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.
READ MORE: If studio groups reach 180-200 million D2C subscribers, it becomes viable to ditch distributors (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+.
READ MORE: Netflix surpasses 200 million subscribers, but has more competition than ever in 2021 (The Verge)
READ MORE: Amazon Prime Passes 200 Million Subscribers (The Hollywood Reporter)
READ MORE: Disney+ reaches a major milestone (CNN)
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.”
“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.”
— Guy Bisson, Ampere
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.