As the ad-supported side of the video business looks to supplement panels with much larger data sets, two alternatives have come to the fore: set-top box data and automatic content recognition (ACR) data from smart TVs.
While each data set has its pros and cons, the fact remains that the overall number of set-top boxes is shrinking at a steady clip, while the number of smart TVs is growing at a similarly steady rate, and this is likely to make measurement much trickier to calculate in the years to come.
Let’s start by looking at the value each data set adds.
ACR data from smart TVs provides a second-by-second look at anything that is “on the glass” regardless of input. That makes it an ideal measurement tool for right now in that it can measure both streaming and linear viewing, not to mention over the air. This is key because most viewers are going to be watching both linear and streaming for many years to come.
As per a recent study from Leichtman Research, 71% of U.S. households still have a pay TV subscription of some sort. (That number includes vMVPD subscriptions.) So while cord-cutting is indeed increasing, it’s still only at a single-digit pace and there’s likely to be a floor too—at TVREV, we’re thinking that somewhere between 30% and 40% of households are never going to willingly give up traditional pay TV.
This means that the video industry will need to measure both linear and streaming for the foreseeable future, at least the next five to 10 years, and ACR data is uniquely positioned to provide that sort of measurement.
On the flip side, ACR data comes from a single TV, not from every TV in the household, which is where set-top box data comes in. Since all of the set-top boxes in a household are connected and track to a single account, it’s easy to measure what that household is viewing.
The downside to set-top box data is that it often reports viewing that happened after the user has shut off the TV and gone to sleep as the user has only shut off the TV set and not the set-top box.
There’s also the issue that if the user has a smart TV, the set-top box and the smart TV are both collecting data on the same viewer. This is why the combined data sets must be cleaned up (de-duplicated) and why one can be used to confirm the other.
Set-tops Boxes Down, Smart TVs Up
The aforementioned Leichtman report also found that just 37% of all TV sets in use today have a traditional pay-TV providers’ set-top box attached– a massive decline from the 58% figure Leichtman recorded in 2016,
Compare that stat to an April 2021 study from Hub Research that found that seven out of 10 U.S. households own at least one smart TV and that 52% of TVs are smart TVs, an increase of 7% from 2020.
Those numbers will only be decreasing (set top boxes) and increasing (smart TVs) in the years to come.
Set-top box numbers are shrinking because the various MVPDs are slowly but surely moving away from them. Set top boxes are notoriously expensive, difficult to upgrade, and the cause of much consumer unhappiness due to missed or delayed tech appointments.
Instead, MVPDs are turning to apps, which can easily be installed on smart TVs and connected devices, including connected devices they themselves provide to their customers in lieu of set top boxes.
Even Comcast, which has been justifiably proud of its X1 set-top box interface, has been slowly shifting away from set top boxes. They’ve made the X1 the basis of their new Xfinity Flex streaming device and they are going to be rolling out their own Comcast branded smart TVs whose user interface will be based on X1.
All of which means that the future of set-top boxes is looking increasingly murky and would seem to be heading further in a direction that is the basis of another common slam, which is that set top box data measures an audience that is increasingly older and less affluent than the general TV viewing population and is thus increasingly less relevant.
Smart TVs, on the other hand, are on the upswing.
Amazon has also rolled out its own line of smart TV sets and Google is pushing Android-branded sets as well.
More than that, it’s all but impossible to buy a new TV set these days that is not a smart TV. So as consumers are replacing their older unconnected TVs, they’re replacing them with smart TVs. That means major ACR providers like LG, Samsung, Vizio and Roku (TCL) are going to be seeing their user bases growing steadily over the next several years. (The average replacement cycle for a TV in the U.S. is around seven years.)
The demise of the dongle is also fueling the growth of smart TVs. While the dongle is far from dead right now, the main reasons to turn to a Roku or Amazon stick—better interface and larger app selection—are no longer valid as smart TV OEMs have dramatically upped their interface games. Roku and Amazon themselves are putting more effort into their own smart TVs too, as they realize that a $300 TV is not as readily swapped out for a competitor as a $29 dongle.
ACR data is not without its own flaws however. Only two of the companies that collect ACR data—VIZIO and Gracenote—actually license that data to third parties, which greatly reduces the data set that can be used to create measurement stats. (The remaining OEMs use the data for their own purposes, to support their ad sales teams and their FASTs.)
In addition, many, if not most households do not exclusively have one brand of TV in the house. That, critics note, can make it difficult to ascertain household data in households with multiple TVs, especially if one TV is the main set and/or if different family members exclusively use different TVs.
All that said, the more viewing that happens on smart TVs, the more valuable ACR data will be as it captures both streaming and linear. While set-top box data has appeal as both a check on ACR data and as a way to understand household viewing, the shrinking size of the set top box database, along with the fact that it does not measure most streaming viewing both serve to lessen its overall value for measurement purposes.
The result is that TV viewing is going to become trickier to accurately measure in the years to come, which is why those companies who are able to figure it out will find themselves in the proverbial catbird seat.
Alan Wolk is the co-founder and lead analyst for media consultancy TV[R]EV
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