Reevaluating direct-to-consumer: The shift toward video aggregators

The industry is approaching peak SVOD stacking

The 2010s were characterized by two adoption trends: a sustained growth in the number of households with access to SVOD services and a steady increase in the number of services used. Deloitte’s research shows a steady increase in the average number of subscriptions in the European market from 1.3 in 2018 to a plateau of 2.35 in both 2023 and 2024 (figure 1). In the United States, Deloitte’s 2024 Digital Media Trends reported that the average number of SVOD services has been steady at four since 2020.⁴

The rationale for the revival of pay TV elements

Given that some fundamental benefits of standalone SVOD were giving consumers control over content choice and contract length and enabling content providers to bypass distributors, moving back to fewer, larger, pricier, and longer-term bundles may feel like a backward step.

But a return to a version of the aggregation model may offer the equilibrium that balances consumers’ and suppliers’ needs.

For consumers, an idealized version of standalone SVOD—that could include multiple relatively low-cost video services, each readily accessible via an intuitive app and each readily canceled at a few weeks’ notice—may, regrettably, be commercially unviable. The more recent reality has been perennially rising subscription prices and password-sharing crackdowns,⁵ overwhelming content choice,⁶ and user interfaces of varying slickness.⁷ Content providers with decades of profitable experience in creating content to sell to distributors on multiple-year contracts may struggle to pivot effortlessly to running all aspects of an end-to-end DTC business, from setting up credit card payments to managing regulatory compliance required to set up an advertising video on demand tier.⁸

For some viewers who remain subscribers, this may be reminiscent of pay TV.

Pathways to reaggregation

There are multiple pathways that could culminate in the new market structure.

Service bundling: For this type of service, bundled SVOD subscriptions with pay TV, telecom, or financial service contracts could offer discounted rates compared to purchasing each service separately. In exchange, subscribers would commit to a minimum contract duration, typically at least one year. A primary rationale for SVOD companies to become part of a bundle is to help diminish churn, which has remained elevated: at about 40% in the United States and at about 20% in the UK market.⁹ An industry analysis estimates that there were 139.3 million cancellations in 2023 in the United States alone.¹⁰ Among those who canceled, about a quarter of those were “serial churners,” having cancelled a service at least three to four times in the prior two years, up from a mere 3% in 2019.¹¹ A fifth of serial churners had canceled seven or more times within 24 months.¹²

Bundling SVOD into, for example, an 18-month traditional pay TV contract (in exchange for a discount on the total price) defers the possibility of cancellation and diminishes seasonal churn. Over half of US consumers would trade a discount for a year-long subscription,¹³ but as of the start of 2024, only 4% of SVOD contracts in the United States were for a 12-month term.¹⁴ For companies currently running standalone video-on-demand services, another appeal of becoming part of a third party’s bundle could be an opportunity to outsource a range of responsibilities including customer acquisition, billing (and management of bad debt), customer support, and advertising sales.

As of 2024, there was already a fair degree of service bundling, and this is likely to become more extensive through 2025 and beyond. The benefits for pay TV companies to integrate SVOD into their offerings can vary by market, but a common motivation is to lock in popular content packages as part of their offerings to help reduce their own churn. Adding SVOD could also increase gross revenue among companies that are seeing only modest growth for their core services.¹⁵

In the United Kingdom, as of 2019, all of Sky’s pay TV packages include Netflix’s ad-funded tier by default,¹⁶ and a single search bar is available across all subscribed content. In France, pay TV channel Canal+ offers Disney+ and Paramount+ for all subscribers, and there are various packages offering multiple SVOD brands.¹⁷ In Central Europe, it’s been estimated that 25% of all SVOD subscriptions are indirect, sourced via pay TV or telco.¹⁸ In the United States, Xfinity broadband users can add a bundle called Streamsaver, which comprises Apple TV+, Netflix Standard with ads, and Peacock Premium with ads for a 30% saving.¹⁹ Twenty-five percent of online video subscriptions globally are expected to be via telcos by 2028, up from 20% in 2023.²⁰

For telcos, adding popular SVOD services at a discount can also help improve retention, particularly in markets in which there may be little perceived variation in network performance between carriers.

Some banks also bundle SVOD into their subscription services. As of August 2024, Barclays in the United Kingdom offered Bank Account + Blue Rewards customers complimentary Apple TV+.²¹

Some smaller SVOD services are pivoting from standalone DTC to add-on channels distributed by aggregators or exiting some markets altogether.²²

Media aggregation: Services get aggregated, most typically by selling multiple formerly disparate services at a discount relative to individual prices. For example, in the US market, a Disney+ Max and Hulu bundle was made available offering a discount of up to 38%.²³ These bundles may be purely video, or video and other media (music, games, or news). As these become more popular, the individual services may be discontinued or priced to discourage standalone purchases.

