Seeing the big picture:

Two weeks ago, in a rare event for me nowadays, I went to the pictures.  I know I’m not alone in shunning the cinema as U.S. year-to-date box office attendance data at the time of writing shows a 6% decline.  More and more people are choosing to watch films at home as digital streams on their large screens.  I should really say “movies” instead of “films” as what I watched were images output from a digital projector as pixels projected onto a screen.  There had been no film involved in the creation of the content, only high definition digital cameras and digital editing equipment.  (Perhaps I should explain that this particular “movie” was actually a live relay of a sold-out production at the National Theatre in London.)   The picture quality wasn’t significantly different from watching TV to matter – 2048 pixels on a large cinema screen viewed from some distance doesn’t look that much better than sitting far closer to my TV screen at home.  It was an excellent play but this cinema (surely now an obsolete name) experience confirmed my prejudices:  although the image and sound quality was fine, the girl next to me, and the chap behind me, continually disturbed me as they unwrapped and ate their smelly popcorn, drank their sodas, wriggled around and whispered.  If that wasn’t irritating enough, the high-priced seat wasn’t comfy.  Cinemas always trade increased revenue from more patrons at the expense of their customers’ leg room.  Sitting comfortably for two hours required more degree of movement than my seat allowed, and I also missed the capacity to hit a pause button and go for a pee.  There is something about not being able to do something that makes that action far more desirable.  I now associate relaxed immersion in a digital story with me being in control, at my time and convenience.  I arrived early at the cinema in order to be sure of being one of the fortunate few who managed to get a seat in the central optical axis of the projector.  Most people seated off to the sides had to be content with viewing an unevenly illuminated screen - and probably suffered an aching neck the following day. My article last month, primarily using U.S. data, was about how television viewing in the developed western economies is being transformed by the Internet, and how TV measurement companies like Nielsen have missed out on the scope of that change.  As I explained, TV audience measurement is commercially very important as it determines what TV programs get made, and which films get bought, even for state broadcasters like the BBC.  During the last month, hardly any of my TV viewing could have been captured by existing audience measuring systems.  And even the new systems now being introduced into Europe and the U.S. would not have detected what I, or many others like me, watched.  All the TV production, including movies, I have viewed recently have been recorded during the last 60 days or so on a digital video recorder (my trusty Humax).  This two month time-shifting viewing period is way beyond any current or proposed new measurement systems.  Much of my Internet TV viewing also often exceeds the meagre seven day catch-up period presently allowed, so I frequently download copies of the programs I want from those thoughtfully posted on YouTube.  The copies may be down a generation but because the original programs are aired in digital format the quality loss is perfectly acceptable.  A sign of the times is that I discovered three important documentary programs I hadn’t managed to record have kindly been made available on YouTube.  I didn’t stream these but downloaded them onto my laptop.  One I watched this month but I will probably view the other two in the next six months or so, when I finally get around to them.  Many films I’ve recorded may sit on my digital video recorder for some months, or be off-loaded to a DVD for much later viewing.  Some of these self-made DVDs of films may never be viewed.  I’ve recorded them “just in case.”  Advertising will, of course, be skipped if and when I eventually view them. With a growing number of discerning “picky” viewers like me, you can appreciate the problem for the TV measurement companies.  As the viewing choice for TV content moves from being a channel button on a remote control to becoming a Web address for each program, measuring viewing figures for specific output becomes increasingly complex.  Worse still for the companies anxious to quantify  what’s happening is that as the Internet is global an individual TV production, or TV film showing, will end up with multiple Web addresses in multiple locations around the world, and who could guess how many of those copies emerge from unofficial sources?  As the commercial reason for measuring TV audiences remains vitally important, and yet is rarely discussed, I’m looking at different aspects that caught my attention this month, using European data.  The official TV audience measurement system used in the UK is BARB.   BARB (the acronym for the Broadcasters Audience Research Board), is an industry group jointly owned by the TV broadcasters and the Institute of Practitioners in Advertising (IPA).  Following Nielsen’s planned updates in the U.S., BARB has finally agreed to start measuring Internet TV viewing. While the introduction of the Internet is blamed for the media fragmentation of TV, as the line chart on the left indicates, the Internet has only accelerated and amplified an existing trend.  