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UK survey reveals consumers are embracing home networking, using the home computer as a true entertainment device to download free content
The Olswang Convergence Consumer Survey 2007 has revealed that, as consumers become increasingly connected using a range of connected devices at home and on the move, they are demanding more rich media content but are still reluctant to pay. To secure free content consumers are willing to tolerate online advertisements which they would normally go out of their way to avoid. Some are even willing to deliberately break the law to secure free content, while others simply don't understand the law.
The demand for free content
Olswang, in conjunction with YouGov, has conducted a nationally representative independent survey of over 1,539 18-55 year old GB consumers boosted by a further 254 13-17 year olds (not weighted). The survey discovered that convergence is taking hold of UK households as a large number of homes have networks installed and the computer is becoming a true entertainment device, with, every month, over 30% of respondents streaming or downloading movie and TV content and even greater numbers watching the range of free content that is already available on websites such as YouTube (63%) as well as streaming music (42%) and accessing podcasts (33%). However, people are much less willing to pay for audiovisual content, with free content being consumed by approximately three times as many people as paid content and those not yet consuming also being around three times more interested in free content.
Now in its third year, the survey provides strong endorsement for those looking to make advertising, rather than payment, the business model for online content. While 84% of respondents said they found online adverts intrusive and 75% claim to actively try to avoid pop up adverts, consumers are prepared to suppress this antipathy in their quest for free content, with 46% of respondents willing to put up with adverts if this means they can get TV or movies for free.
Commenting on the survey, Matthew Phillips, Media, Communications and Technology Partner at Olswang, said "True convergence is starting to take hold in UK households, with more people networking their devices to share content in the home and taking this content with them when on the move. This has intensified demand for free content, as consumers want a full range of content for these devices but are unwilling to pay for it. New challenges are facing broadcasters, rights holders and service providers who are keen to target these consumers but need to overcome the issue of reluctance to pay. Advertising is likely to become the natural alternative as companies battle to attract an audience that is willing to accept adverts with their content - as long as the content is free. However, the challenge will also include ensuring that consumers keep on the right side of the law as they begin to download more and more material and to use it on an ever-increasing range of devices."
Computers as entertainment devices and the rise of the streaming device
Connecting several devices to one network is popular among consumers of all ages, with 51% saying it is easy or very easy to transfer content between devices on the network. Consumers are now connecting a range of devices to their home networks, including computers and the next generation of gaming consoles (Xbox 360, PS3, Wii), which are also being used to view photos and to play DVD's and music as well as games.
Although the lion's share of current regular viewing is free content from user generated content sites and TV clips and movie trailers, each month nearly one in seven (14%) respondents download or stream free TV programmes to keep. Even more consumers (18%) download or stream free programmes for a limited time (e.g. from time-limited "catch-up" TV services) each month, although movies are more likely to be acquired permanently (12%) than temporarily (9%). 12% of respondents who use the computer to obtain audiovisual entertainment already play this back through the main television screen, not a computer monitor, by plugging the PC into the television screen (9%) or through a dedicated streaming device (3%).
By contrast, those not yet viewing content on a computer still perceive it to be incompatible with traditional "lean-back" TV entertainment. They are happy watching TV the way it is, or see the computer as alien to watching content in the environment of a comfortable chair/bed, with family and friends and on a big screen. The survey explores the potential of the technology which is hailed as bridging this gap, so called streaming devices, the best known of which is the Apple TV, a dedicated streaming device. However, streaming functionality is also built into a range of other popular devices, notably the Xbox 360.
When offered the prospect of a streaming device to take content from their computer onto the main TV set, 5% of the sample claimed already to have such a device, and of the remainder, just under half (46%) stated that they were interested in such a device (at the right price). 78% of those who were interested believed that this might then lead to them streaming or downloading more movies or TV content to their computers, suggesting that if the market for these products can be stimulated, this may well set the demand for online content alight.
Can pay, won't pay?
The pattern from last year's survey regarding consumer demand for free content continues in this year's results, as respondents become even more determined not to pay and frustrated at the lack of free content. This year, only 12% of respondents state that they either already pay or are willing to pay for downloaded or streamed movies or TV shows, with 49% only prepared to consume free content and 30% not interested at all. Interestingly, among the respondents who admit to illegal downloading of film and TV content, the survey reveals a notable divergence. Among such illegal downloaders, a greater proportion are already paying or willing to pay for content (20% as against the 12% in the overall sample). These are presumed to include "content junkies" who just want whatever content they can lay their hands on.
Even those few consumers who are already spending or are willing to spend money on online content will not bring new money to the overall entertainment market as, the survey suggests, spending on other forms of entertainment will suffer. When asked what will happen to their other entertainment spending over the next two years if they paid for content, only 32% said it would not change (with 5% don't knows). The remainder indicated that they would spend less in a variety of other areas, with the largest numbers expecting to spend less on DVD purchases (43%), renting DVDs (39%) and Pay TV (21%).
The survey does not make encouraging reading for those seeking to persuade consumers to buy online content. People generally won't pay and, where they will, this is at the expense of other media, principally DVD.
This consumer reluctance to pay for content is clearly evident from looking at what is currently consumed online, compared with what people who do not currently consume content online would like to consume. Today, the most commonly downloaded/streamed content is free user generated content, with 58% of respondents accessing this short form material every month. However when asked for viewing preferences if everything were free, the most popular form of content (amongst 59% of respondents) was full length movies. The second most popular category was catch-up TV (i.e. programmes that have been on TV in the last 7 days – selected by 55% of respondents), closely followed by older programmes that are no longer on TV (which 54% of the sample want to watch), providing yet another validation of the "long tail" theory.
Advertising – an alternative to payment?
