ESPN is going all in on DTC.
Bob Iger is crowning it the network’s boldest play since grabbing the full NFL schedule in ’87.
Chair Jimmy Pitaro calls it “the biggest transition in our history.”
Translation: everything ESPN directly to you in an app for $30 a month.
Using the ESPN announcement as the backdrop, MarketWatch sounded the latest alarm for cable TV: subscribers keep bailing, and the drop-off is accelerating. Analysts say live sports is the only thing still propping up the bundle, but even that pillar is starting to wobble.
A decade ago, cable boasted 186 original scripted series. Today the count is near zero. What’s left? Wall-to-wall reality reruns and an eternal loop of Law & Order episodes. Peak TV, this ain’t.
News like this makes me think about the once-popular narrative that DTC will soon kill off wholesale partnerships and more.
In fact, in 2021, Freightwaves published an article titled, “Brands are killing the wholesale model. Can they kill retailers too?” The piece discussed how many consumer brands were shifting away from wholesale distribution and towards DTC models.
The notable example in that article is Nike.
There was a time where retail brands charged ahead with their own efforts to go direct to consumer. Wholesale partnerships were shunned with the thinking that cutting out the middleman would be path towards boosting profitability.
As we know now, underestimating the value of wholesale was a mistake, especially for Nike. The truth is that both channels work hand in hand with one another. And, in the case of Nike, it was not about where they were selling, it was more about what.
Perhaps that is why ESPN secured popular programming deals before the big announcement. The network secured a deal to broadcast the ever popular “Inside the NBA” from Turner and then a deal to onboard the Rich Eisen Show. At $30/month, the inventory must be sufficiently compelling to mitigate churn and drive customer lifetime value.
I wonder, if we fast forward three years from now, will we be reading headlines that say “ESPN Rediscovers Cable?”
And there is some precedent here to suggest this could occur: movie theatres.
Why would anyone go to the movies anymore when content can be streamed directly to consumers? Turns out that releasing movies in theatres is a good approach to improve the streaming performance at home. Amazon Studios took this approach by taking its movie, Red One, into theaters with the specific intent of making it a streaming hit.
It is examples like these that make the wholesale-DTC dance fascinating.
At first glance it seems riddled with irony and contradiction.
Many brands have told us that customers wander into their owned stores and when asked “how did you discover our brand?” they reply “we discovered you at the department store.”
Is it possible that being one step removed from my customer actually brings me closer to them?
My favorite is brands becoming the very thing they hate. By cutting out the middleman, they become the middleman themselves.
Meanwhile, Dick’s Sporting Goods just snapped up Foot Locker and Away Luggage is now going into wholesale by cozying up to Amazon.
There’s never a dull moment. There is no “one size fits all” answer. Watching brands and retailers tango is half the fun. But there are valuable learnings to be had from every approach, relationship and strategy.
Our colleague, Simeon Siegel, might end up writing a new report about this in the future. His findings in his original “DTC Isn’t All It’s Cracked Up To Be” challenged entrenched assumptions within retail about the value of going direct.
Maybe Bob Iger should read it.
