Millennials and TV: What is really going on?

Our world has changed because of technology and no U.S. demographic has been immune to evolving cross-platform media habits over the last six or seven years. As online and offline media outlets continue to merge and digital access becomes easier and more cost-effective with connected devices, we expect our lives to be increasingly facilitated by the internet. Whether it be entertainment or information, accessed on-the-go or at home, consumers are able to acquire internet-based treasure troves on their own schedules.

This anytime, anywhere access platform was once solely the playground of those who were technologically adept. With the exception of this niche, digital adoption was swifter among younger age segments who had the time, energy, and wherewithal to find entertainment sources in an initially clunky but largely free environment. As traditional media establishments dipped their toes in the digital space, offering a free user experience was the obvious way to encourage usage, and millennials in particular came of age expecting digital content at little to no cost.

With major digital hubs now advancing monetization efforts and pay-to-play digital access becoming the norm, all eyes are on millennials as they act the part of the “crystal ball” generation, guiding the ad industry toward the tipping point in the future of linear versus online usage. Because this generation has so many options at their fingertips, it is thought that their choices will dictate the future in ways previous, less technologically-advanced generations have not.

Enter the video discussion and its multi-faceted complications, ranging from tracking users across linear and digital properties, to identifying single users across multiple devices, to understanding how multiple platforms affect the millennial purchase funnel when only one of these platforms (digital) is supremely trackable.

On the topic of cord-cutters

As always, we urge perspective. This subgroup is comprised of a negligible number of households in the U.S. That means gauging the future of TV and designing digital campaigns solely because of a belief in widespread “cord-cutting” is misguided. Cord-cutting (i.e., canceling once robust household cable packages and replacing linear home television viewing entirely with over-the-air or streaming video options), is not common practice.

The current cord-cutters are an outlier group exhibiting few of the desirable attributes advertisers covet. Here’s why: recent reports by NCC Media, eMarketer and Leichtman Research Group, among others, have reiterated that the number of cable subscribers lost over the last two years totals a mere 2.5 million households. In a cable universe comprised of nearly 100 million households, this loss is not indicative of a mass exodus from cable television. In addition, 80 percent of cord-cutters have resorted to reliance on home antennas for traditional TV reception, rather than the often reported streaming sources. Essentially, this is a low-income group of consumers driven by the need for drastic cost-cutting measures who, because of their continued reliance on “bunny ears,” can still be reached by broadcast television campaigns.

On a more interesting topic: cord-nevers

There’s been so much reference to cord-cutters in the media that many believe “cutters” and “nevers” are interchangeable groups; they are not. Cord-nevers are actually a fascinating new segment whose future is difficult to predict and whose current viewing habits can be lost in the fragmentation shuffle. This is the group to watch because their tolerance for limited access to new and mainstream TV inventory is high and their entertainment choices are driven by cost effectiveness and an on-demand approach to content.

Since linear TV does not allow for on-demand fluidity, millennials are less likely to adhere to the rigid schedule programmers must maintain on the linear platform model. As a result, the number of live TV viewing hours drops year-over-year within the 18 to 34-year-old age group. The most recent Nielsen Audience Report for the second quarter of 2016 shows that 18 to 24 year olds now watch approximately 15 hours and five minutes of TV per week, which is a drop of just over an hour per week between 2015 and 2016. This was the lowest drop since the first quarter of 2013, but the losses over the last five years have been undeniably dramatic.

What makes the situation complicated is the lack of reliable measurement regarding millennials’ future consumption habits. Will the declines continue and will the majority of millennials eschew pay TV for the convenience of streaming-video-on-demand (SVOD) sources like Netflix as they age? The first waves of data are just now being released regarding millennial life stages and adjusting consumption habits.

In December 2015, Pew Research conducted a study of cord-nevers, determining that about 9 percent of U.S. consumers had never subscribed to linear paid TV. About 35 percent of 18 to 29 year olds had yet to sign up for a cable package of any kind. This is not surprising due to the rising costs of linear cable packages, but there is another factor at play. It is believed that one of the key variables in pay TV subscription (and the life of linear TV in general) is establishment of new households. As U.S. consumers age and purchase new homes, adding pay TV subscription to monthly “utilities” has been a staple of the over-25-year-old population’s rite of passage for the last 40 years. While 18 to 24 year olds often exhibit behaviors that can be telling for the future of technology adoption, it is what they do when they age, have access to more disposable income and live in multi-person households, that truly defines adoption rates.

Since fewer households have been established in the years since 2008 than any other decade in modern history, pay TV has pressures outside of the streaming world threatening their subscription revenue. Many young adults are not leaving their parents’ homes after college, choosing to postpone home purchases, marriage and having children until later in life. While the trend climbed steeply after the 2008 recession, an improving economy did not alter its trajectory as millennials seem to be choosing cohabitation over acting as head of their own households.

