Marketing Costs are One Reason Video Streaming Business Model Suffers

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