How many times have we heard this during conferences: “Kids today refuse to pay for media. Paying for it is unthinkable: all free, all the time.” I don’t agree with this statement and I’ll explain why in this guest post.
Allow me to begin by pointing out that the opinion expressed above is not an isolated point of view. A quick Google search produces hundreds of thousands of results. Here’s a particularly juicy one from 2011: “Selling HD Content To A Generation of Thieves That Honestly Don’t Know Its [sic!] Wrong To Steal.” And that’s not just a quote taken from the article, it’s actually the article’s title!
We may want to start by noting that a desire to not pay for content is hardly unique to current generations of young people. Nobody torrented movies in the 1950s, but they did sneak into drive-ins hidden in the trunks of their friends’ cars to avoid paying for admission. MP3 piracy didn’t exist in the 1970s, yet millions of cassette tape copies were made and distributed. We stole all kinds of IP content when we were young, and so did our parents. So let’s stop the finger pointing and move on to the question of whether it’s even true that young people today refuse to pay for content or watch ads.
The answer to that question depends a lot on to which content or ads we’re referring!
There are some 18–34 year olds who are not subscribing to or watching as much traditional TV as the population as a whole, listening to very much radio or paying for a subscription to a print newspaper or magazine. But the first point to make is that younger demographics have ALWAYS under-indexed on those forms of media consumption. They tend to be busy, poor and physically active.
Next, some of the changes we are seeing have nothing to do with evolving media habits. For example, between 2001 and 2009, Americans aged 16 to 34 years old drove 23% fewer miles. The number of those with driver’s licenses fell from 80% to 61%. Less driving means less time listening to the radio. These teens aren’t averse to radio ads per se; they just aren’t spending as much time in cars for various non-media related reasons.
Much more importantly, there are tens of millions of 16–34 year olds who are paying for media and listening to/watching ads. The numbers of young people who are listening to radio ads, paying for cable TV, subscribing to print newspapers and magazines may be down from where they were 10 or 20 years ago, but the shift has not been anywhere near complete. For example, 47% of Americans aged 18 to 29 years got their news from print publications in the last week: that’s lower than other age groups, lower than in the past, and less than half of the population making up that age group. But while it is lower than it used to be, it’s nowhere close to zero. Even a substantial minority of 16–24 year olds in the UK still read newspapers for the news: 36% according to a survey conducted in 2014 in the UK.
At Deloitte, I write predictions across what we call TMT: Technology, Media and Telecommunications. We used to print separate reports for each segment, but stopped doing so a few years ago and now produce a single publication. The boundaries between the three industries have now blended to such a point that we can’t place most predictions in any one single silo. In the same way, consumers (including young consumers) lump all such spending together and likely think about it as coming out of the same part of their budget.
And what does that budget look like today? In the US, annual spending on cell phone bills reached $913 in 2013, up 50% compared to 2007. Recent Canadian data from the CRTC shows that in 2013, the average household spent $191 per month on a basket of communications services, or nearly $2,300 per year. Our Deloitte 2013 Prediction on spending on consumer electronics pointed out the incredible growth in global spending on hardware. Worldwide spending on TV sets, PCs, smartphones, tablets and game consoles rose from 2007 levels of $387 billion to a projected $768 billion in 2014, up 98% or nearly twice as fast as the increase in US cell phone bills cited above. In the past decade, consumers (including 16–30 year olds or sometimes even their parents) have been spending unprecedented amounts on new devices, and then spending yet more on connecting those devices to networks.
Younger demographics are less likely to buy CDs or DVDs, pay for cable or put up with ads on traditional TV. But that doesn’t appear to be true for some newer music and video services.
OTT services: In a poll of 1,032 Canadians conducted by Ipsos in partnership with Deloitte in December 2013, the 18–34 age group was more than twice as likely to subscribe to Netflix (or other OTT video services). Alexa data supports that finding for the US, with both 18–24 and 24–34 year olds over-indexing on visits to Netflix.com and all older demographics under-indexing.
Movies in theatres: Although some kids today download movies from torrent sites and watch them on their laptops, the overall youth population continues to make its way to movie theatres and pay for admission. And at levels higher than the overall population! 12–17 year olds represent 8% of the total US population but purchased 12% of all movie tickets sold; 18–24 year olds form 10% of population yet bought 19% of all tickets sold, over-indexing by nearly 100%! And their share has been stable over the last four years. Meanwhile, 50-somethings are 14% of the population but only 9% of cinema tickets sold: where are the stories that older people won't pay for content?
Music: Younger age groups have almost stopped buying recorded music in physical formats, but that doesn’t mean that they won’t pay for music. In the US, annual music spending sits at about $105 per person per year, and CDs account for only about 10% of that total. But live music is nearly half, at $48 per person annually. Here in Canada, concert and music festival revenues totalled $845 million in 2013: that’s up by nearly 10% compared to 2010 and is 60% more than the COMBINED sales of all music in digital or physical formats!
