The industry is abuzz about direct‐to‐consumer (D2C) streaming video services, which give consumers programming choices that fall outside of traditional pay‐TV packages.
Early entrants to the D2C streaming video market, such as MLB.tv and Netflix, have proven it’s possible to attract a large audience with a D2C offering. For example, Netflix has over 66 million paid members around the world and MLB.tv has 3.5 million paid subscribers. Now, the question is whether or not others will follow in their footsteps and also go direct to consumer.
Two views on the future of D2C
D2C is heading in one of two directions. Consumers could favor centralized access to streaming video content. This consumer preference could make it difficult for niche streaming video providers to secure the subscribers they need to sustain their offerings. It would allow players like Netflix, Hulu, Amazon Prime Instant Video and MVPD apps to capture the bulk of time and budgets that consumers are willing to spend on streaming video.
On the other hand, consumers could embrace the ability to curate their own collection of content. It’s cumbersome to manage today, but search and discovery innovations could easily improve the curated experience in the near future. With this, any streaming video provider with a loyal audience could thrive going D2C.
2015 was a big year for D2C launches
Whatever the future of D2C holds, one thing is for certain. There’s a quickening pace of new D2C launches. Together, 2014 and 2015 had eighteen major launches. This is more than all prior years combined. And even more D2C streaming video services are set to launch in 2016. AMC Networks is in beta with a horror‐themed offering called Shudder and Bell Media’s CraveTV plans to go direct to consumer on January 1st.
Sources: Launch dates announced in industry press. Data compiled November 2015.
Programmers future‐proofing their business
The main impetus for going D2C is to find another path to viewers who are watching less traditional TV. A MarketingCharts.com analysis of Nielsen data reports, “Between 2011 and Q2 2015, TV viewing by 18–24-year-olds dropped by almost 8 hours per week, or by more than an hour a day. Tellingly, the largest decline (in absolute time) occurred within the past year, between Q2 2014 and Q2 2015.”
Source: MarketingCharts.com analysis of Nielsen data
Over‐the‐top (OTT) devices make going D2C easy
Another impetus for going D2C is the ease and range of options for getting premium streaming video content onto TVs. D2C streaming video services can provide a viewing experience that’s as good or better than traditional TV by going over‐the‐top (OTT) to TV screens via set‐top like Apple TV and Roku, streaming media sticks like Chromecast and Amazon Fire Stick, and gaming platforms like PlayStation 4 and Xbox One.
Who else will go D2C?
Existing entrants in the D2C space have proved that OTT can be leveraged at the same time as traditional TV distribution deals and that it can grow the pie of viewers beyond what traditional TV can reach. However, subscriber acquisition can be difficult and nobody wants to launch a service that can’t gain traction. Expect ad technology and marketing automation partners to ease this difficulty for new and existing D2C players.