I’ve previously discussed how panel data, i.e. data created using a relatively small sample of people, has to be viewed sceptically.  BARB’s existing data is gathered using a current sample of 12,000 people, but one advantage of this data is that, as it has been collected for many years, it can be used to gain an historical perspective.  When I looked at BARB’s table of data, the Annual % share of viewing by individuals 1981-2012, I was struck by the consistent growth in the numbers in the “other” data column over the last 20 years.  Graphing this as a line (the left hand chart on the slide) it becomes very obvious that during this period BARB panel viewers have been watching fewer and fewer television productions and films shown on the main TV channels.  To put it another way: as the number of TV channels has increased, and TV content has been spread around and time-shifted, viewers have been steadily migrating away from the main channels.  A high proportion of the content being viewed on these other channels are films which may date from a few months to a few decades ago.  This data seems to confirm that the gravitation to view alternative TV channels was an established trend well before the Internet came along.  Today, as more and more high quality content like films become available online from a myriad of official and unofficial resources, that trend is being greatly amplified. Now look at the bar chart on the right of the PowerPoint above: this aggregated peak traffic data is captured with the software that a lot of the major Internet Service Providers (ISPs) use to manage their service to subscribers.  Sandvine categorises video streaming as Real-Time Entertainment and, averaged out across Europe, this makes up over 40% of the data traffic.  This is low compared to North America (see last month’s chart) and it varies widely between countries.  U.K. viewers, for example, consume online video in a similar way to viewers in North America.  In fact, in the UK online video already makes up over 50% of online traffic at peak times because of services like BBC iPlayer, ITV Catch-Up, YouTube and Lovefilm (Amazon’s streaming service).  Looking at actual online data traffic like Sandvine’s data reveals another interesting fact.  Where Real-Time Entertainment traffic is high, file-sharing traffic is low, and vice versa.  This clearly shows that where there are fewer legitimate options to view TV programs and films, there is an increased use of illegitimate sources to view them, especially those without the disruption of advertising.  Films have long relied on revenue from television as well as cinemas but attention-grabbing films are now finding other outlets.  According to Oxford Economics 2012 data, on average a feature film makes 29% of its U.K. revenue from television.   This is greater than the average 24% revenue acquired from cinema distribution.  Naturally, that average masks some exceptions, for example, the award winning film documentary “Senna” made 62% of its revenue from physical DVDs and online digital streams, 32% from TV broadcast and cable channels and only 6% from cinema box office sales.  The 2011 British prison/crime thriller “Screwed” has so far made 95% revenue from physical and digital sales, 4% revenue from TV broadcast and cable channels, and only 1% from the cinema box office.  This data about film revenue confirms that people will seek out good quality video content from whatever sources are available – and they’ll watch it at their convenience where they are most comfortable.  The established cinema and TV industries are becoming less important as a source of revenue for the making of high quality productions.  A prime example of this is Netflix’s financing of House of Cards, such a highly popular production that people spent four billion hours streaming it from Amazon’s servers in its first three months of availability.  That is more viewing time over the same period than that spent watching the entire output from the most popular cable channel in the U.S. Whilst TV channels are finding their content is being unbundled, the film industry is also escaping from the tyranny of the box office which previously limited productions to the Hollywood mean.  My cinema visit confirmed that for most viewers of a digital screen, there is no discernible difference between a TV series and a Film production, whether the content emanates from a digital stream or a physical DVD, or indeed, whether the content is recorded and distributed legitimately or not. As long as BARB and Nielsen’s established audience measurement methods remain so woefully inadequate it is difficult for the TV and Film industries to comprehend what is happening.  Only Amazon and Netflix seem currently capable of generating accurate data on legitimate digital physical and online streaming sales, and it’s very unlikely that either of these two will release such valuable data as they seek to monetise it.  This means that the TV and Film industries will continue to miss seeing the big picture. July 2013       
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Audience fragmentation continues...
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2013
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Seeing the big picture:

Audience fragmentation continues...
