-->
Save your FREE seat for Streaming Media Connect this August. Register Now!

CES 2019: D2C in 1, 2, 3

Article Featured Image

How will streaming services stay in business in the new direct-to-consumer (D2C) world? That was the topic of the CES 2019 panel "Into the Zeitgeist: The Direct-To-Consumer Entertainment Economy," during which panelists from incumbent services talked up their accomplishments and outlined how they are improving their businesses' bottom lines by staying innovative and offering a variety of options to keep up with consumer expectations.  

“2019 has bought a lot of new entrants into the premium space: Apple, Warner, Disney. Everyone will be vying for the $2.1 billion dollars that consumers are spending on this,” said moderator Ben Rogers, president, platform and technology clients, National Research Group. Each of the six panelists has pursued innovative ways to reach viewers—Conde Nast is designing a wide range of compelling sponsored content which has a huge YouTube following, and Discovery is going niche with content which appeals to super serve their viewers—but the most compelling stories came from Hulu, YouTube, Tubi, and Fandango Now.

Breaking the TV Grid Mentality

Hulu ended 2018 with 25 million subscribers, said chief marketing officer Kelly Campbell. "Hulu is now so much more than next-day television," she said. "Consumers want choice, flexibility, and control in a direct-to-consumer environment. That’s why we offer an ad-supported model and an ad-free model. You can watch live TV, on-demand, in your living room, on the go. I think it’s going to be increasingly about tapping into the consumer expectation and getting in front of it."

One way Hulu is staying out in front is looking at how their newest viewers watch content.

"We find that GenZers think about television completely different than other generations," she said. "They think about TV as a gallery of shows, not a grid of channels. They tend to be more interested in watching from episode one, season one, all the way through to the final episode of the final season." 

When Hulu launches premium content, the service isn't forced into the old broadcast TV schedules, length and formats. "We’ll launch shows binge or weekly; depending on how the characters are developing we might drop three episodes and go weekly from there." 

Competing with YouTube

The millennial viewer who comes home and wants a quick entertainment fix opens the YouTube app, and an hour later they’re still watching. "That average session length (for millennials) is 60 minutes, and the user didn’t come to YouTube to watch 60 minutes of content. They may have come to watch a 5- or 10-minute clip," said Neal Mohan, chief product officer at YouTube.

How does YouTube move the viewer from 5 minutes to 60? It’s the recommendation engine. "The amount of traffic we drive from recommendations in (the viewers) home feed has grown 10X in the last few years," said Mohan.

If the attention grab of YouTube mobile viewing isn’t hard enough to compete against, now viewing on the big screen is gaining in popularity. "The television screen is YouTube’s fastest growing device," Mohan said. "Over 180 million hours of watch time a day are those living room devices."

How New TV = Old TV

In addition to market leaders like Hulu and YouTube, lesser-known OTT services are seeing tremendous growth. "We’ve grown triple-digit in the last four years, every year," said Farhad Massoudi, founder and CEO of Tubi. "Tubi offers advertisers the ability to run a TV experience on a digital platform."

In the competition for eyeballs, going AVOD is what’s important, because most consumers will only have a few SVOD subscriptions, "The average median household income in the United States is $54,000 ... The idea that (viewers) will be subscribing to Netflix, Hulu, Amazon, HBO, ESPN, Disney+, YouTube Red, and many other services is ludicrous. Most households have 1 or 2 services, and there’s no way that’s going to change, which means most SVOD services will struggle to become a viable business."

What are brands buying in AVOD? For their ad-supported business, Hulu offers great flexibility in how brands can target viewers. "We offer a ton of choice to advertisers," said Campbell. "You can buy 15s and 30s. You can pretty much buy spots of any duration. You can also buy commerce ads, you can buy sequential ads, you can do sponsorship with us, you can do integrations. There’s a lot more room for creativity for brands to reach consumers." For example, last year Range Rover previewed a concept vehicle that tha main characters on the Hulu show The First drove throughout the entire season.

The Varying Price Point

"We run a home entertainment service, a TVOD service" said Cameron Douglas, head of FandangoNow. "That thing you didn’t see in theatres is available 69 days after on our service." FandangoNow is part of a bigger network of entertainment services that includes movie theater ticketing company Fandango and review-aggregation website Rotten Tomatoes.

"We have no problem selling four tickets to Mary Poppins for a Friday night, but (some consumers) flip out if we ask them to rent something for $4.99. I believe different generations will handle a la carte differently," Douglas said. For some users, a la carte premium home entertainment will only be for a special occasion, while for others it’s a regular habit. Likely it’s the regular habit which is helping FandangoNow thrive, and Douglas said that the company tripled its TVOD revenue in the last year, at a growth rate of more than 30%. 

FandangoNow was one of the first services to offer a complete 4K library, and now the company is moving on to home IMAX content. “We just announced a collaboration with IMAX and DTS to serve as the first and exclusive digital retailer in the U.S. for IMAX Enhanced content, offering (a remastered 4K HDR) version, allowing consumers to enjoy the best in-home experience available today.”

It’s a Wrap

Doing D2C at scale means needing to be very flexible on service offerings, panelists agreed. These companies have gone from scrappy startup to dominant service providers and they keep tweaking both their business and content offerings. "It’s very difficult to drive subscriber momentum, grow, and also to scale in this business," said Campbell. "We lived through this, and it’s difficult to scale as quickly as [Apple, Warner, and Disney] are going to need to take a leading position."

CES Direct-to-consumer panel

Left to right: Kelly Campbell, Hulu; Cameron Douglas, Fandango; Peter Faricy, Discovery;
Oren Katzeff, Condé Nast; Farhad Massoudi, Tubi; Neal Mohan, YouTube. (Not pictured: Ben Rogers,
National Research Group) [Photo: Nadine Krefetz]

Streaming Covers
Free
for qualified subscribers
Subscribe Now Current Issue Past Issues
Related Articles

CES 2020: Delta Brings Streaming to the Ground, Expands it in the Air

Delta's CEO announced that the airline would let travelers stream content on Delta Studio as soon as they check in to their flight, and may introduce a "binge button"

Applicaster Takes $20M in Funding, Serves D2C Media Market

Applicaster runs a software-as-a-service platform called Zapp that lets content owners create and launch over-the-top D2C services and integrate media in third-party apps.

Companies and Suppliers Mentioned