VIDEOAGE June 2024 Direct-to-Consumer 20 (Continued from Page 18) Indeed, the direct-to-consumer business is not something new. It has been circling businesses for many years, but it only took flight with the so-called “dotcom era,” starting in 1995, when the acronyms B2C and DTC became popular. With the new millennium, the direct-toconsumer business model began to make believers out of folks in many different industries, especially in the retail sector. With technological advantages, and at the encouragement of their retailers, more manufacturers (producers) started operating lastmile deliveries (i.e., closer to consumers’ homes), but instead of focusing on the product, they started focusing on the market. In the DTC process, these producers discovered that they had to be vertically integrated in order to replicate the business of wholesalers. Plus, they had to master new business practices like fulfillment and home delivery. DTC effectively shifted storage and shipping costs from wholesalers to producers. And if the rewards with DTC were potentially higher, so were the risks associated with increased competition, which resulted in higher advertising costs and marketing challenges. In addition, there were more production issues, like releasing new product more often, creating more inventory, developing packaging, and making return policies. For those reasons, last year, Nike, for example, returned to selling to retailers in order to clear out merchandise (overstuffed inventory). In the case of Hollywood’s streamers, in 2022 the studios were convinced that with broadband readily available, they could have gone directly to the consumers, thereby eliminating the aggregators (middlemen in the form of cable TV operators), and doing away with the advertising agencies (by simply charging a subscription fee). A year later, in 2023, the studios’ streamers were losing an estimated $10 million a month each and quickly called back the advertising agencies to bring in clients willing to buy commercial spots. The cable TV middlemen also came back with demands that they carry the studios’ ad-supported streaming services (if they wanted to receive payments for the studios’ TV networks and their own local TV stations’ retrans fee, and also keep the studios’ cable channel carriage fees). Bundling, in which multiple services are packaged and sold as one by middlemen, is also making a comeback. DTC created additional disciplines in the form of a subscription economy and big data analysts. This subscription economy is now pervasive, spanning from streaming services and cable TV, to magazines and daily newspapers, alarm services, wine deliveries, gym memberships, digital newsletters, and even car wash services. The New York City-based consulting firm West Monroe reported that in a survey about monthly subscription expenditures, people guessed that they spent $62 on various subscriptions, when in reality they spent a whopping $273. It is also clear that the cultural environment between the two business operations — the traditional wholesale model and the DTC model — needs to better integrate. As demonstrated by the success of Netflix and some other manufacturers, those who started in the DTC business have had better results than producers who adapted to the DTC business after being previously grounded in the retail or wholesaler model. (By Dom Serafini) The studios’ idea to eliminate the middleman started in 1951 when Paramount began its Telemeter pay-TV service. Checking Ad TV Values VideoAge went snooping around inside TV outlets’ ad wallets to find out how much advertising is worth to them. For Amazon Prime, it is $2.99 per month per TVHH. Disney+ ads are valued at $6 per household ($14 a month without ads, and $8 with ads). For Hulu, ads are worth $7 per TVHH ($15 without ads, $8 with ads) per month. And Netflix is valued the most at $8.50 per month per sub ($15.50 with ads, and $7 without ads). For a FAST channel, the average viewer is worth $0.1 per hour for ad dollars, while for a TV broadcast station each viewer is worth an average of $0.23 per hour, or $34 ad dollars per month.
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