One of the biggest challenges for direct-to-consumer services today is the ‘binge-and-bolt’ phenomenon, as identified by Colin Dixon, Chief Analyst and Founder at nScreenMedia during the recent Videoscape Europe conference in London. This is where people sign up for a service, watch the best content (or at least, the programming that interests them), then disappear.
“We have a discussion about this challenge every day, right now,” said Alexander von Woikowsky, Managing Director at 7TV, the German streaming platform that is co-owned by ProSiebenSat.1 Media and Discovery. “You cannot stop it, especially if people are signing up to watch a football match. And people will binge-watch a popular German series and then go.”
The solution is to give people other reasons to stay, of course. “You must find the content that brings them back on a weekly or monthly basis and you have to build a long-tail of content [that contains titles that appeal to them],” he advised.
A key ambition for 7TV is to ensure that even if someone leaves one of the paid content offers (Eurosport and the Maxdome SVOD service sit within the app) they will keep watching the free content (like the various ad-supported channels from ProSiebenSat). Customers register and log-in to the service to see free as well as paid content, which means the value of viewers can be maximised for advertising, thanks to a better understanding of their demographics and location.
‘Binge-and-bolt’ is fundamentally a customer retention issue and for the direct-to-consumer market, as with other OTT services, it stems from the short nature of contracts – with a month now the standard. Dan Fahy, VP, Commercial & Content Distribution at Viacom International Media Networks (VIMN), which has been slowly expanding its DTC efforts, agreed with the 7TV retention strategy and added that short-form content is one way to maintain engagement beyond peak programming.
Arlen Marmel, General Manager at VRV, the new SVOD aggregator owned by Ellation (which runs the Crunchyroll anime service) noted that the DTC market does not benefit from the inertia that is created by a traditional Pay TV bundle. “The challenge is having enough to keep customers coming back over and over again,” he agreed.
If you can engage customers beyond video, this helps to grow a diversified entertainment brand but also boosts loyalty to the video service, he reckons. Ellation is looking to expand its interest in games and live events and Marmel even pointed to cinema viewings as another layer to a real-world, content driven community.
Retention is not his first concern, however. “One of the biggest challenges in direct-to-consumer is acquiring the customer in the first place. If your customers are already there, that is 80% of the battle [won]. Avoiding binge-and-bolt is a ‘champagne problem’ to have,” he declared.
When it comes to acquiring customers, there is a list of potential strategies, many of which were covered during a DTC-focused panel at Videoscape Europe. VRV, for example, uses a free channel as a conduit through which the population at large can reach the SVOD aggregator brand and the services within. The company monetises non-subscription viewers with advertising and tries to upsell them with incentives like exclusive content or better viewing windows.
Scott Kewley, COO at TV Player, the UK-based multichannel online bouquet that combines a range of free-to-air channels with some Pay Lite subscription bundles, traced the acquisition challenge to its source – the prominence that standalone apps can achieve in a world filled with OTT as well as broadcast services. “Thematic and niche OTT services have to carve out their share of the user interface. How well you do that decides if you survive or not,” he told the London audience.
One option is app onboarding. Maxdome, which is among the best recognised SVOD brands in Europe, was one of the first to follow this path when it was integrated onto Unitymedia cable set-top boxes four years ago. But Pay TV operators (like free-to-air platforms) are not looking for hundreds of bespoke partnerships of this kind, so that window of opportunity is strictly limited. App stores on STBs and Smart TVs offer less exclusivity.
Few DTC (or OTT) providers are going to achieve the kind of co-marketing and service deal Maxdome has with the Deutsch Bahn train service in Germany. The ProSiebenSat.1 Media owned SVOD service provides onboard entertainment for travellers on ICE trains and you can even buy a ‘tickets-plus-Maxdome’ bundle!
As von Woikowsky at 7TV pointed out, broadcasters (like ProSiebenSat) also have the means to drive viewers from the linear world into the OTT domain. They could show a programme on classic TV as a taster and make the rest of the series available on-demand, on a digital service, for example.
The whole point of the DTC market is that you cut out the platform owner who previously acted as the aggregator and retailer, but as Ellation’s Marmel points out, this also removes a layer of your marketing funnel. Pay TV bundles help to drive consumers towards all content in the bundle.
“In the direct-to-consumer world you have to build your own funnel – that is a fundamental difference.” Marmel warned: “This is not a case of ‘build it and they will come’. You have to think about where you are going to find your audience.”
Miles Weaver, Marketing Director at Airbeem, the cloud-based SaaS provider specialising in UX, analytics and monetisation that helps media companies launch and run a DTC offering, advised the Videoscape audience to seek out the online communities who will be interested in their content. They could be on Reddit or Facebook, as examples.
This kind of marketing becomes more necessary, as well as more powerful, in a world where you can segment audiences in a more granular way. And as Marmel pointed out, it helps if you can identify different consumer segments and serve more than one, which means a flexible approach to your service model and marketing.
