Ultimately, in order for Netflix and – to a lesser extent, considering the resources at its disposal – Amazon to become a true threat to traditional TV, the adoption of an advertising revenue model is inevitable.

Until then, SVOD will remain a supplement, and not a replacement, to what remains a robust traditional TV market.