UK content boom leads to saturation

UK consumption of on-demand content has grown quickly, but the customer base for it has reached saturation, according to research from polling firm YouGov. This means service providers must fight among themselves within the existing customer base and seek new business models to combat churn and stimulate demand for more valuable premium content.

The YouGov survey found that 48 percent of the UK’s online viewers had used catch-up services in the last three months. Among those those that did not watch catch-up, only 7 percent said they intended doing so in the next year, compared with 79 percent that said they were unlikely to.

“Among converts, there is clearly a huge appetite for content on-demand services in the UK. However, those who don’t currently access content have a limited interest in doing so in the future,” said Shaun Austin, associate director for media consulting at YouGov. “Therefore, the focus for digital content providers needs to be on working out ways to get the most out of the existing user base rather than expanding into new audiences.”

These figures appear at first sight to contradict another recently published study from information services firm Experian, which found that UK web users spent 45-percent more time watching online video in February 2013 than in the same month a year earlier, amounting to 323 million hours. This survey also reported thatusers made 1.06 billion visits a month to video sites in February 2013, 16 percent up over the year.

The two surveys do accord, though, in suggesting that the recent rapid growth in TV consumption not only has led the UK on-demand TV market to saturation in customer numbers but also created a base of committed users who are still increasing their levels of usage. One unique factor in the UK is the existence of a big elephant in the room, the BBC iPlayer, which provides access to a huge range of premium free content and has created a great appetite for on demand TV along with an expectation that access should be free. The YouGov survey found that YouTube, also free, was the second-most popular on-demand TV service in the UK. This demonstrates, according to the firm’sassociate director Shaun Austin, that UK consumers are gravitating strongly toward free services.

In terms of online video as a whole, not just TV, YouTube now accounted for 70 percent of all video web site access and had been responsible for most of the growth in web video consumption, according to the Experian survey. This made it now the UK’s third-most popular website after Google and Facebook, accounting for 203 million hours a month and an increasing average session time, now 20 minutes. YouTube visits from mobile devices were also increasing, with one in five now coming from a mobile device over via WiFi compared with one-in-20 a year earlier.

The upshot of these trends according to YouGov’s Austin is that UK service providers face a big challenge persuading consumers to pay for access to online TV.

“As newspaper paywalls have shown, this will not be easy, especially when commercial rivals have to face-off against the dominant free-to-view BBC iPlayer,” said Austin.

He suggested that providers should consider adopting a model like the Anglo Swedish Spotify music service. This operates largely under the "Freemium" model, which offers basic services free for the user to try, aiming then to convert them to more advanced or additional features for a monthly subscription, augmented by revenue from music purchases within the player. Currently, of 20 million Spotify members, 5 million pay subscriptions, either $5 a month, or $10 for unlimited access.

But Spotify has been criticized for failing to compensate artists fairly, and it remains to be seen how successfully it would transfer to the different world of TV and video.