Why Streaming Services Are Turning Their Audiences Into Channel Stores

Peacock is selling STARZ inside its own service. Disney says Disney+ can aggregate third-party streaming services through bundles and add-ons. Roku is preparing to expand bundling across apps. Netflix execs have reportedly discussed making services including Peacock and FOX One available inside Netflix.

The companies that built direct-to-consumer businesses to own the customer are finding another use for those audiences: selling somebody else’s subscription and collecting economics from the transaction.

Amazon has already demonstrated the model at scale. Prime Video offers more than 100 third-party streaming subscriptions in the U.S. and increasingly bundles those services together. The rest of the market is trying to turn existing subscribers, billing relationships and discovery surfaces into distribution businesses.

Peacock Is Using STARZ to Monetize Customers It Already Paid to Acquire

Peacock launched STARZ as an $11.99 monthly add-on in June. Eligible Peacock subscribers can purchase STARZ through their Peacock account and watch its programming inside the Peacock experience, with a broader rollout planned later this year.

The current structure requires an active Peacock subscription, which makes STARZ an upsell rather than a neutral marketplace. Peacock can increase revenue from customers it already acquired without paying to produce the programming behind the incremental subscription.

STARZ gets access to Peacock’s installed subscriber base, merchandising and billing infrastructure. Peacock gets another product to sell through an account relationship it already operates.

That distribution role sits alongside Peacock’s own aggressive wholesale strategy. Peacock Premium Plus is available through Prime Video and YouTube Primetime Channels, while Roku also sells Peacock through Premium Subscriptions. Peacock is simultaneously a product inside other companies’ channel stores and a distributor of STARZ inside its own service.

The economics become more attractive as Peacock’s installed base grows. The service had 48 million paid subscribers when Comcast reported its first quarterly Peacock profit this year. Every additional product Peacock can sell against that audience creates another way to monetize scale without attaching the full cost of another programming slate.

Peacock doesn’t need to replicate Amazon’s entire channel catalog for the model to work. A smaller collection of complementary services can increase revenue per account and give subscribers additional reasons to keep the Peacock billing relationship active.

Disney Wants Disney+ to Aggregate Third-Party Services

CEO Josh D’Amaro told investors on August 5 that Disney+ can become an “aggregator of third-party services” through both bundles and add-ons.

Disney already has years of experience selling premium add-ons through Hulu. Moving that capability toward Disney+ gives the company a much larger global storefront and fits its broader effort to consolidate streaming activity around one account and interface.

Disney also has evidence that packaging services together can improve retention. D’Amaro said churn among comparable Disney+, Hulu and HBO Max bundle cohorts is significantly lower than for standalone Disney+ or Hulu customers.

A Disney+ subscriber could eventually produce revenue from a Disney subscription, advertising, premium add-ons and third-party services while remaining inside the same customer relationship. Disney handles more of the merchandising and transaction while the outside programmer supplies the incremental content.

The model gives Disney another way to increase customer lifetime value without requiring every additional dollar of subscriber spending to finance Disney-owned programming.

Roku Is Expanding the Commercial Infrastructure Beneath Apps

Roku is preparing to expand bundling across apps, according to a source familiar with its plans.

Roku’s public developer infrastructure already supports parts of that model. Catalog 2.0 lets publishers create add-ons for premium content and additional apps and package multiple products into subscription bundles. Those public tools don’t independently establish a cross-publisher marketplace where Roku packages independently operated streaming services together, but they show Roku Pay moving toward more complex subscription products.

Roku is simultaneously expanding the legal structure around app-less streaming distribution. Its updated Distribution Agreement gives publishers more ways to distribute and monetize inside Roku-owned services, including standard terms for branded paid subscriptions that don’t require a separate Roku app and Partner-Sold Inventory for approved Roku Services partners.

Roku already controls a valuable discovery layer through its TV operating system. Expanding subscription packaging lets the company connect more of that discovery directly to Roku Pay and subscription management.

A viewer who can discover programming from the home screen, subscribe through Roku, combine products and manage those subscriptions through one account gives Roku more opportunities to participate in the transaction before the publisher’s app becomes relevant.

Amazon Shows Why Everyone Wants the Transaction

U.S. customers can buy more than 100 streaming subscriptions through Prime Video without downloading separate apps. Amazon also sells bundles containing combinations such as STARZ and Crunchyroll, Apple TV and Peacock, and several packages built around specialty services.

