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The Race to Re-bundle Direct-to-Consumer Services

Robert Koch

Global Head of Media & Entertainment
  • Media, Entertainment & Telecom

The direct-to-consumer (DTC) video business is poised to become a victim of its own success. Today, Netflix continues to hold the dominant position in the market, but the competition is finally increasing from existing providers like Hulu and CBS All Access, along with soon to come premium offerings from Disney+, HBO Max, NBCUniversal and Quibi. To differentiate themselves from one another, these services are procuring incredible amounts of exclusive content and recapturing their existing content ownership rights from competing services. On the surface, it seems like this influx of new media would benefit consumers, but the fragmentation of content catalogs and the resulting need to subscribe to multiple services means consumers will pay more and have to navigate between different platforms and interfaces to get everything they want.

This challenge of fragmentation and growing consumer frustration presents an opportunity for the market to develop creative, integrated solutions. Currently, there are two camps that are well-positioned to address this concern and act as aggregators of the many DTC services. The first camp are the multichannel video programming distributors (MVPDs) like Comcast and AT&T. The second industry poised to profit from collective streaming offerings is device manufacturers like Apple and Roku.

The Case for MVPDs as a DTC Distributor

When MVPDs initially came into existence, they were intended to solve a similar problem that streaming services are now. Where disparate broadcast channels were sometimes hard to receive; they could bundle them all into a singular user experience. With the creation of advanced video platforms like Liberty Global’s Horizon or Xfinity’s X1, we are starting to see the beginnings of DTC product integration becoming more commonplace, but the current offerings still fall short of providing a seamless experience for customers. 

They only partner with a small number of DTC services, which are not included as part of personalized recommendations to users, ultimately still feeling bolted-on rather than as an integral part of the product. However, these video platforms benefit from being connected to the largest screen in your home and are therefore still a prime candidate to become the entertainment hub, bringing together traditional broadcast, DTC services, gaming and even home automation.

The Case for Device Manufacturers as a DTC Distributor

Device manufacturers like Apple, Amazon, Samsung and Roku are also well-positioned to become a re-bundler of DTC entertainment experiences. These device manufacturers have developed consumer-friendly products, rich content stores and mass adoption among consumers. However, their closed ecosystems and lack of local broadcast content will continue to be a challenge for them. The primary providers to date for these services have taken an “App Store” approach, relying on publishers to join the platform and build their own applications. This results in disjointed, inconsistent experiences for end-users across apps, as publishers independently define their own user experience and can provide little insight at a system level into the content that lives within each DTC app. Although they have not quite hit the mark to win in this re-bundling race, these manufacturers are investing a lot of money into new products that address this need, getting closer with each iteration, and will undoubtedly soon arrive at the right solution.

3 Key Attributes to Win the Centralized Streaming Race

1. A Unified, User-Friendly UX 

As platforms begin to amalgamate many different services, consumers need a strong, unified user experience that easily allows them to filter through and surface recommendations from all of the aggregated content catalogs, while still allowing for some brand differentiation. Striking the right balance between the re-bundler’s interests and the DTC services’ desire to differentiate themselves will be the key to gaining support and adoption from DTC providers.

2. Content Driven Personalization

By taking DTC services with substantial amounts of content and bringing them together with other massive catalogs, a unifying service that enables search, discovery and personalized recommendations from within those platforms is critical. The re-bundler needs to be the hub of that personalization experience, tracking, analyzing and recommending content from within each DTC silo based on user behaviors.

3. Broad Inclusion of DTC Providers 

Finally, the platform must be all-inclusive and easily adoptable by DTC services. While the device manufacturers and traditional app stores are currently winning here, the steep fees they charge for access is opening a door for new entrants to pull ahead in this re-bundling model.  

While the next generation of services is just starting to reach the market, we can already see MVPDs and device manufacturers positioning to address the need to re-bundle their offerings. Whoever can best adapt to this new model and develop the technology solutions necessary to provide an all-inclusive customer experience has a unique opportunity to capture significant market share and become a major disruptor in the space.

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