Everybody Wants To Be DTC Streaming Provider, But Can Market Support Them?

  • by , Featured Contributor, October 11, 2018
More premium video is coming your way.

Just this week, we learned that AT&T’s WarnerMedia will launch a new subscription-based video service in addition to HBO Now in late 2019. Snap just launched episodic programming purpose-built for vertical viewing. Walmart announced a studio deal with MGM for its ad-supported Vudu video service. And Apple announced that it will be offering PG-rated video programming for free to owners of Apple hardware through its Apple TV app.

This is all on top of dozens and dozens of services already available in the U.S., like Netflix, Amazon Prime, Hulu, CBS All Access, PlutoTV — and the list goes on to more than 200 offerings already

No matter what you think about how cool it will be to have all of these video choices, one thing is certain: This is going to get messy.

Consumer confusion. There’s no way everybody will be able to know about all the services available, let alone the ins and outs of every different offering, how they work, and what they’ll cost you. No way.



Hitting a market ceiling. How many streaming video services will people want? WarnerMedia’s CEO says he doesn’t know, but thinks that it’s probably more than two and less than 10. We’ll find out.

A bigger question is, how many can people afford? Most of America doesn’t have the kind of the incremental disposable income to keep buying more services.

Hitting a broadband ceiling. And, the biggest question: How do you provide streaming video to people without broadband at home? Just last week, Pew Research told us that we’ve hit a ceiling on total U.S. households with streaming services, since 35% of the country doesn’t have fixed broadband at home. More importantly, that number has gone up, not down, over the past two years.

Crazy competition. These streaming video services won’t just be competing with each other. For sure, they will be competing for a share of consumers’ wallets with every media subscription out there, from The New York Times to Washington Post, to Spotify and Meredith magazines. Watch out.

Cross-subsidies. An enormous challenge for many who want to get into video streaming is that so many of today’s services are fully or heavily subsidized from adjacent businesses. Streaming video is like the “free toaster” that banks give away to get account sign-ups.

Amazon’s Prime is subsidized by free two-day e-commerce shipping; DirecTV Now, by AT&T mobile service plans; Apple’s new service, by hardware purchase; Netflix, by investor capital.

Is Netflix impervious to a fall? Probably not. Don’t forget, Amazon used to have a business model that was largely investor-subsidized before its massively profitable AWS took off to subsidize its retail business. What will be Netflix’s AWS?

What will be some of the consequences of all of these factors?

One, making premium video will be very profitable for those who can do it well.

Two, smart consumer subscription marketing will be very much in demand.

Three, lots of folks will take their eyes off the video advertising business.

It will be hard — or near-impossible — for large media companies to be both maniacally focused on building, marketing and driving subscriptions for direct-to-consumer products, and simultaneously investing, innovating and executing well in all of the areas required to make TV and premium video advertising better. Just watch. Big opportunities will abound.

What do you think? What will all this DTC streaming video mean for our industry?

1 comment about "Everybody Wants To Be DTC Streaming Provider, But Can Market Support Them?".
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  1. Neil Ascher from The Midas Exchange, October 12, 2018 at 9:43 a.m.

    Dave, I think the key point you make is affordability.  If you accept the premise that most "cord-cutting" is prompted by the desire to save money relative to a traditional cable/satellite package, then building a significant subscriber base for these services will be a real challenge.  Ultimately, consumers will have less choice, rather than more, as content is siloed.  Fewer subscribers to each service means less audience to sell for advertising supported services and less revenue to produce top quality original content (beyond what is secured from the parent companies for those services that have them).

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