Originally published at tdgresearch.com on February 19, 2015
Eliminating the middleman has long been one of the tenets of the Internet revolution. While this formula has worked well in a range of industries from taxicabs (Uber) to lodging (Airbnb), it remains to be seen whether it can upend the conventional order of the entertainment industry.
There are a number of startups now banking on the notion that it’s more profitable for content producers to distribute their shows directly to consumers themselves, allowing them to keep the lion’s share of whatever advertising and/or subscription revenue they might earn.
Are they onto something? Maybe.
To begin with, let’s take a look at the core value proposition of what’s become known as “the sharing economy.” In established industries where the elimination of the middleman has worked very well, the sharing economy innovation solves a consumer problem, providing a service they’ve been unable to obtain elsewhere, such as reliable non-taxi taxi service or a safe and accountable way to use an apartment as a hotel room.
In the entertainment industry, eliminating the middleman solves a vendor problem, as content producers believe they are giving up too much of their profits to middlemen (in this case, the studios and networks). And while that may well be the case, it’s not something consumers particularly care about. They just want to watch their favorite programs.
From a consumer point of view, the television industry already has a (relatively) easy and widely accessible distribution system. While many feel it is overpriced, the new solutions aren’t promising to be any cheaper. The problem they are solving is that many content producers look at what networks and movie studios offer (distribution and marketing) and think, “I can do that myself, and make a lot more money doing so.”
Startups like Whalerock and VHX make it easy to find a reliable distribution platform. And marketing, many believe, can be handled for free, using social media. That, however, may prove to be a very dangerous assumption.
Too often I hear people expounding on how easy it is to use social media for promoting entertainment properties, pointing to Vine and YouTube stars (among others) as examples. While this is true for a small subset of performers, once you get past that subset, the premise falls apart.
People look to celebrities like Howard Stern as proof that using social media to drive buzz is a snap. What they forget is that in addition to over one million Twitter followers, Stern has millions of captive listeners via his Sirius radio show. The combination makes it easy for him to create buzz around his projects.
But few celebrities have those kinds of resources.
Social media is easy to use for marketing purposes if you have the time and the staff to run a proper campaign. A good social media marketing campaign is far more complicated than just issuing a tweet every other day. It’s a full time job, one that requires both a dedicated support team and the temperament to become a ceaseless self-promoter. For many celebrities that’s just not who they are, and if they ever decided to take that route, their fans would surely have a negative reaction.
But that Kardashian-esque compulsion for constant self-promotion is the only thing that’s going to deliver the sizeable audience they need. Without it, they’re better off sticking with the studios or networks.
This is not to say direct distribution by content creators is a total wipeout. It has worked very well for performers with dedicated followings. For example, comedian Louis CK is able to sell his specials directly to fans precisely because they are so loyal. Ditto for WWE, which enjoys millions of devoted fans and Twitter followers. Many music acts could probably achieve the same results, provided they have developed sufficiently large social media followings to market their performances.
Niche performers can also benefit from cutting out the middleman, provided they have an active social media fan base. Former Kodak CMO and Bloomberg TV personality Jeffrey Hayzlett was able to launch his own C-Suite Network, using his sizable social media following to create buzz for the show that runs on an OTT platform created by Piksel.
As live viewing numbers continue to decline, we can expect a greater number of content creators to explore the direct-to-consumer model. Of course, we will be surveying the landscape as this plays out, so stick with TDG and stay ahead of the curve.
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