Two weeks ago, in a rare event for me nowadays, I went to the pictures.  I know I’m not alone in shunning the cinema as U.S. year- to-date box office attendance data at the time of writing shows a 6% decline.  More and more people are choosing to watch films at home as digital streams on their large screens.  I should really say “movies” instead of “films” as what I watched were images output from a digital projector as pixels projected onto a screen.  There had been no film involved in the creation of the content, only high definition digital cameras and digital editing equipment.  (Perhaps I should explain that this particular “movie” was actually a live relay of a sold- out production at the National Theatre in London.)   The picture quality wasn’t significantly different from watching TV to matter – 2048 pixels on a large cinema screen viewed from some distance doesn’t look that much better than sitting far closer to my TV screen at home.  It was an excellent play but this cinema (surely now an obsolete name) experience confirmed my prejudices:  although the image and sound quality was fine, the girl next to me, and the chap behind me, continually disturbed me as they unwrapped and ate their smelly popcorn, drank their sodas, wriggled around and whispered.  If that wasn’t irritating enough, the high-priced seat wasn’t comfy.  Cinemas always trade increased revenue from more patrons at the expense of their customers’ leg room.  Sitting comfortably for two hours required more degree of movement than my seat allowed, and I also missed the capacity to hit a pause button and go for a pee.  There is something about not being able to do something that makes that action far more desirable.  I now associate relaxed immersion in a digital story with me being in control, at my time and convenience.  I arrived early at the cinema in order to be sure of being one of the fortunate few who managed to get a seat in the central optical axis of the projector.  Most people seated off to the sides had to be content with viewing an unevenly illuminated screen - and probably suffered an aching neck the following day. My article last month, primarily using U.S. data, was about how television viewing in the developed western economies is being transformed by the Internet, and how TV measurement companies like Nielsen have missed out on the scope of that change.  As I explained, TV audience measurement is commercially very important  as it determines what TV programs get made, and which films get bought, even for state broadcasters like the BBC.  During the last month, hardly any of my TV viewing could have been captured by existing audience measuring systems.  And even the new systems now being introduced into Europe and the U.S. would not have detected what I, or many others like me, watched.  All the TV production, including movies, I have viewed recently have been recorded during the last 60 days or so on a digital video recorder (my trusty Humax).  This two month time-shifting viewing period is way beyond any current or proposed new measurement systems.  Much of my Internet TV viewing also often exceeds the meagre seven day catch-up period presently allowed, so I frequently download copies of the programs I want from those thoughtfully posted on YouTube.  The copies may be down a generation but because the original programs are aired in digital format the quality loss is perfectly acceptable.  A sign of the times is that I discovered three important documentary programs I hadn’t managed to record have kindly been made available on YouTube.  I didn’t stream these but downloaded them onto my laptop.  One I watched this month but I will probably view the other two in the next six months or so, when I finally get around to them.  Many films I’ve recorded may sit on my digital video recorder for some months, or be off-loaded to a DVD for much later viewing.  Some of these self-made DVDs of films may never be viewed.  I’ve recorded them “just in case.”  Advertising will, of course, be skipped if and when I eventually view them. With a growing number of discerning “picky” viewers like me, you can appreciate the problem for the TV measurement companies.  As the viewing choice for TV content moves from being a channel button on a remote control to becoming a Web address for each program, measuring viewing figures for specific output becomes increasingly complex.  Worse still for the companies anxious to quantify  what’s happening is that as the Internet is global an individual TV production, or TV film showing, will end up with multiple Web addresses in multiple locations around the world, and who could guess how many of those copies emerge from unofficial sources?  As the commercial reason for measuring TV audiences remains vitally important, and yet is rarely discussed, I’m looking at different aspects that caught my attention this month, using European data.  The official TV audience measurement system used in the UK is BARB.   BARB (the acronym for the Broadcasters Audience Research Board), is an industry group jointly owned by the TV broadcasters and the Institute of Practitioners in Advertising (IPA).  