Netflix Is Driving the Direct-to-Consumer Movement, Says IHS
The TV industry is in a period of change and rapid experimentation. Research from IHS shows that broadcasters are increasingly releasing direct-to-consumer offerings, changing the traditional meaning of a channel.
As services like HBO Now, Discovery DPlay, and DisneyLife show, broadcasters are experimenting with direct-to-consumer (D2C) offerings. According to IHS Technology research director Ted Hall, the strategy offers two advantages: It lets channels gain more power in carriage-fee negotiations and establishes a brand in the growing over-the-top market.
The rise of Netflix is a major factor in this shift. IHS predicts that Netflix will have 100 million global subscribers in 2018. It currently has 69 million. While 10 million of those new subscriptions will be in the U.S., Netflix will invest in international content to spur demand abroad. Netflix spent twice what ITV and Amazon spent on new content in 2014.
Netflix will gain 10 million new subscribers in Western Europe in the next three years. The U.K. will be Netflix's biggest market in Europe, with 7.1 million subscribers by 2018.
This evolution will fragment the meaning of a TV channel, as broadcasters and other content owners try to meet viewers' tastes.
“The traditional linear channel will be around for a long time to come, but it will become increasingly marginalised by a plethora of online services, from catch-up TV to TV Everywhere, pay TV channels’ streaming offerings, and YouTube multi-channel networks," Hall says.
Viewers are streaming more video to their mobile devices, and demanding mobile supports in the subscription video services they choose.
Launching direct-to-consumer video services is increasingly easy, but gaining a mass audience requires getting access, warns IHS Markit.
Netflix is now available on 32 percent of all connected devices in the U.S., making it the de facto rival to any other video service in the country.
While some pay TV operators have seen increased customer satisfaction with Netflix integration, others will likely face lower average revenues.
DisneyLife will cost £9.99 per month, and will include time-limiting parental controls and the ability to download content for offline viewing.
Programmatic online video ad sales are growing faster in some countries than others, but will count for over half of revenue by 2020.
Italy is the biggest TV viewer in Europe, but Americans watch even more. Catch-up services are popular in the U.K.