Aggregating video services should improve ease of use, for example, by providing a single search bar and a single electronic program guide across all content available to the viewer, based on their subscriptions. By contrast, with standalone services, there can be friction in exiting one service and then opening another, particularly when viewing on an older or budget TV that may have less powerful processors. Deloitte’s research has found that almost half of US consumers surveyed would spend more time on streaming services if content was easier to find.²⁴ About three-quarters of surveyed Gen Zers and millennials in the United States say they would like to be able to search across all services they have access to.²⁵ Deloitte UK’s research indicates that a major driver of cancellation is not being able to find anything to watch, a paradoxical result given the current all-time abundance of titles.²⁶

Bundling of SVOD services could help mitigate churn. According to industry analysis, subscribers to one bundle (Disney+, Hulu and ESPN+) were 59% less likely to churn than those subscribing to Disney+ alone.²⁷ Deloitte’s research suggests that consumer tolerance for further price increases may be reaching its limit: Almost half of US consumers polled in the fourth quarter of 2023 stated that they would cancel an SVOD service if it increased in price by US$5 per month.²⁸

Permanent churn: Other video-on-demand (VOD) services, including free broadcaster VOD (BVOD) which is popular in Europe, or video-sharing services like YouTube (which is predominantly consumed for free), may, for some households, usurp paid-for SVOD. A major driver of SVOD churn is cost. Over recent years, the cost of subscription has become an increasingly prominent factor with 24% of UK respondents who canceled SVOD services citing “subscription was too expensive” as the reason for cancellation. By 2024, this had risen to 31%.²⁹

There may be an increased offer of FAST (free ad-supported television) services from companies that were formerly subscription-only. For example, Amazon, which started offering SVOD in 2008, launched the FAST channel Freevee in the United States in 2022.³⁰ Crunchyroll, an anime SVOD provider since the mid-2010s,³¹ launched a FAST service in 2023.³² There may also be increased consumption of existing user-uploaded and typically free services such as YouTube. Viewing of YouTube on the television set is expected to increase by 90% between 2024 and 2029, rising from 12 to 22 minutes per day.³³ Some of this growth may come from the displacement of SVOD viewing.

Bottom line: The business of television is evolving … again

The industry is undergoing a decades-long shift from broadcast to IP-based delivery.

Historically, this was characterized by the genesis and growth of the standalone SVOD market, which enjoyed growth in adoption in the 2010s, a period where the offer was novel, competitors were fewer, and the SVOD subscriptions were modestly priced and often shared.

But the 2020s are proving less benign, churn has been high, and growth has proven more difficult than expected. In a relatively mature market such as the United Kingdom, SVOD’s measured share of viewing has grown languidly of late, from 15.8% to 16.4% between 2023 and 2024: Broadcasters’ content- and video-sharing sites have markedly higher shares.³⁴ The standalone SVOD market is unlikely to become predominant, and aggregation of a type reminiscent of traditional pay TV is likely to grow over the coming years.³⁵

Standalone SVOD players should consider the role they want to have given this new model. A few players have attained sufficient scale and breadth of capability (from billing to user interface design to compression) such that they may want to remain focused on full-service SVOD (that is with one player being fully integrated, from content creation to ad sales to customer management). The exception may be in markets where third-party distribution makes better commercial sense.

Some SVOD players may want to take the lead on aggregating other players’ content in addition to their own: They can create bundles with their content at the core. They could also market and host other companies’ channels like traditional pay TV. However, many players may determine that their focus may simply be on selling content to the highest bidder—a role that they’ve historically been successful at.³⁶

The nub of this bottom line is that pure direct-to-consumer (DTC) is often challenging to deliver, particularly for companies that may need to add in capabilities and adjust corporate culture: A company that has spent decades thriving at generating content for others to distribute may not immediately be able to thrive at DTC. The difficulty of DTC as a sole business model is a constraint that applies to most industries and is not specific to video. There are very few companies of scale that have managed to pivot entirely to DTC. Distributors are key to most major consumer brands, and this tenet is unlikely to change.

The fact that standalone SVOD may not be the predominant industry model should not be cause for complacency for broadcasters, which, in many markets, retain the majority of viewing hours across all measured viewers. In Europe (based on 42 markets), the average viewing of traditional TV was at 3 hours 16 minutes per day in 2023; but among younger viewers, it was just 1 hour 12 minutes.³⁷ Broadcasters should work together to ensure their offer has a resilient and growing appeal to younger audiences.