Originally featured by: The Digital Entertainment Group
Direct-to-consumer (DTC) is an evolving U.S. retail trend with startups such as Warby Parker and manufacturers like Harry’s Shave Club seizing the opportunity wrought by the rapidly changing retail landscape. This trend extends beyond CPG brands and has already established a foundation in the TV and Movie industries. It’s being facilitated by the proliferation of TV-connected device adoption, faster in-home broadband, a la carte channel availability, and the consumer’s desire to pay for only what they intend to watch. Indeed, the primary direct-to-consumer channels, HBO NOW, Showtime, Starz, CBS All Access, ESPN+, WWE Network, and Hallmark Movies Now, have publically disclosed a total of over 17 million gross subscribers.
The NPD Group’s new report, The DTC Video Landscape, delves into the behaviors of these early adopters. As is often the case with emerging technology and content distribution, the DTC channel model is attracting a highly engaged audience. Nearly all (92 percent) of DTC video households subscribe to a video-on-demand service from Netflix, Amazon Prime Video, or Hulu. And homes that watch DTC channels are three times more likely than the general population to be virtual MVPD (multichannel video programming distributor) subscribers as one-in-five (19 percent) have a service such as Sling TV, DirecTV Now, or Hulu TV.
Uptake of these video services is often linked to cable cord cutting. So let’s dispel that myth; subscribing directly to a channel as a means to replace cable ranks 16th out of the 20 reasons evaluated. Indeed, a majority, 66 percent, subscribe directly to channels in addition to their cable or satellite TV bundle. Granted, affordability is driving adoption and that is the top reason cited for subscribing to a la carte TV channels, as such being less expensive than a cable channel bundle is a key factor. But it’s not cost alone that is motivating consumers, it’s the core attributes of this distribution model, a la carte access to the programming viewers want.
The available content in this market has expanded beyond a few major networks and a sea of niche providers to a more comprehensive array of channels. Indeed, the pending launch of Disney+ and WarnerMedia DTC channels will add significantly to the already bourgeoning list of content owners distributing their own programming. Beyond having the TV-connected devices, mobile hardware, and broadband speeds in place to facilitate content distribution in this manner, consumer interest is critical to success. To that end, an overwhelming majority of DTC channel subscribers (87 percent) cite being likely (somewhat, very, or extremely) to subscribe to additional channels in the next 12 months. That level of positive appeal is simply staggering and depicts consumer interest in the dream of a la carte TV.