Why The Top D2C Brands Are Actually Media

MONTAUK, NY -- As I was preparing the opening remarks to kick off MediaPost's TV & Video Insider Summithere this morning, I was struck by the ad industry's obsession with direct-to-consumer (D2C) brands and the realization, that some of the biggest ones have been -- and always will be -- media brands.

We don't necessarily think of it that way, because as much as media brands spend on paid advertising, they have the advantage of promoting themselves via the original "earned media," themselves. I remember this from covering the major broadcast networks early in my career and learning that as much as ABC, CBS and NBC spent buying ads in TV Guide, newspapers, magazines and outdoor media, it was dwarfed by the value of their "on-air promotion" by something like 10 to one, and if you factored it in, they were actually the biggest brands on TV.

The same thing is true today for the burgeoning OTT marketplace, where new SVOD brands seem to be launching weekly, and for all the money they will spending in conventional consumer media, their biggest war chests are themselves. Or in the case of established media company spinoffs like Disney+ or NBCU's Peacock, it is the extended reach of all their parent company properties that will give them a marketing edge, and massive reach.

And as Needham & Co. analyst Laura Martin explained to me recently, it's also what will enable them to market an especially attractive price point to new subscribers: free.

According to Martin, "the new price for SVOD services is free." That's because big media companies can amortize the incremental cost of their new subscription services by bundling them at a discount -- or even zero direct cost -- to new subscribers by packaging them with other properties.

It's a model that has already been used successfully by Amazon's Prime Video service for years, in which many subscribers sign up for free shipping, but get the video service as a bonus. And Amazon gets subscriber penetration that can be monetized in other direct or indirect ways.

She says similar packaging will occur with Disney+, in which families who stay at Disney resorts of theme parks will get the SVOD service free or at a discount.

But the real way consumers are paying for some of these services is an even more indirect method: they're doing it with their data.

Whether it is a "bonus" subscription to Amazon Prime or Disney+, or a discounted big screen TV from Roku, media companies are using free or discounted access to attract new subscribers, but it is the underlying value of data that can be used to market, or re-market to them, that is perhaps the greatest potential asset.

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