The effect of subscription-based direct-to-consumer channel additions on firm value

摘要

Technological advancements have made it easier for firms to bypass traditional distribution networks and establish subscription-based direct-to-consumer (SBDTC) channels. Despite their growing popularity, little is known about the effectiveness of these channels. However, pursuing these new channels may not be the best decision for firms even though technology allows it and, in some instances, consumers demand it. Results from an event study of SBDTC channel additions in the cable television industry show that they complicate channel relationships and can lead to conflict, which reduce firm value. Further analysis reveals that firm-specific characteristics and strategic execution factors operate to mitigate the loss in firm value. Specifically, the study results show that channel power diminishes the negative impact of channel conflict, suggesting that firms with greater channel power benefit from adding SBDTC channels. The study also finds that firms marketing high-quality, differentiated offerings are rewarded with more favorable firm valuations.