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D2C services set to disrupt pay-TV market in 2019

Impact of D2C products is likely "to come to a head" with the expected launch of Disney+ later this year

The continued emergence of direct to consumer (D2C) products is expected to continue to disrupt the pay-TV market in 2019, according to analysts Futuresource Consulting.

According to the company’s digital media and entertainment team, the impact of D2C products is likely “to come to a head” with the expected launch of Disney+ later this year.

The company said this is particularly significant as it will exclusively include Disney movies in the first pay-TV window, as these rights expire on Netflix.

Terms of existing exclusive deals will be a major consideration of international D2C launches, said Futuresource, as they look to balance the subscriber potential of new services compared, to existing revenue streams for the same content.  WWE was one of the first major entertainment brands to make this ‘leap of faith’ in going truly OTT, realising it was an important step in determining the long-term future of its business.

“Although there was notable D2C activity prior to the announcement of Disney+, the brand power and high-quality bar of content will see it have a significant impact in several ways,” said Futuresource, including:

  • Accelerating other content holders to follow suit – with AT&T (HBO, Warner Bros, Turner) stating its plans to launch a D2C service in the USA in 2019
  • As a result, providing consumers with greater choice of premium streaming video services, but this fragmentation also provides challenges e.g. what content is on what service, leading to the emergence of the super-aggregators
  • Disrupting the traditional pay-TV carriage model and potentially impacting their consumer base, as well as negotiating carriage of these new third-party services as apps on their pay-TV platform
  • Improving the appeal of connected devices to consumers, potentially helping bring in later adopters or even encouraging upsell and upgrade
  • Further fuelling Netflix’s investment in original content, as it looks to make the transition of Disney content exiting the service as invisible to the consumer as possible

Futuresource said the most intriguing development of the D2C movement is the role pay-TV providers and their respective platforms will play moving forwards: “D2C brands want the best of both worlds, direct control over their service and creative freedom, but also wide and targeted reach, straight into consumers’ living rooms,” said the company. “So, over time, Disney+ and other D2C services will be increasingly carried by pay-TV providers, with content potentially integrated into a seamless UI, like Netflix TV shows and movies are on Sky Q in the UK.  The capability of STBs may be a limiting factor in this rollout, but this may further stimulate investment from the pay-TV providers in this advanced hardware.”