Media companies are taking the wrong approach as they play catch-up with Netflix, analyst says

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Netflix is “a rocket,' while legacy media companies are 'bicycles' trying to catch up, he says.

Traditional media companies that are reclaiming their content from licensees or planning their own direct-to-consumer streaming services may be biting off more than they can chew.

“While we have argued that becoming an arms dealer to a growing array of tech platforms that are building streaming services is the optimal strategy for legacy media, their envy of Netflix’s NFLX, +1.98% global platform and $160 billion market cap is driving their desire to enter the DTC wars themselves,” he wrote.Related: Opinion: How the Disney-Netflix streaming war will create collateral damage

“Unfortunately, what media companies are missing is a full appreciation that content is only a small part of the DTC equation, with technology and data analytics equally, if not more important ,” said the note. “Gross Adds, Subscriber Acquisition Cost, Lifetime Value, Retention Marketing and Churn are simply not part of legacy media’s core DNA.”

“From a marketing standpoint, these channel platforms can highlight individual pieces of content that drives you to subscribe versus app stores that are app focused versus content focused,” he wrote. “Not only does this shift the subscriber acquisition cost to a third-party, but it also leads to far lower churn, as a subscriber through a Channel store is buried within a much larger monthly bill vs. a direct bill from the subscription service itself.

 

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