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In theory, the big studios would need 180-200 million paying
subscribers to their direct to consumer services if they are to cut out all
content licensing to third-parties and pay TV channels.
So calculates Ampere Analysis as reported at Video
Net.
The 180-200 million subscriber figure applies to every major
studio group and takes into account their different D2C pricing. The model is
based on replacing content licensing and pay channel income from every window.
Advertising revenues (i/e AVOD) were not included in the modelling.
This does not imply that studios are actively trying to
replace their third-party revenues, yet. But it does put a flag in the sand.
What would happen if they did?
“This is a theoretical model,” Ampere’s Research Director
Guy Bisson explained: “Bear in mind that each of the studios has gone to market
with very different price points yet there was an amazing consistency to the
subscriber figures that allows them to say goodbye to their entire legacy
business outside of free TV networks, and it is 180-200 million.”
Netflix surpassed 203.6 million subscribers earlier
this year and Amazon claims Amazon Prime has also gone over that mark (though,
as THR points out, not every Amazon Prime member watches the
company’s video content). Disney has stormed to 100 million in just 16
months and has announced it will close linear channels in various markets
to prioritize Disney+.
Bisson pointed out that D2C is a long-term play for the
studios, and it could be five years or a decade from now before they could then
use D2C to fully replace their traditional revenue streams.
Nonetheless, faced with the possibility that major studio
groups could, at some point, become financially independent of third-parties,
how will the rest of the media business respond?
As Bisson noted, “What we are effectively talking about is
restricting the flow of content from the traditional chain of exploitation that
starts with cinema and moves through packaged media and on-demand into Pay TV
and then into free television. If the major [content] suppliers squeeze the
head of this chain, it forces change on everyone.”
V-Net editor John Moulding notes that Ampere Analysis has
previously modelled the viability of studios skipping the theatrical window in
order to boost premium VOD or feed movies exclusively to their own services.
The conclusion was that they will make more money using a hybrid approach.
“The likely outcome is that in key markets where a D2C
service is in early growth stages and there is a keen focus on customer
acquisition, we could see films released to D2C services at the same time as
theatrical, or one or two lower-budget movies could go direct-to-D2C as
streaming service exclusives.
“The bulk of movies, especially the higher budget ones, will
still go through theatrical windows,” Bisson predicts.
As Bisson pointed out, all-or-nothing makes for good
headlines but the reality is usually nuanced and hybrid. And that includes the
fact that the content supply chain stretches beyond the major studios and
includes large TV production houses and independent film studios who will
continue to feed the rest of the ecosystem
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