After a period of time when live music concerts were dominated by boomer acts like Fleetwood Mac and the Eagles, “concerts and music festivals are becoming more millennial” with 31% of 14–30 year olds planning on attending a concert or festival in the coming year. As a percentage of their total spending, teens spend nearly five times as much as adults on concerts and events.
Music service Spotify offers either a free ad-supported version or a premium pay model that is ad free. Spotify had 40 million users as of May 2014, and 10 million of those are paying up front. We don’t know the split for premium versus ad-supported by age, but 40% of Spotify users are aged 18 to 24 and willing to pay with either money or attention.
YouTube: You thought I was going to talk about all the advertising that is part of YouTube, right? The pre-rolls and such add up to a lot of dollars: although not publicly disclosed, one estimate is that YouTube generated $5.6 billion in gross ad revenues in 2013. But I’m not even going to go there…
First, the audiences for these shows skew young… so young that they don’t even appeal to the upper end of the 16–34 year age group. Next, while some believe that these are original creators shaping a new form of storytelling, they can also be viewed as ads for the products, whether video games or Disney merchandise.
Let’s look at it another way. Below is a screenshot of YouTube’s Trends page for the US as at October 25.
For the 18–24 year old demographic, Marvel’s “Avengers: Age of Ultron” official teaser trailer was the most viewed video in 149/150 (99.3%) of the markets measured. In contrast, in 92% of markets measured, Americans aged 45–64 years were watching footage of a Dallas Airport fight. The older group is watching content with just a smattering of advertising, while the younger group is watching something that is a two-minute long ad!
Print books: For about a decade now, industry observers have been predicting something along the lines of “eBooks will take over from printed books, in the exact same way as MP3s took over from CDs, especially among younger readers.” This is a worrying thought for the book industry: in 2000, 730 million CDs were sold in the US; in 2013, that number was down to 165 million (-77%).
But the same thing has not happened to books. Despite a proliferation of the number of physical devices ideally suited to reading eBooks (like eReaders and tablets), and eBooks being pushed by various online retailers, 2013 US data show that of the 2.59 billion books published, only 513 million (20%) were eBooks, and by dollar value eBook revenues were only $3.04 billion (11%) of the total $27 billion market. For Canada, we can examine some data from PwC. Its 2014 Media Outlook report lists all its forecasted and actual results for 2013 across the various Entertainment and Media sectors. Many of the forecasts were too high: actual growth was at least 10% lower than forecasted for all consumer magazines, newspapers, TV ads, out-of-home ads, and radio (AKA the traditional media industry.) But they under-forecasted with respect to consumer and educational book publishing: they predicted 1.8% growth in 2013, and the actual result was 6.3%, or 250% higher.
Is this because older people still consumer print while younger demographics have gone digital? Not even close: in fact, attachment to print as a medium for books appears to be higher in younger than older demographics. In a 2013 survey, 62% of 16–24 year olds preferred print to digital when it came to books. A more recent 2014 survey showed that 73% of 18–29 year olds had read at least one print book in the last year, higher than any other demographic and higher than the average of all older readers (68%).
Another 2013 survey asked people to agree or disagree with the following statement: “eBooks will never take the place of real books for me.” The demographic that most agreed with that statement was the 25–34 year olds, with 55% agreeing, more than all other age groups. Interestingly, 60% of females aged 16 to 20 agreed with that statement (among the highest percentage of all age categories).
Although many younger readers refuse to read newspapers, magazines or phone books, they are buying print books and refusing to steal them electronically. That may feel like a bad thing for traditional print publishers, but it isn’t.
So here’s my core message to those in traditional media: some subset of young people will pay for content… they just won’t pay for YOUR content. Or, to quote the Internet: “Ur doing it wrong”
And that is fantastic news for traditional media companies. Because if young people truly won’t pay for content or watch ads, then we’re all in trouble.
But if there are forms of content or kinds of ads that they will pay for and watch, then there is hope. I’m not saying it will be easy. The aversion to traditional ads or newspapers or cable is fairly intense for certain portions of the youth market. But they have money, and they will pay, so I believe that “old media” will be able to figure out a strategy that will appeal to them. The margins or price points may not be the same, but it remains possible.
As a complement to this post, watch Duncan Stewart's interview on the Business News Network.
 These are by far the largest hardware device markets.
 This poll was released only as part of the Deloitte TMT Predictions series.
 All Canadian figures are from the PwC 2014 Media Outlook. Subscription only.
 These figures are from the 2013 Association of American Publishers Annual Survey, a report available only by subscription. UK and Netherlands data for the same period depict very similar trends. Digital books represent less than 20% of all books by volume, and even less than that in dollar terms.
 Annoyingly, almost all market researchers use a variety of break points to define demographics. 18–34 is the most common, but there are many others.
 Proprietary book publisher survey.
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