Insights: Strategic Priorities in Media and Entertainment
Chapter 5.
Direct-to-Consumer vs. Traditional Distribution: Finding the Balance
The tension between direct-to-consumer models and traditional distribution channels represents one of the media industry's most significant strategic challenges. Content owners are evaluating whether to maintain established distribution relationships, develop their own direct platforms, or pursue hybrid strategies. Our research reveals how leading organisations are navigating this complex landscape to maximise reach, revenue, and audience relationships.
Marco Berkheij from Red Bee Media describes the primary motivation for content owners exploring direct-to-consumer (DTC) models: "Content owners are primarily motivated by financial considerations when exploring direct-to-consumer models. They believe they can generate more revenue and maintain greater control over their content. Technically, launching an OTT platform has become relatively straightforward – companies like Red Bee Media can provide fully managed solutions that handle everything from content ingestion to global distribution across various devices."
Our poll data confirms this perspective, with "the need to remain competitive in a changing market" identified as the primary driver for considering direct-to-consumer distribution. However, implementation challenges remain significant, with "operational complexity and resource requirements" emerging as the biggest barrier.
Berkheij articulates these practical challenges: "The subscription model faces significant challenges and consumers are becoming more selective. This creates a high barrier for new entrants unless they offer truly distinctive content."
This insight suggests that content differentiation is crucial for DTC success. Berkheij continues: "Sports and special interest content represent the most promising areas for DTC success. Premier League football, Formula One racing, or niche interests like horse racing can attract dedicated audiences willing to pay for another subscription. For general entertainment – films and series – the space is already crowded with established players like Netflix and Disney+, making it difficult for new entrants to gain traction."
Rather than an either/or proposition, many content owners are pursuing balanced approaches. Berkheij notes: "Many content owners are pursuing hybrid strategies, maintaining their B2B relationships with traditional broadcasters while simultaneously launching direct channels to consumers. This creates a dynamic where broadcasters may find themselves constrained by legacy technology while content owners leverage newer platforms to deliver enhanced experiences."
Angus Mitchell from Channel 4 describes how established broadcasters are managing this transition: "For us, it's about maintaining a strategic balance between streaming, which is clearly where the industry is heading, and the current reality of linear broadcasting. We often describe it as managing the clutch control between these two spheres. Linear television remains critically important and generates a substantial portion of our revenue."
Channel 4's digital transition demonstrates substantial progress: "We're fortunate to be ahead of the curve, with 30% of our revenue now coming from digital channels – up from 22% two years ago and 16% five years ago. This significantly outpaces the industry average, where broadcasters typically generate about 10% of revenue from digital."
Mitchell highlights the cultural dimension of this shift: "The most significant challenge emerged when we launched our 'Fast Forward' strategy, which represented our pivot towards digital. This meant commissioning content with digital distribution as the primary consideration. The single biggest shift was cultural, with many colleagues initially apprehensive about what these changes would mean for their roles."
Our poll indicates that when considering implementation approaches for direct-to-consumer distribution, content owners prefer "partnering with technology providers" rather than building platforms in-house. This preference reflects the complexity of creating and maintaining dedicated streaming infrastructure, especially for organisations without extensive technological expertise.
Berkheij reinforces this perspective using an analogy: "I always use the company car analogy – if you're in the banking business, you don't buy and maintain your own cars; you lease them. Similarly, content owners should focus on their core business of creating compelling content rather than building and maintaining technology infrastructure. Whatever technology you invest in today might limit your flexibility tomorrow, especially considering how rapidly the landscape is evolving."
For organisations evaluating direct-to-consumer strategies, success depends on several key factors:
- Content distinctiveness and audience specificity
- Technological approach (build, partner, or managed service)
- Balance between direct and traditional distribution
- Organisational capabilities and culture
- Long-term flexibility in technology choices
- Pricing strategy
The future will likely see further experimentation with hybrid models. Berkheij concludes: "Looking ahead, I believe the success of direct-to-consumer models will largely depend on content uniqueness. Sports content is particularly well-positioned for DTC success, as evidenced by movements from rights owners like Premier League and Formula One. These properties can offer enhanced viewing experiences that traditional broadcasts cannot – multiple camera angles, player-specific views, and interactive features that leverage newer technologies."
The evolution of distribution models represents not a wholesale replacement of traditional channels but rather a strategic realignment that places greater emphasis on direct audience relationships. The organisations that navigate this transition most effectively will maintain flexibility while focusing on their core strengths in content creation and audience engagement.
Key Insights Recap
The tension between direct-to-consumer models and traditional distribution represents a significant strategic challenge. Content distinctiveness is crucial for DTC success, with sports and special interest content showing the most promise, while hybrid approaches that balance direct and traditional distribution are increasingly common.
Quick Action Guide
Key Insights Recap
The tension between direct-to-consumer models and traditional distribution represents a significant strategic challenge. Content distinctiveness is crucial for DTC success, with sports and special interest content showing the most promise, while hybrid approaches that balance direct and traditional distribution are increasingly common.
Quick Action Guide
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