Content owners going direct to consumer – food for thought

Content owners going direct to consumer

Food for thought

There can be no doubt that content owners have more options than ever to appear on an ever-growing number of screens. To conventional Pay TV players this seems to represent yet another potential threat. 2015 after all was the year that the number of US homes with a paid streaming service hit 70% (USA Today/Clearleap). To me though, content owners have a lot to think about when going direct and more and more variations on the model to consider…

Academics writing in Forbes magazine offer a 20-strong list of factors to consider in digital distribution, including things like speed-to-market, capex, and technical competency.

Here’s a quick example: one of many key decisions is ’buy or rent a CDN?’. This has considerable implications for those three factors and more. As ‘a content business’ should you save time and money by giving your precious content over to a third party (even one owned by the same group as you) to deliver on a best-effort basis? The OTT market is characterised by short subscription periods and high quality expectations. A recent study suggests that 20% of viewers will abandon poor experiences immediately and never return to that service. A recent BTR article suggests a sensible stepwise approach , but this alone is a decision requiring quite some thought.

The chase is on for the cord-never market. From Amino’s experience in many markets, here are some approaches to this which seem to be viable longer-term:


Hulu has its detractors but it has a key edge: its three owners (Fox, Disney and Comcast) all offer content the day after network screening. Detractors dislike ads on a paid-for service, but their recent ‘no-ads’(actually, still some ads) subscription will win them some homes, along with their decision to take over licencing EPIX content, boost original content generation and buy the rights to perennial favourites like South Park and Seinfeld. They share cost and risk three ways and may have less need to make expensive new content because (unlike say HBO Now or Showtime OTT) the combined content package is already attractive. And of course all owners get an extra slice of revenue from content they have already monetised once. Some say, though, that longer term the potent combination of short subscriptions, three brands’ fresh-from-broadcast shows and an ‘ad-free’ option may end up hurting Hulu’s owners as it wins over current cable subscribers.


HBO seem to be leading the way here as they offer a traditional cable service, HBO GO for free with any cable subscription, and HBO Now as a pure-online offer. So far, no-one seems to mind, but the HBO Now uptake numbers are modest at best (In the time HBO Now went from zero to 800,000 subs, Netflix grew by 15 million). A concern here, and for similar offers like Showtime OTT, would be cannibalisation: within the modest uptake how many loyal HBO GO or cable subscribers have dropped cable to go over to HBO Now?


Could established OTT players focus even more on being content generators, and over time become ‘content kings’?

Netflix has not only gone from ‘DVD-by-mail’ (which it still does) to ‘strongest OTT offer’, to ’the service most likely to replace TV’ according to 20% of respondents to a mid-2015 Adweek survey - they were of course OTT pioneers in making strong new content, and reap brand loyalty partly as a result of that. People so far seem attracted to their mix of bought TV, bought movies and original work – but what if they focused way more than today on loads of new content? They have many of Forbes’ 20 Factors sorted out already, so they could then dominate even more and their risk in doing so is relatively low.

And watch out for Amazon Prime Instant Video: Amazon of course can offer a package which bundles many useful home services – appealing to the many millions out there who trust them….even though as recently as mid-2015 many Amazon Prime users were apparently unaware they had the video offer, were unsure how to access it, or wouldn’t buy it separately. As they begin to fund original series themselves, one could ask – what if they were to really boost investment in marketing the video brand heavily (and more clearly), buying many more top-rated shows and making lots of original content? They probably have the financial muscle. Is it so hard to switch from selling billions of e-books to billions of TV shows? They could over time become a winner in a battle where ‘content is king’.

And finally, some other interesting moves… CBS cut a deal to discount their Showtime OTT to Hulu subscribers, and Time Warner apparently investigated, then didn’t pursue the option to buy into Hulu - with CEO Jeff Bewkes in essence arguing that they have other fish to fry and it would hurt their traditional cable business.

So all in all, we live in interesting times. Content owners are finding successful OTT formulae, many of which come close to ‘Direct to Consumer’, though not without hiccups. And the right content is still king: Game of Thrones alone seems to be a force that has rewritten some of the rules here. It’s reputed already to be the saviour of HBO Now, and season six isn’t even out until April 26th.

Content owners might be reaching out to homes, but companies like Amazon or Netflix might conceivably go the other way by building on their ‘direct to home’ infrastructure and becoming genuine content heavyweights. But it seems to us there is much to think about if you really want to own the entire food chain from sound studio to home theatre.