15 September 2017

Route one: The growth of direct to consumer streaming

If an article from UK newspaper The Daily Telegraph is accurate, the number of subscribers joining Netflix is stagnating in the UK. It reports that the media company’s UK audience has plateaued at 6.1 million, compared to an estimated 8 million at arch rival Amazon Prime.

Whilst the unreleased data cited in the article doesn’t act as any concrete evidence that Netflix has peaked in the UK, it does raise some interesting points, especially in the wake of Disney’s announcement to stop licensing its content with Netflix in 2019 and launch two streaming services of its own.

According to Ofcom, the UK’s communications regulator, 75% of 16-24 year olds use subscription streaming services. As consumers increasingly access the shows they want to watch on the device of their choice, wherever they are, many big broadcasters, brands and content creators are considering the merits of creating a direct to consumer (D2C) service.

WWE Network was one of the early movers in creating a D2C streaming service, a decision which was based on research conducted with its audience whilst planning the launch of a linear TV offer.  Their CEO Michelle Wilson said in an interview with AdWeek, “We felt streaming provided the greatest long-term transformative growth for WWE on a global basis.” She wasn’t wrong – with nearly 2 million paid and free trial subscribers across the globe, it’s the 10th most subscribed channel in the US.

Nielsen recently announced  that it will begin crediting video content distributed on Facebook, Hulu and YouTube in its Digital Content Ratings. As its measure for digital content consumption, including streaming video, static web pages and apps on all major devices and platforms, this is a significant development for the OTT industry. By providing more accurate audience data, it will be easier to assess consumer viewing behaviours and preferences, whilst ensuring that advertising revenues are adjusted to reflect value for money. This will help new services to plan using better estimates of the size and value of their new audiences before launching.

There are many benefits to brands, creators and rights holders of creating a D2C service, from having access to the data, and being able to generate much closer, deeper relationships with each and every fan. Significantly, there may be opportunities to generate new revenue streams such as merchandise, sponsorship and licensing deals.

However, there are many challenges to overcome from getting the price right, creating a service which attracts loyal and long term audiences and establishing the right technology partners to deliver a seamless service which allows the viewer anytime, anywhere access.

Whilst the prize for success is high, the challenge of getting it right is equally significant. Consumers are unforgiving when it comes to changing services, and will opt in and out, as easily as they will swipe left or right. It’s never been more essential to plan, and plan well for success.