Driven by the influx of new services, faster in-home broadband speeds, and TV-connected device adoption, direct-to-consumer (DTC) channel adoption rates grew three-fold over the last three years to reach 15 per cent of US households, according to data, industry expertise, and prescriptive analytics specialist The NPD Group.
In 2019, NPD expects growing consumer interest and new service launches will push the DTC distribution channel market to continued growth. In fact, nearly nine out of 10 (87 per cent) customers that are currently subscribers indicate that they are likely to add channels in the next year – but why and where will they choose to sign up?
While uptake of streaming video services are often linked to cord-cutting, subscribing directly to a channel as a means to replace cable ranks 16th out of the 20 reasons the new Direct-to-Consumer Video Online Study evaluated. Indeed, a majority of current subscribers, 66 per cent, subscribe directly to channels in addition to their cable or satellite TV bundle. Affordability is driving adoption and that is the top reason cited for subscribing to à la carte TV channels, with the ability to subscribe only to the channels desired also among the top five reasons.
“In addition to what is driving adoption, it is imperative for players in this space to understand where consumers prefer to sign up. With the advent of the ‘Channels Model,’ consumers can now subscribe to only the channels they want and get the benefit of a single billing vendor and user interface,” said John Buffone, executive director, industry analyst, NPD Connected Intelligence. “DTC channel aggregators such as Amazon, Roku, Hulu, Sling TV, and other potential market entrants, stand to gain a lot by garnering subscription revenue for managing DTC channel transactions.”
The growth in this market will come from both current subscribers adding channels and new subscribers entering the fold. Looking at the combined group of current and prospective subscribers with a positive likelihood to sign up in the next 12-months, the most likely destination for subscribing to DTC channels is Amazon Prime Channels (31 per cent). The second most popular choice is to subscribe directly from the TV channel’s app (26 per cent). Interestingly, prospective subscribers are even more likely than current subscribers to indicate they would use Amazon Prime Channels to sign-up.