According to the Diffusion Group, if forced to decide between legacy pay TV or over-the-top (OTT) subscription VOD (SVOD) services, 57% of dual-service users would choose legacy pay TV, 43% streaming services like Netflix and Hulu.

"One would be excused for thinking the difference would be more dramatic," said Michael Greeson, president of TDG. "After all, one is a multi-channel TV service with live primetime shows, even live sports; the other an on-demand service with no live programming. Apples and oranges, right?"

"No, this does not yet constitute perceptual parity," said Greeson. "But there is no doubt that SVOD has taken and is taking a growing part of mainstream mindshare, especially among younger viewers."

TDG's analysis indicates that the choice is largely a factor of age. Some 65% of 18-24 year-olds would select SVOD over legacy pay TV, a rate that declines as age increases. Conversely, 72% of 55-65s chose legacy pay TV over SVOD, a rate than declines as age decreases.

"Traditional MVPDs face the growing threat that today's legacy+SVOD user could very well be tomorrow's vMVPD subscriber," said Greeson. "The stage is set. The question now is whether pure-play broadband pay TV providers - those without legacy assets, like Hulu TV - can capitalize on the opportunity."

Unlike legacy providers that also offer an vMVPD service like Sling TV and Dish, pure-play broadband pay TV operators have no conflict of interest in transitioning SVOD users to multi-channel subscribers. The new revenue will be accretive to ARPU, not dilutive, as the linear package also includes the SVOD service. Cannibalization is thus not a concern for virtual operators as it is for the growing number of legacy providers now dabbling in multi-channel streaming services.