Nearly 85 percent of adults 50 years and older subscribe to cable, so it goes without saying that most young adults still living with their parents have ready access to this format. But the average household only has two cable boxes and high prices coupled with the complexities of in-wall installation make connected TVs operating on Wi-Fi a more convenient option for 18 to 34 year olds still living with their parents.      

This may explain why a 2015 Piper Jaffrey study reported that 60 percent of U.S. millennials preferred watching video on their televisions, but their definition of “television” is far different than that of previous generations. Netflix and YouTube are commonly referred to as “TV” among younger millennial groups and the delineation between on-demand and linear options has blurred substantially over the past five years.

So since cable bills are not necessarily part of millennials’ monthly circumstances, are they paying for SVOD services outside of the linear pay TV environment? Maybe not. According to an April 2016 IBM Cloud Video survey, about half of millennials have shared a password to an online video platform like Sling TV, Netflix or HBO GO. This is a dramatic amount, especially considering that most major streaming properties have made only minimal moves to restrict multiple users on a single account. HBO has limited concurrent streams, but states they have no intention of cracking down on “borrowed” authentication. Netflix openly allows sharing across five users and attributes this to subscription growth over the long term. Some say this is the subscription video version of the early days of free content access on the internet. Consumers became so accustomed to free access that they balked at pay walls and monetization when publishers began to restrict access. Millennials certainly have become comfortable with vast digital options at a relatively low cost. It remains to be seen whether they will subscribe to multiple video sources as they age and the pay TV package begins to unbundle in the

online environment.

For now, early indication shows that 25 to 34 year olds are still subscribing to cable when they establish new households. Nielsen’s second quarter Total Audience Report shows that this group is watching approximately 20 hours of live TV per week. Here, life stages have a large impact on pay TV access: 88 percent of 18 to 34 year olds living at home reside in a household with cable. That percentage drops to 72 percent when they become heads of their own households, but tellingly climbs back to 79 percent when they begin to establish families (i.e., get married and have children). Essentially, overall data is still supporting the theory that SVOD options remain complementary to traditional television in multi-person households with disposable income for entertainment options. As traditional programmers begin to upgrade these over-the-top offerings, it is expected that digital bundles will replace linear bundles. That said, the short term still requires multi-platform ad campaigns to achieve total millennial reach.

So how can advertisers reach millennials with video?

• Media usage fragmentation from 18 to 34 years old creates the need for more platform coverage, not less. If budgets allow for TV minimums to be achieved, campaigns requiring quick reach accumulation need TV alongside digital video elements. Lower viewing levels than five years ago do not warrant a complete removal of the TV line item, especially considering the efficiencies of scale achievable through TV.

• Cost efficiencies are undeniable. Traditional TV still boasts national cost per thousand impressions at about half the cost of national premium streaming sites like Hulu (approximately $15 versus $30 on a national level). Viewership (in terms of time spent) is similar on both platforms. In addition, the combination of TV’s quick reach accumulation and scale with digital’s high impact and frequency against lighter TV viewers is the most powerful combination for reaching millennials.

• Utilize advanced TV targeting wherever possible. TV sync technology is coming into its own and, though the various platforms tout highly variable methodologies, they have been making huge advancements in household device connection and cross-platform impact. Connecting linear and digital platforms and attributing them to single users has been a challenge. TV sync is trying to remove the hurdles and guesswork from identifying cross-platform reach and frequency.

• No media plan targeting 18 to 34 year olds should disregard the impact of engagement. An effective plan can never rely on TV alone since about 15 percent of this target audience never watches any kind of linear TV at all. On the flip side, campaigns utilizing engagement tactics on social hubs like Snapchat can expect equal (if not more) limited reach with extremely hefty price tags. Expect higher costs associated with high engagement tactics but acknowledge that social engagement is a boon to sales for any brand trying to make an impact in the millennial market.

• The differences between 18 to 24 year olds and 25 to 34 year olds consumption habits can be stark, since life stages are dramatically different between the two groups. While millennial life attitudes and backgrounds are similar, schedules, disposable income and priorities for the two groups are completely different. This is no different than previous generations. Campaigns targeting the entire group need to account for media usage differentials and incorporate multiple platforms in the video and social spaces to achieve optimal reach and frequency levels.

• Since TV sync technology is largely unavailable on a local basis and online video penetration can be low in many local markets, cable operators have begun to fill the void with highly stable, audience-based targeting. Using set-top boxes, cable companies are offering addressable advertising with sales attribution and detailed, actual viewing data. Unlike Nielsen which relies on projection analysis based on a typical household sample, cable providers can offer valuable viewing data across all set-top boxes in a given market. This data offers opportunity for real targeting insights beyond the projected assumptions that have guided TV scheduling for many years. As cable companies harness the collection of data housed in set-top boxes, it is expected that TV advertising will become more measurable than it ever has been on a local basis.