Antenna estimates specialty SVOD reached roughly 42 million subscriptions in Q2, up 14% year over year. About two-thirds of specialty gross additions came through Prime Video Channels. Roku specialty additions reached 1.4 million during the quarter, while YouTube Primetime Channels specialty acquisitions increased 47% year over year.

Amazon already has the account, payment method and consumer relationship before the specialty service needs the subscriber. A publisher can keep more subscription revenue by selling directly, but it then absorbs the cost of marketing, checkout, payment processing, customer support and churn replacement. Prime Video performs much of that work in exchange for a share of the subscription economics.

That trade gets more attractive as subscriber acquisition becomes harder and streaming churn keeps forcing services back into the market for replacement customers, increasing the value of controlling the payment and checkout infrastructure.

YouTube Has the Audience but Still Has to Create the Buying Habit

YouTube Primetime Channels now offers more than 45 channels, including HBO Max, Paramount+, FOX One and Peacock. Peacock Premium Plus launched inside Primetime Channels in June, allowing users to subscribe and watch directly through YouTube.

YouTube has enormous reach and engagement, but Antenna’s specialty SVOD data still puts Primetime Channels well behind Amazon as a subscription acquisition source and behind Roku in absolute specialty additions.

YouTube users already open the service constantly to watch free video. Primetime Channels has to establish a second behavior: paying YouTube for recurring access to third-party premium streaming services.

Amazon has spent years teaching customers to treat Prime Video as a place where entertainment from many suppliers can be purchased. Roku can merchandise subscriptions from an operating-system interface that appears before viewers enter a streaming app. YouTube has to convert its dominant discovery position into recurring premium transactions.

Its opportunity remains substantial. A viewer can discover a clip, creator, sports highlight or trailer and eventually subscribe to the underlying premium service without leaving YouTube. The closer discovery gets to checkout, the more valuable YouTube becomes to programmers trying to acquire paying customers.

Netflix Could Turn One of Streaming’s Best Home Screens Into a Storefront

Netflix execs have reportedly discussed making third-party services including Peacock and FOX One available inside its app, raising the possibility that Netflix could become a storefront for competing streaming services.

Since June, members in France have been able to watch TF1 live channels and TF1+ programming directly through Netflix. The content integrates with Netflix features including My List, Continue Watching and Top 10 while remaining TF1 programming.

Selling a Peacock or FOX One subscription would go one step further by turning Netflix’s interface into a customer-acquisition channel for another streaming service.

Netflix already has the account, payment method, recommendation engine and habitual TV usage. A channel-store model could generate subscription distribution economics without requiring Netflix to own or license every incremental piece of programming being sold.

Netflix has spent years training consumers to see its interface as a tightly controlled destination rather than a marketplace containing competing subscription brands. Opening that interface to third parties gives other media companies valuable shelf space.

The financial incentive grows if Netflix can earn from those third-party transactions while keeping discovery, recommendations and billing inside Netflix.

Channel Stores Turn Subscriber Scale Into Distribution Margin

Streaming services historically valued scale because larger subscriber bases spread content and technology costs, created advertising inventory and strengthened bargaining power. A streaming service that has already acquired tens of millions of customers can also sell additional products against those relationships at relatively low incremental cost. The company doesn’t have to produce the third-party programming. It needs the billing infrastructure, entitlement systems, merchandising and consumer demand required to close another transaction.

Subscriber growth creates more economic value when each customer can support several revenue streams. A subscriber can pay for the core service, generate advertising revenue, buy an add-on and subscribe to another company’s streaming service through the same account.

Peacock can earn from STARZ while allowing Amazon, Roku and YouTube to earn from Peacock. Disney can distribute Disney+ wholesale while building third-party aggregation into Disney+. Roku can sell subscriptions without owning the programming. Netflix can potentially become another distributor for companies that spent billions building services to compete against it.

The Streaming Wars Take

Channel stores let streaming services monetize distribution without financing all of the programming that generates the transaction, an increasingly attractive trade as direct subscriber acquisition gets more expensive.

A programmer can preserve the full retail economics by owning the app, billing and customer relationship, or surrender part of the revenue to a distributor that already has the audience and payment method.

Amazon has proved that enough publishers will make that trade to create a substantial subscription marketplace. Roku and YouTube are building competing demand layers. Peacock and Disney are beginning to monetize their own subscriber bases as distribution assets. Netflix has enough scale to become one of the largest channel stores quickly if it decides that third-party subscriptions improve the economics of its interface.

The competitive question is shifting from how many subscribers a streaming service can acquire to how many transactions it can generate from the customers it already has.

A large subscriber base becomes more profitable when the service can collect economics on entertainment somebody else paid to make.