There is a ‘demand curve’, as he calls it, which at the top end features the ‘whales’ who are willing to spend good money to feed their thematic passion with your content. But there are also potential super-fans who are not willing to give you a dollar, but who can still evangelise about your service if you give them the chance. This explains the willingness at Ellation to offer some free content.
‘Free’ also contributes to the creation of the marketing funnel that ultimately feeds your core subscription services. “Our priority is to widen that funnel and increase engagement and increase the number of people then taking our premium offering,” Marmel confirmed.
Meanwhile, VRV is taking a leaf out of the Pay TV book and using aggregation and bundling to create greater audience scale, establishing a ‘bouquet’ that helps feed each SVOD offer under its umbrella. “For our partners, we are creating a marketing funnel, as well as a service that appeals to the slightly more casual fan,” Marmel said of the bundle that gives a hefty discount compared to the cost of signing up for nearly a dozen DTC offers individually.
“We are resolving the consumer problem associated with fragmentation [of content distribution] and having so many price points and [consumer-to-media subscription] relationships. Our partners tend to be pretty good at content curation and brand building, but they struggle with product and customer acquisition, so we help by bringing an audience together under one roof.”
Marmel declared himself “bullish about bundling” because of the way it helps deal with customer acquisition and retention challenges. “I think there will be some return to bundles,” he predicted.
The panellists agreed that channel brands remain highly relevant in an increasingly app-populated world, with von Woikowsky arguing that they give consumers a sense of orientation, with a clear pointer to what kind of content has been curated for them. Marmel believes channel brands are becoming even more important in a world where consumers have to pull content towards them rather than have it pushed to their door.
Specialist and thematic OTT brands can be powerful, too. “There are people wearing Crunchyroll tee-shirts; you do not see many people wearing Netflix tee-shirts,” he observed.
Companies with an established thematic SVOD/DTC service can now take advantage of the trend towards OTT service stacking, where households subscribe to several online services simultaneously. John Armah, Chief Operating Officer at Marquee TV, the ad-free, subscription streaming service focused on the arts (theatre, dance and ballet) predicted that cord-cutting will increase and people will take 3-4 OTT services at home.
“We think they might take one related to film, one for kids entertainment and maybe one for sport, and one focused on their passion. We hope that if their passion is culture, they will choose Marquee.”
All the panellists were asked to name the business metric that is most important to a DTC service. For Marmel it is engagement, as this is closely correlated to the lifetime value of a customer. This was also flagged as a key metric earlier in the day by Armah, whose service is now in the UK, U.S. and Canada. He said his biggest competitor is someone having supper or drinks with a friend, or attending live arts performances. “There is a small window in which you could be doing a variety of things, and one of those is consuming culture from us,” he acknowledged.
Armah is not concerned if a subscriber does not return to Marquee TV every day, or even every week. “We know we must have 2-3 compelling things on the platform to make them stay and continue subscribing,” he told the Videoscape Europe audience.
For Dan Fahy at VIMN, a key metric is conversion figures – how many customers you have acquired and who also start paying for content. “That comes back to marketing, which is why marketing is a big chunk of our business costs.” There was a similar answer from von Woikowsky at 7TV: he cares a lot about the number of registrations that can ultimately drive a pay relationship.
And what other challenges do companies with a DTC strategy face? von Woikowsky flagged the need to understand, 100%, what the customer needs at any time, anywhere.
For Fahy and VIMN, the biggest challenge of all (speaking as a media company with an established distribution model) is understanding where direct-to-consumer fits into your overall market strategy. “What is our TV business, how does DTC fit into that, and how does it all come together?”
Viacom has remained a firm supporter of Pay TV operators, which may explain why it has yet to make a really big move in the direct-to-consumer space in its core markets. The company has been expanding its DTC interests in some places, however. There is a growing relationship with Amazon Channels, for instance, with the pre-school kids offer NOGGIN now available on the U.S. version of the SVOD/DTC aggregator offering, and Nickelodeon and MTV MIX recently added in Japan.
Viacom is known to be gearing up for a bigger DTC presence in the U.S. but Fahy had a warning for everyone going down this road: it is very hard making the direct-to-consumer business model work. “You should not think about DTC as a standalone exercise,” he emphasised.
Scale is another challenge, flagged by Marmel at Ellation. He observed that the biggest pure-play SVOD providers grew their streaming business out of something else [Netflix from DVD rental and Amazon from online retail]. “There is no example of a cold-start OTT service that gained huge audiences on the back of an unknown brand,” he added.
You need what Marmel calls an unfair advantage to grow a DTC offering and he believes VRV has created this for itself, as an SVOD aggregator, by drawing upon the existing scale of Crunchyroll and its one million subscribers. This service is now part of the VRV bundle, which targets the same kind of audience and also includes some third-party content (including from VIMN and AMC).
He also offered some choice advice for thematic content owners: you cannot replicate the Netflix model on a smaller scale and expect that to work. But you can find your own place in the streaming world, especially with Netflix so firmly rooted to the centre ground. “As it grows, Netflix will be perceived as a quality ‘everything store’, he suggested. And as the Crunchyroll tee-shirts confirm, there is money where there is passion.