A two-tiered D2C landscape emerges for next-gen TV networks and next-gen operators – Mulligan

Tim Mulligan

One year on from the start of the pandemic, and a year and a half on from the start of the D2C Big Bang Moment, the U.S. now has more streaming video subscriptions than people. MIDiA Research’s 2021 video model puts the number of U.S. subscriptions in Q4 2020 at 332.1 million, slightly higher than the 329.7 million U.S. population at the end of 2020.

This year, MIDiA forecasts the total U.S. subscription number to grow a further 25% to 425.9 million by the end of 2021. With video subscription penetrations forecasted to reach 51% this year, this means that each of the 173.1 million U.S. video subscribers in 2021 will have on average 1.25 accounts.

Video is now poised to become effectively streaming pay TV, with the likes of Peacock and Paramount+ providing the missing news and sports pillars of traditional pay TV for the streaming landscape. The result is that streaming services are now transitioning away from being additive video services and towards substitutive services, with big implications for multiple service subscriptions.

A two-tiered D2C landscape is emerging

The long-term viability of multiple streaming subscriptions only make sense if the proliferating D2C services are viewed in the context of the rapidly emerging consumer use case for streaming. The most successful D2C services will be those that clearly understand the division between the new digital TV networks (think Disney+) and the combined distribution and programming streaming TV services (think HBO Max) – which they are all almost by default currently being marketed as to consumers seeking on demand TV content.

Comcast and AT&T, with their integrated operator and production businesses, are well placed to position Peacock and HBO Max as these streaming pay TV solutions. However, the likes of Disney+ (outside the ESPN+ and Hulu combined bundle) and Paramount+ are effectively TV networks without the portfolio of complimentary network partners which make up a robust pay TV offering.

For the new wave of silver streamers (the 55+ demographics) who now make up a fifth of the entire video subscriber base in the U.S. and are the most engaged binge viewers in the U.S., a perceived pay TV inferior product will lead to one of two outcomes: switching to another D2C provider or settling for a re-aggregation streaming service with breadth and depth of content and a unified curation experience to match.

While there will be a continuing upward trajectory for multiple streaming video subscriptions in the U.S. market, the first sign of a two-tier D2C landscape is already emerging. On the one hand, next-generation operators with fully integrated D2C services led by the communications majors and the tech majors will compete directly against next-generation networks; think Peacock versus Netflix, or Apple TV+ versus Disney+.

Multiple accounts will not be equal in this new OTT landscape, and the value of a D2C subscription will be based upon how closely it reflects the comforting yet disappearing world of traditional pay TV for the mainstream consumer.

2021 will be a pivotal year for OTT services. The long-term behavioral impact on consumers who have spent a year glued to screens for all aspects of their lives – work, social, communication and entertainment – is still unfolding, but point to a regression in the current positive sentiment around digital.

Subscriber retention is now the central focus for providers facing an inevitable decline in engagement, and failure to hold audience engagement will lead to accelerated churn.

For decision makers in D2C the choice for long-term viability is clear: are you going to be a next-generation operator or a next-generation TV network? For more on how to manage OTT subscriber retention issues in the D2C era join MIDIA for a one-hour webinar on Future-proofing growth & curtailing subscriber churn post pandemic webinar on April 21.

Tim Mulligan is the research director and lead video analyst at MIDiA Research – the entertainment intelligence and consulting firm. MIDiA works with businesses in the space, from TV broadcasters and production companies to streaming services, tech companies and financial organizations. Tim’s research encompasses the entire online video economy, with a key focus on how streaming is transforming the video consumption landscape. Prior to joining MIDiA Research, Tim ran a number of technology starts-ups focused on the TV and film industries.MIDiA Follow MIDiA on Twitter and LinkedIn

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