The Nielsen Total Audience Report for Q4 2015 came out this week, and (as always) it is filled with a trove of information for those tracking the traditional television industry, and the habits of viewers, especially the key 18-24 year old demographic. You can download the full report for free.
Everyone who follows TV knows that younger viewers are watching much less live and time shifted traditional TV (the stuff you get on your cable package, but not Netflix or YouTube) today than in the past: in Q4 2010 American 18-24 year olds watched 244 minutes of TV per day, and that number was down 41% by Q4 2015 to 144 minutes. That is still well over two hours per day on average, but 100 minutes less PER DAY is a big drop. Unprecedented in the media industry, in fact…unless you look at what happened to young people buying CDs, or reading newspapers!
Media analysts are divided into two camps: those who believe that younger viewers are abandoning traditional TV the same way they abandoned print newspapers (“We are never ever getting back together” to quote Taylor Swift) and those who acknowledge that viewing has indeed dropped for this age group, but 1) the decline seems to be moderating, and perhaps we will find a new plateau of viewing at a stable-but-lower level; and 2) as this age group gets older and has children, their traditional TV viewing may start rising again.
As you look at the chart at the top of this post (guess what I was doing all Good Friday?!) you can see the live and time shifted viewing minutes for US 18-24 years olds for each quarter between Q3 2010 and Q4 2015 (blue line and the left hand axis), as well as the annual change in viewing minutes on the right hand axis in red. I don’t think anyone else has ever published this data in exactly this way before, so feel free to share, or ping me for the data file.
You will notice that the blue line is declining over time, but is kind of wiggly: it is always important to make sure you compare viewing across the same quarter, since there are seasonal effects in TV viewing habits. People watch less in summer, for instance. When I look at the red line, which indicates the year-over-year decline, a few things jump out at me.
1) 2012 data saw some pretty consistent declines approaching 10%, but the rate of decrease lessened into 2013 and it looked like a new viewing plateau around 200 minutes daily might be the new normal. In Q3 2013 the annual decline for 18-24 year olds was 0% — time for a party in the TV industry!
2) Oops, not so fast. 2014 was NOT a good year for TV watching for this demographic: annual declines of 24% and 25% in two quarters were the nadir. That kind of year over year change is (so far as I know) without precedent – neither CD sales nor newspaper subscriptions ever fell that steeply! Needless to say, a raft of “TV is dead” articles started being written around this period, and for good reason. If that level of erosion continued…
3) But it didn’t. For every quarter since Q3 2014 the year-over-year change in viewing minutes for this age group has been getting better/less awful. In fact, in the most recent quarter, viewing was down “only” 10% from a year earlier. That isn’t going to cause TV execs to burst into song, but it isn’t nearly as bad as the 25% drop from a year ago.
4) A REALLY interesting additional point can be seen in the chart above. Enders Analysis in the UK has the semi-annual viewing data for various age groups in the UK, and the three youngest demographics are lines in various shades of green. An exact match of the US viewing trends is unlikely, but you can clearly see that the UK data has a roughly similar shape to what happened in the US. Moderate declines at first in 2011/2012, maybe a bit of stability in 2013, a terrible collapse in 2014 (although muted compared to the US data – UK viewing was down 12-14% compared to 20+% in the States!) and then some signs that the worst is over and the annual changes moderated across all of the younger demographics in 2015.
What do I think? Well, first off…annual declines of 25% feel like they were an exception, and were likely a bit of a one-off. Next, it is possible that annual rates of decline may stabilize at around 10% in the US, or that they may improve even more, and we may see single digit annual decreases in traditional TV viewing. I don’t have enough data yet to know, but my hunch is that a 10% annual decline is the most reasonable assumption. The five year CAGR is exactly -10% since 2010. Our Deloitte TV Prediction for Q1 2016 was that 18-24 year olds will watch 150 minutes (2.5 hours) daily, which would be a 12% year-over-year drop. We will see! Now, what about that having kids question?
Take a look at the chart above: one in six (16%) of US 18-34 year olds who live on their own without kids are broadband only. They have no cable package and no TV antenna, and therefore are getting all of their video Over-the-Top (OTT) through the internet, and services like Netflix, YouTube, Hulu, and so on. (I need to note here: those who don’t watch an average of 3-4 hours of traditional TV per day are still watching 3-4 hours of VIDEO content per day. They just aren’t getting it from the traditional broadcasters and distributors, which is a $170 billion industry in the US.) But once those 18-34 year olds start a family, the percentage of broadband only homes collapses from 16% to 6%. Stage of life does seem to matter.
And if you look at the next figure, it matters not just in terms of video source, but also in terms of traditional viewing minutes: people with kids watch over an hour (62 minutes) a day more of traditional TV than those living on their own! This may be good news for the existing TV industry: some younger viewers are perhaps having a brief fling and enjoying OTT hookups only (why do you think it is called “Netflix and chill?”) but once they settle down with kids, they will return to the traditional TV viewing habits of their parents…perhaps with a little OTT added as spice?
That is certainly what the TV bulls would say. I am a little less sure: the Nielsen data is great, but the problem is that relatively few 18-24 year olds are starting families, so the data for those with kids over-represents 25-34 year olds. It will be interesting to see if that same “once you have kids you return to traditional TV” finding still holds true over the next few years? My gut says it will be partially true, but less so than in the past. Too many people with three year olds keep telling me that Netflix plus YouTube has more than enough content for their children. I have no opinion – my kids are too old for children’s TV, and haven’t started spawning yet themselves.
This post is already way too long, but I should add a few things.
Please download the Nielsen report: it is filled with much more useful information. I would particularly highlight Table 5C on page 25. It divides American homes that have internet in five quintiles, or groups representing 20% of the population each. Although the average American watched over four hours of TV per day in Q4 2015, some watched more and some watch less. The lightest viewing quintile watched only 16.4 minutes per day, which is a record low for that group. If you are wondering where the cord-cutters of 2016 are going to come from, I have to point to that number: hard to justify paying $60 per month or more for pay TV when you watch that little.
The other thing I want to add is that our Deloitte TMT 2016 Prediction on US TV is tracking really well. The number of homes paying for a traditional TV bundle (cable, telco or satellite) fell by 1.5 million, and we are predicting 1-2 million for the year. The number of homes that rely on an antenna for TV (broadcast only) rose by 650,000, and we are calling for growth of about a million. The daily live and time shifted viewing time by the population aged 18+ fell by only three minutes compared to 2014, and we are looking for slightly bigger drop of about ten minutes. Might be the televised election primaries…the Republican debates have been drawing bigger audiences than expected: Trump makes for compelling TV, as we all know. 🙂