What is the DTC Distribution Model?
Direct-to-Consumer (DTC or D2C) distribution is an over-the-top (OTT) monetization strategy where content owners bypass middleman by monetizing assets on their own proprietary platforms.
In the realm of media and entertainment, content owners traditionally earn revenue by licensing video assets to third-party distributors. However, a DTC strategy gives content owners the ability monetize by delivering content directly to the audiences that want to view it.
How Does DTC Distribution Work?
DTC Distribution Goes Over the Top
DTC video services are OTT digital media streaming services that deliver television and film content to audiences over the Internet. Subscribers access DTC video services by visiting the content owner’s website or downloading an application for their mobile device, tablet, or Smart TV.
The development of the Internet and technologies like cloud computing have made it easier and cheaper than ever before for content owners to reach audiences directly and at scale without help from middleman distributors.
DTC Distribution Leverages Multiple Revenue Models
Direct-to-Consumer distribution can leverage a variety of different models to generate revenue. Some DTC video services offer linear content supported by advertising revenue (FAST), while others are video-on-demand services that generate money via subscriptions (SVOD), advertisements (AVOD), or on a transactional basis (TVOD).
DTC Distribution Bypasses Licensed Distribution
Monetizing content directly to the consumer means that content owners can bypass the traditional channels that involve licensing their content assets to third-party distributors. As a result, content owners going DTC don’t have to worry about lengthy licensing negotiations, complex royalty calculations, or the time-consuming process of managing license agreements.
DTC Distribution Increase Technical Overhead
To deliver content to audiences via a proprietary streaming platform, content owners must transform themselves into technology companies that can build, manage, deliver, and efficiently monetize a video streaming service.
Many of the largest DTC distributors made this change by acquiring other companies that provided streaming technology services. Examples include Disney’s acquisition of BAMTech to propel its DTC initiatives in Disney Plus and ESPN, and WarnerMedia’s acquisition of You.i TV to help launch HBOMax outside the United States.
What are the Advantages of DTC Distribution?
While there are many challenges in DTC streaming, delivering content directly to one’s audience provides numerous advantages to content sellers.
Market Directly to Customers
Building a DTC video service gives content owners the ability to market directly to audiences who love their content. As a result, content owners find excellent opportunities to deliver experiences that elevate brand loyalty, strengthen relationships with their customers, and deliver personalized experiences based on audience preferences and viewing habits.
Capture Valuable Audience Data
Going DTC puts content owners in charge of the software platforms where audiences consume their content. As a result, content owners with their own DTC video services enjoy direct access to reliable and high-quality data on audience behaviors, preferences, and content performance. Armed with this data, content owners can start doing analytics and leveraging insights to increase customer satisfaction, reduce churn, and maximize their revenue potential.
DTC Distribution Offers Excellent Revenue Potential
DTC distribution is an attractive option for content owners because of the added revenue potential it provides.
Cutting out middle-man distributors gives content owners a larger slice of the pie, along with better opportunities to market directly to audiences, capture and leverage audience and content data, and experiment with new strategies for maximizing revenue.
Reduce Blackout Risk
Investing in a DTC offering means that content owners have the infrastructure to deliver content directly to audiences without help from a third-party distributor. As a result, content owners can participate in licensing negotiations with greater leverage and without the risk of a channel blackout if those negotiations fail.
Why is DTC an Important Distribution Model?
Given the advantages listed above, DTC distribution is increasingly the first choice for new media companies, and traditional media companies are trying to quickly launch their own proprietary platforms.
Over the past few years, millions of TV viewers have cancelled their cable subscriptions and switched to OTT video streaming services. This cord-cutting means that content owners get less revenue from licensing to Multichannel Video Programming Distributors (MVPDs), a reality that’s driving them to explore alternative distribution strategies like going DTC.
By developing DTC video services and capabilities, traditional media companies with established assets can compete with existing streaming services. If they move quickly, these companies can stay relevant as the media landscape reorganizes around OTT offerings.
3 DTC Distribution Examples You Should Know
HBO Max
HBO launched in 1972 as a Premium Pay TV channel, charging viewers an extra monthly subscription fee for access to uncensored and ad-free content.
After decades of success, HBO started moving into the OTT space with the 2012 release of HBO Go, an SVOD platform exclusively available to subscribers of its Pay TV service. Then, in 2015, HBO Go was replaced by HBO Now, a stand-alone OTT service that no longer required users to have a Pay TV subscription.
The latest iteration of HBO’s streaming service is HBO Max, a subscription-based DTC service where audiences can view original HBO content, along with other television shows and films under the Warner Bros. brand umbrella.
F1 TV Pro
Even while signing multi-billion dollar broadcast deals, successful sports brands are increasingly investing in DTC video services to build stronger relationships and offer an elite experience for their most committed fans.
F1 TV Pro is a great example. Fans can usually watch these races on cable, but F1’s subscription-based DTC video service allows fans to stream qualifiers and practice sessions, access driver onboard cameras and team radios, and view historic races on demand.
Disney Plus
Disney is an industry-leader in both media production and distribution. Developing its own DTC streaming platform has allowed Disney to effectively monetize its legacy content assets, acquired media properties, and new releases while experimenting with new revenue models and effectively competing with larger distribution platforms like Netflix and Amazon Prime Video.
Optimize DTC Distribution Revenue with Revedia Digital
By developing their own direct-to-consumer streaming platforms, content owners gain control of valuable audience behavior and content performance data that can be analyzed to enhance the customer experience and drive revenue.
The Revedia platform allows content owners operating DTC platforms to seamlessly integrate user, content, and financial data into a single platform, unearthing valuable insights that help maximize revenue.
With Revedia Digital, content owners can harness their data to predict audience content preferences, prevent subscriber churn, improve revenue KPIs, and optimize DTC content monetization.
