According to the “Entertainment Trends in America” report from The NPD Group, many consumers are supplementing their pay television offerings from cable TV, satellite TV and IPTV operators. Looking beyond traditional basic and premium TV channels, subscribers are seeking TV programming and movies from Netflix and other video streaming services, as well as free streaming video from sites like Hulu and YouTube.

Among all U.S. subscribers to television-services (i.e., cable TV, satellite TV, or IPTV), 27 percent also subscribe to Netflix, while almost half (46 percent) also pay for a premium movie channel or sports channel. Nearly a quarter of television-service subscribers (24 percent) watched movies via both paid and free video-on-demand from their providers. Comcast led other companies in the percentage of their subscribers who use VOD (41 percent), followed by Verizon (38 percent), and Time-Warner Cable (20 percent).

“Even though many consumers are paying for more content from their TV-service providers in the form of premium channels and video-on-demand, there's still quite a lot of alternative video downloading and streaming activity going on,” said Russ Crupnick, senior vice president and entertainment analyst for The NPD Group. “There may also be too much emphasis on so-called ‘cord cutters’ who represent a small group, as opposed to potential ‘cord throttlers,’ who are a massive segment of the subscribing population.”

Three out of four (73 percent) consumers who used Netflix, streamed video for free, or who paid for Internet-video downloads and rentals also have a cable, satellite, or IPTV subscription. “With all the various methods consumers now have to download video, TV-service providers would be in a better competitive position if they could expand their content offerings and improve on-screen search functionality,” Crupnick suggested.

Overall 10 percent of television-service subscribers streamed movies for free, and the same percentage streamed TV programs for free; television networks themselves are the most popular sources for free online TV viewing. With a mean age of 37, OTT video viewers are five years younger than the average cable TV viewer; this group also includes more students who may be viewing on small screens in their bedrooms and dorm rooms.

“Most movie and TV viewers who use OTT options also subscribe to cable TV, satellite TV, or IPTV services, where VOD and premium channels represent high margin add-ons,” Crupnick said. “These services provide operators with an opportunity to bond with their customers and gain more revenue per user. If the programming and user experience aren’t on par with digital alternatives, operators could find themselves increasingly sharing their customers with Netflix or other OTT services, like Apple TV and Roku.”