The video streaming business, going direct to consumer, has higher costs than the older linear video subscription model for the same reason other retail distribution models come with higher costs than wholesale models.
Wholesale is a business-to-business transaction with a few customers. Retail is a business-to-consumer transaction with many to millions of customers. Wholesale avoids the costs associated with selling to actual end users, including marketing, stocking, point-of-sale operations and handling of returns, plus lots more customer service and billing and payments processes.
Cost element | Video streaming | Linear video |
Content | Higher | Lower |
Marketing | Higher | Lower |
Technology | Higher | Lower |
Operations | Lower | Higher |
Total costs | Higher | Lower |
Revenue | Subscriptions | Advertising |
In the case of the older linear video subscription business, content providers and channels could rely on distributors for most of the marketing, retail operations and also allowed simplified business-to-business billing.
In the direct-to-consumer business, streaming services must handle all that themselves.
Cost | Linear | DTC |
Acquisition marketing | $5-$10 per subscriber | $10-$15 per subscriber |
Retention marketing | $1-$2 per subscriber | $2-$3 per subscriber |
Avoided expenses | $2-$3 per subscriber | $0 |
Total marketing costs | $8-$13 per subscriber | $12-$18 per subscriber |
No comments:
Post a Comment