Streaming Video Subscriptions Top Traditional Pay TV in U.K. for First Time

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Netflix CEO Reed Hastings

Netflix is the most popular SVOD service in Britain, ahead of Amazon, says a report from media regulator Ofcom that also finds music streaming subscription revenue beating out physical sales.

Streaming video has overtaken traditional pay TV services in terms of subscribers in the U.K. for the first time, according to a new report from British media regulator Ofcom.

"There are now more U.K. subscriptions to Netflix, Amazon and [pay TV giant Sky's streaming-only service] Now TV than to 'traditional' pay TV services," Ofcom said late Tuesday, highlighting that this is "marking a major shift in the U.K.'s viewing habits."

The regulator said the latest data show streaming services reached 15.4 million subscribers in the country in the first quarter, overtaking the 15.1 million pay TV subscriptions. It found that 11.1 million households in the country, or 39.4 percent, have at least one service out of Netflix, Amazon or Now TV.

Netflix is the most popular subscription VOD service in Britain, with an estimated 9.1 million subs as of the  first quarter, Ofcom said, citing the latest data from the Broadcasters Audience Research Board (BARB), ahead of Amazon's estimated 4.8 million.

The regulator cited "a competitive shift within the U.K. television industry, driven by the rise of the major global internet companies and the changing habits and preferences of U.K. audiences. With more choice for viewers than ever before, U.K. broadcasters are competing for viewers in an increasingly fragmented landscape." Its report also highlighted that a third of subscription VOD viewing focuses on original programming.

The amount of revenue generated by pay TV services has also fallen for the first time, "after a period of sustained growth," to £6.4 billion ($8.4 billion) at the end of 2017, but remains well ahead of streaming and other online audiovisual revenue of £2.3 billion ($3.03 billion), Ofcom noted.

"Broadcast TV remains popular, but viewing among 16- to 34-year-olds is moving online," it highlighted in its Media Nations report. "Spending by the BBC, ITV, Channel 4 and Channel 5 on new U.K.-made television programs fell to a 20-year low" of £2.5 billion ($3.3 billion) on a combined basis.

At the same time, Brits are spending less time watching television. Average daily broadcast viewing on TV sets fell by nine minutes in 2017 to three hours and 22 minutes, down 38 minutes from the time spent back in 2012.

Total daily viewing time across all devices stands at five hours and one minute, including one hour and 28 minutes spent on nonbroadcast content. However, among 16- to 34-year-olds, total daily viewing time in 2017 was four hours and 48 minutes, of which less than half, two hours and 11 minutes, went to broadcast content, with under an hour a day spent on watching content on YouTube.

"Today’s research finds that what we watch and how we watch it are changing rapidly, which has profound implications for U.K. television," said Ofcom CEO Sharon White. "We have seen a decline in revenues for pay TV, a fall in spending on new programs by our public service broadcasters, and the growth of global video streaming giants. These challenges cannot be underestimated."

She added: "But U.K. broadcasters have a history of adapting to change. By making the best British programs and working together to reach people who are turning away from TV, our broadcasters can compete in the digital age."

Ofcom also said that the report's findings reinforce its call, earlier this year, for U.K. networks to collaborate to match online competitors' growing scale. "That means U.K. broadcasters joining forces with each other, or with third parties, to share ideas and pool resources," it said. "Ofcom expects public service broadcasters to adapt for the digital age by finding new ways to distribute programs; capture younger audiences; and make world-class content that reflects life in the U.K. — which has not typically been a focus for global internet video streaming companies."

Streaming services are not only leading the charge in the TV space in Britain, but also in music. "As with video streaming, music streaming services, like Apple Music and Spotify, continue to soar in popularity," Ofcom's report noted. "For the first time, music industry revenues from online streaming subscriptions exceeded physical sales in 2017."

Total retail music sales grew by 6 percent in real terms between 2016 and 2017, driven by a 38 percent increase in online streaming service subscriptions to £577 million ($760 million). But sales of physical music formats fell to £470 million ($619 million).

"The shift away from music ownership toward streaming was reflected by a 25 percent drop in sales of music downloads," Ofcom also highlighted. "Almost a quarter (23 percent) of all adults listen to music via streaming services each week, increasing to over half (51 percent) of those aged 15-24."

Radio listening in Britain, meanwhile, reached a significant milestone in the first quarter, as, for the first time, more than half of all listening hours, 50.9 percent to be precise, came through digital platforms.