LAS VEGAS — More than two-thirds of “Over-the-Top” free trials will not fork over the dollars to pay for a subscription.
That’s a key takeaway from a “connected entertainment research” study from Parks Associates that sought to put a positive spin on OTT—a big buzz topic and exhibit hall draw at the 2017 NAB Show.
The data came as Parks Associates Senior Analyst Glenn Hower spoke at a midday session Monday (4/24) on how OTT video services are “fighting to capture and retain users.”
Parks took a positive spin on its results, noting that “nearly one-third” of OTT free trials will convert to a paid subscription.
However, the data clearly suggest that services such as Hulu and Netflix often offer a period of free service to new subscribers, and fail to convert the majority of these non-paying users into paying customers.
Hower sees it differently.
“Free OTT trials are effective in converting a sizeable portion of trial users into subscribers,” he said. “There is a potential for free trial abuse, but only roughly 1% of consumers are ‘serial trialers’ who abuse free trials to avoid paying for services. Most consumers use trials for their intended purpose of trying out a service before deciding whether or not to continue as a paid subscriber.”
Even so, the majority of individuals who take on a free trial with an OTT aren’t paying for a subscription. That may be welcome news for the broadcast TV executives in attendance at this 100,000-attendee conference—including Nexstar head Perry Sook, who was in attendance at the Wiley Rein cocktail reception on Monday afternoon.
Parks further twists the numbers by saying “more than one-fourth of U.S. broadband households (25%) trialed at least one OTT service in the previous six months. Of these users, 47% subscribed to at least one trial service after the free period expired.”
Translation: Roughly 11% of U.S. households are subscribing after a free trial taken in the last six months to an OTT service like Netflix.
Nevertheless, Hower maintains his positive outlook on OTT trends.
“While spending on transactional services has declined, average monthly spending on subscription OTT video has increased, reaching $7.95 per U.S. broadband household in 2016,” he said. “Most households build their services around at least one of the top three services—Netflix, Amazon, and Hulu—which also show among the most effective trial conversion rates. Since there isn’t much money left for niche OTT services, these services should not expect to expand beyond their particular audience niche and may also have to implement tiered services or hybrid business models to diversify their subscriber bases and generate incremental revenue wherever possible.”
Parks Associates is a market research and consulting company specializing in emerging consumer technology products and services, hence its presentation of the data to positively reflect OTT growth.