A surprising result from the survey was that online adverting creates more consumer antipathy than traditional forms of advertising. Even though advertising spend in online media is at an all time high and growing fast, 84% of respondents find online adverts annoying when it intrudes on their activities and 76% claim to have actively taken steps to avoid online advertising.
Given that consumers will not pay for content, advertising is a natural alternative, allowing free consumption at the point of use. Whilst it might be expected that consumer antipathy towards online adverts would damage this potential, the survey suggests otherwise. Despite the dislike of online advertising, 44% of respondents with computers at home connected to the internet would be happy to have some (or more) adverts included at the beginning of a programme if it meant that streaming/ downloading of films and TV shows could be free. This is a clear indication to rights holders and online businesses that consumers are open to different business model propositions and companies need to consider alternatives to direct consumer payments.
Confusion over legal downloading
The survey revealed a degree of confusion surrounding what content consumers are legally allowed to use on their home computers. Possibly due, at least in part, to a significant amount of national press coverage, 75% of respondents recognise that downloading music from an unofficial file sharing site to a computer is illegal, with similar results for downloading movies (73%) or TV shows (67%). However, once people have a disc in their hand, or a track on their computer, there is greater uncertainty - only 33% believe taking the content from a DVD and putting it onto a computer ("ripping") is unlawful. Once on the computer, only 26% believe copying that content to a portable device is illegal. These activities are currently illegal in the UK (in most cases), at least in theory, although the Government is currently considering whether to introduce a "format shifting" exception in line with the recommendation in the Gowers' Report.
Copyright owners continue to face an uphill battle to persuade consumers that rules on content use (enforced by Digital Rights Management ("DRM")) are "fair". However, it is clear that consumers are also still confused about the purpose and effect of DRM. Whilst a third of respondents support DRM to protect content from people who haven't paid for it, 71% of people surveyed believe that, once they have bought some content, they should have the freedom to transfer that content between all of their personal devices. At the same time, only 12% think that once they have bought something they SHOULD be entitled to give it away to their friends. Only 8% of respondents support the use of DRM to control what happens to content once they have paid for it.
Even with heightened illegal downloading, consumers are not concerned about getting caught and the main reason for not illegally downloading is moral guilt, with 34% of respondents believing it's wrong, with the second most common reason being the consumer's desire for quality authorised files (33%), this reason being especially common among 16 and 17 year olds.
The full report also examines:
Mobile TV
· 65% of respondents have a general lack of interest in watching TV channels or TV or movie clips on mobiles.
· Respondents are more likely to use their mobile phones to share content with their friends, with 30% receiving photos and 17% receiving videos on their phones from friends at least once a month.
· Respondents who are not already streaming to their mobiles show the most interest in sideloading music or podcasts from their computers, with 15% being definitely or possibly interested in this latter activity, rather than acquiring content through the mobile network.
Video On Demand
· There is substantial take up of Video on Demand ("VOD") with 17% of respondents using this emerging technology, with a further 25% of respondents expressing interest in such a service.
· The key reasons given for their disinterest by the 29% of respondents who say they are not interested in VOD are that they already have plenty of choice (45%), are not willing to pay any more for TV content (41%) and are happy to watch broadcast television at the time it is scheduled (40%).
Social Networking Sites
Social networking sites are very popular amongst respondents, with 68% of respondents registered with a site. Clear leaders in this area are Facebook (44%), Friends Reunited (32%), Myspace (26%) and Bebo (16%). 43% of Facebook users use it every day. The reasons why respondents use their preferred site are very varied; 50% using a site to view and share photos, 13% to see or share videos and 12% to see what music friends like. -ends-
Notes to editors
For further information on the Olswang Convergence Consumer Survey 2007, please visit www.olswang.com/convergence, or contact:
Verity Dephoff, T 020 7067 3003, E This e-mail address is being protected from spam bots, you need JavaScript enabled to view it Lucy Chapman, T 020 7067 3009, E This e-mail address is being protected from spam bots, you need JavaScript enabled to view it Natalie George, T 020 7067 3018, E This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
About Olswang
Olswang is a leading business law firm with a distinctive approach. Our pioneering and problem-solving ethos has established a commanding reputation in the technology, media and real estate sectors, as well as a wide range of other industries.
Founded in 1981, the firm has grown to a team of over 600, including 85 partners, across four European offices. In addition, Olswang has a formal alliance with a major US firm Greenberg Traurig LLP and a long-established best friends network of leading independent law firms throughout the world.
As more companies look for opportunities to expand into new digital markets, Olswang's Media, Communications and Technology Group has been at the forefront of the convergence revolution advising world-class businesses through to entrepreneurial start-ups. The rich diversity of our client base ensures a broader perspective and, as a result, deeper commercial insight. Our expertise in digital media and convergence gives us unparalleled insight into the latest technologies that are redefining the way media companies connect with their customers and enables us to advise our clients based on a complete understanding of the technology available to them.
About YouGov
Founded in May 2000, YouGov is a professional market research agency pioneering the use of the Internet and information technology to collect high quality in-depth data for market research and public consultation.
YouGov has pro-actively recruited respondents from all ages, socio-economic groups and regions of Britain. The sample for each survey is carefully selected and controlled so that it is representative of the adult population as a whole - or the specific audience that the survey is designed to measure.
YouGov offers a full market research and consultancy service, collaborating with other agencies in Britain and abroad.
For more information on YouGov and its services please contact:
Marek Vaygelt Head of Technology and Telecoms Research T 020 7012 6160 M 07718 587 667 E This e-mail address is being protected from spam bots, you need JavaScript enabled to view it W www.yougov.com
For further information contact: Lucy Chapman T 020 7067 3009 E This e-mail address is being protected from spam bots, you need JavaScript enabled to view it W www.olswang.com
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