2019: When D2C Video Services Will Become Super-Charged
2018 was yet another fascinating year in the development of the video and TV content sector, which has paved the way for further dynamism, disruption and potential opportunity in 2019.
From Disney’s proposed acquisition of Fox, to the proliferation of OTT channels and SVoD services - and with it the growing prominence of D2C services - existing legacy industries are being challenged in a way previously not witnessed.
Streaming video services, in particularly SVoD (subscription video on demand), has shaped how people are consuming video content and given rise to record levels of creative output for TV shows and movies. They have also been a major driver of in-home connected device uptake; by the end of 2019, services such as Netflix will have helped the installed base of smart TVs to double to over 900 million in just 4 years. Similarly, the number of media streamers will have also doubled in the same period, to 100 million.
Perhaps one of the most significant movements is the emergence of direct to consumer (D2C) services. This will come to a head in 2019 when Disney launches its much-anticipated Disney+ service in the USA. This is particularly significant as it will exclusively include Disney movies in the 1st Pay-TV window, as these rights expire on Netflix. It will bring a host of key TV and movie franchises, including Star Wars and Avengers, plus Pixar, its classic animation and a wide range of other content. Disney’s investment in its key franchises in recent years means that the service will have universal appeal, rather than just focused on children and their parents.
The service is set to gradually rollout out worldwide, largely dependent on when existing 1st Pay window deal expire in each country (unlike in the USA and Canada, Disney’s 1st Pay window deal in most other countries is with a local Pay-TV operator). Much D2C activity is centred around the USA, but for many entertainment brands and services, the road to scale may be less obvious in other countries.
Terms of existing exclusive deals will be a major consideration of international D2C launches, as they look to balance the subscriber potential of new services compared, to existing revenue streams for the same content. WWE was one of the first major entertainment brands to make this ‘leap of faith’ in going truly ‘Over-The-Top’, realising it was an important step in determining the long term future of its business.
Although there was notable D2C activity prior to the announcement of Disney+, the brand power and high-quality bar of content will see it have a significant impact in several ways, including:
- Accelerating other content holders to follow suit – with AT&T (HBO, Warner Bros, Turner) stating its plans to launch a D2C service in the USA in 2019
- As a result, providing consumers with greater choice of premium streaming video services, but this fragmentation also provides challenges e.g. what content is on what service, leading to the emergence of the super-aggregators.
- Disrupting the traditional Pay-TV carriage model and potentially impacting their consumer base, as well as negotiating carriage of these new third-party services as apps on their Pay-TV platform
- Improving the appeal of connected devices to consumers, potentially helping bring in later adopters or even encouraging upsell and upgrade
- Further fuelling Netflix’s investment in original content, as it looks to make the transition of Disney content exiting the service as invisible to the consumer as possible
What is perhaps most intriguing in the development of the D2C movement is the role Pay-TV providers and their respective platforms will play moving forwards. D2C brands want the best of both worlds, direct control over their service and creative freedom, but also wide and targeted reach, straight into consumers’ living rooms. So, over time, Disney+ and other D2C services will be increasingly carried by Pay-TV providers, with content potentially integrated into a seamless UI, like Netflix TV shows and movies are on Sky Q in the UK. The capability of STBs may be a limiting factor in this rollout, but this may further stimulate investment from the Pay-TV providers in this advanced hardware.
One thing is for certain, such initiatives will see 2019 will be one of the most dynamic yet for the video entertainment industry.
About the author
David is a Principal Analyst – Media and Entertainment. David has over 20 years’ experience in a research and consultancy environment and is closely involved in researching, analysing and consulting on key content industry and consumer technology developments worldwide, with a particular focus on the evolution of digital business models in the TV, video and music industry. David works with a wide variety of high profile Futuresource clients across the content ecosystem including studios, broadcasters, technology companies, hardware vendors, service providers and industry associations. He also directs Futuresource’s long-running global consumer panel ‘Living with Digital’.
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