Following Nielsen’s planned updates in the U.S., BARB has finally agreed to start measuring Internet TV viewing. While the introduction of the Internet is blamed for the media fragmentation of TV, as the line chart on the left indicates, the Internet has only accelerated and amplified an existing trend.  I’ve previously discussed how panel data, i.e. data created using a relatively small sample of people, has to be viewed sceptically.  BARB’s existing data is gathered using a current sample of 12,000 people, but one advantage of this data is that, as it has been collected for many years, it can be used to gain an historical perspective.  When I looked at BARB’s table of data, the Annual % share of viewing by individuals 1981-2012, I was struck by the consistent growth in the numbers in the “other” data column over the last 20 years.  Graphing this as a line (the left hand chart on the slide) it becomes very obvious that during this period BARB panel viewers have been watching fewer and fewer television productions and films shown on the main TV channels.  To put it another way: as the number of TV channels has increased, and TV content has been spread around and time-shifted, viewers have been steadily migrating away from the main channels.  A high proportion of the content being viewed on these other channels are films which may date from a few months to a few decades ago.  This data seems to confirm that the gravitation to view alternative TV channels was an established trend well before the Internet came along.  Today, as more and more high quality content like films become available online from a myriad of official and unofficial resources, that trend is being greatly amplified. Now look at the bar chart on the right of the PowerPoint above: this aggregated peak traffic data is captured with the software that a lot of the major Internet Service Providers (ISPs) use to manage their service to subscribers.  Sandvine categorises video streaming as Real- Time Entertainment and, averaged out across Europe, this makes up over 40% of the data traffic.  This is low compared to North America (see last month’s chart) and it varies widely between countries.  U.K. viewers, for example, consume online video in a similar way to viewers in North America.  In fact, in the UK online video already makes up over 50% of online traffic at peak times because of services like BBC iPlayer, ITV Catch-Up, YouTube and Lovefilm (Amazon’s streaming service).  Looking at actual online data traffic like Sandvine’s data reveals another interesting fact.  Where Real-Time Entertainment traffic is high, file-sharing traffic is low, and vice versa.  This clearly shows that where there are fewer legitimate options to view TV programs and films, there is an increased use of illegitimate sources to view them, especially those without the disruption of advertising.  Films have long relied on revenue from television as well as cinemas but attention-grabbing films are now finding other outlets.  According to Oxford Economics 2012 data, on average a feature film makes 29% of its U.K. revenue from television.   This is greater than the average 24% revenue acquired from cinema distribution.  Naturally, that average masks some exceptions, for example, the award winning film documentary “Senna” made 62% of its revenue from physical DVDs and online digital streams, 32% from TV broadcast and cable channels and only 6% from cinema box office sales.  The 2011 British prison/crime thriller “Screwed” has so far made 95% revenue from physical and digital sales, 4% revenue from TV broadcast and cable channels, and only 1% from the cinema box office.  This data about film revenue confirms that people will seek out good quality video content from whatever sources are available – and they’ll watch it at their convenience where they are most comfortable.  The established cinema and TV industries are becoming less important as a source of revenue for the making of high quality productions.  A prime example of this is Netflix’s financing of House of Cards, such a highly popular production that people spent four billion hours streaming it from Amazon’s servers in its first three months of availability.  That is more viewing time over the same period than that spent watching the entire output from the most popular cable channel in the U.S. Whilst TV channels are finding their content is being unbundled, the film industry is also escaping from the tyranny of the box office which previously limited productions to the Hollywood mean.  My cinema visit confirmed that for most viewers of a digital screen, there is no discernible difference between a TV series and a Film production, whether the content emanates from a digital stream or a physical DVD, or indeed, whether the content is recorded and distributed legitimately or not. As long as BARB and Nielsen’s established audience measurement methods remain so woefully inadequate it is difficult for the TV and Film industries to comprehend what is happening.  Only Amazon and Netflix seem currently capable of generating accurate data on legitimate digital physical and online streaming sales, and it’s very unlikely that either of these two will release such valuable data as they seek to monetise it.  This means that the TV and Film industries will continue to miss seeing the big picture. July 2013       
Click here to download the PowerPoint chart: Click here to download the PowerPoint chart: