SVOD LAUNCH STRATEGIES: TURNING IT UP TO 11
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- Drusilla Caldwell
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1 Sponsored by: share: SVOD LAUNCH STRATEGIES: Subscription video on demand appears to be all the rage these days. Seemingly dozens of new SVOD services are popping up across all corners of the market, targeting virtually every niche audience imaginable, from soccer fans to anime addicts. The result is a dizzying array of announcements, price points, go-to-market strategies and brands, all jockeying for position in a market that many expect to eventually eclipse the traditional, established market for large bundles of pay-tv services. However, there remains a significant amount of uncertainty in the nascent but potentially explosive SVOD space, most notably how players both big and small will be able to rise above the crowd. This Fierce ebrief will delve into this question and more in two parts. 1
2 PART 1: SURVEYING THE FIELD By Rob Pegoraro The over-the-top video industry is currently dominated by big names like Dish Network s Sling TV, Netflix, Amazon, AT&T s DirecTV Now, Sony s PlayStation Vue, YouTube TV and the new Hulu with Live TV. But sitting on a tier below those heavyweights is a wide and growing range of smaller, more specialized streaming options. A look at Amazon s Channels storefront an option for easy subscription signups launched in December 2015 as Streaming Partners suggests this range. Beyond obvious, name-brand fare like HBO, Showtime and Starz, there s the Amazon-owned Anime Strike, the yoga-centric Gaia, the selfexplanatory TheSurfNetwork and many more. Our niche subscriptions, like Acorn TV, Indie ShortList and CONtv, are all performing really well, an Amazon spokesperson said. So, while we ll continue to add the bigger-name subscriptions, like HBO and Cinemax, it s equally important to us that we re growing this more niche offerings. Amazon made a bet with its own money on the appeal of niche content when it launched Anime Strike in January. Anime content can be difficult to find in one place, and there s a gap in anime subscriptions currently available in the U.S., the spokesperson said. There s a passionate group of fans who would love to have anime content all in one place, and to do that, it made sense to create a separate and dedicated channel. The same diversity is on display at the Roku Channel Store, where you don t have to scroll down its most-watched list too far to start seeing such unlikely items as the Anglophilic Acorn TV and the Jehovah s Witnesses channel JW Broadcasting. And these channels, unlike the random things you can find on YouTube, support themselves with traditional paid subscriptions hence the common shorthand SVOD, short for subscription video on demand, for them. There s something for everybody on the internet, 2
3 said analyst Roger Entner, founder of research and consulting firm Recon Analytics. The downside is, you will have to pay for it. Depending on how niche your interest is, the price tag will go up. MAKING CURIOSITY PAY At CuriosityStream, a science-centric, ad-free SVOD service launched in 2015 by Discovery Channel founder John Hendricks, there s not one price but a menu of them. A standard-definition feed costs $2.99 a month, high-definition video runs $5.99 a month, or a Premium offering with Ultra High Definition quality costs $11.99 a month and annual rates shave 16% off each of those. Our subscribers are all ages, although many are closer to middle age, and have some disposable income to feed their curiosity, CuriosityStream COO Peter North said in an . He added that many have been disappointed by the turn of adsupported documentary channels towards shallower, glitzier programming. Networks that used to focus on factual content have broadened the appeal of their content in pursuit of advertising impressions and ratings. Fortunately, we re not subject to those same pressures. Peter North, COO, CuriosityStream Networks that used to focus on factual content have broadened the appeal of their content in pursuit of advertising impressions and ratings, he said. Fortunately, we re not subject to those same pressures. North added that a multitude of the company s subscribers also pay for Netflix and Amazon Prime video. A PITCH FOR SOCCER FANS An upcoming video service, the English Football League s (EFL) ifollow, is taking an opposite approach. For roughly $142 a year, subscribers will be able to watch games from 61 of 72 clubs; the other 11 already have their own video feeds available. That s a steep price, but EFL executives point to the intensity of fans demand. Our research tells us that, at this point in time, most subscribers will sign up purely because they cannot access the majority of EFL games via a cable TV sports bundle, marketing director Drew Barrand said in an . The league plans to market this new SVOD service on the sites of individual clubs as well as during the handful of EFL games carried on pay TV. But EFL also anticipates fans telling each other about this option something most SVOD services can t benefit from. In New York City alone, for example, we know that there are fan club branches for the majority of EFL Championship clubs, reaching many hundreds of fans each, Barrand wrote. As such, in addition 3
4 You are the proverbial sand on the beach. Roger Entner, founder, Recon Analytics part because we focused on our specific genre and niche. We never choose a category like Movies and TV if there s a better fit like Science and Technology available. to our paid-for campaign, we also anticipate that word-of-mouth amongst these fan networks will play a significant role in driving awareness and signups for ifollow. DISTRIBUTION SCHEMES EFL s ifollow and CuriosityStream are also taking different approaches in how fans will watch. CuriosityStream is agnostic about playback hardware, offering apps for Roku, Apple TV, Android, ios, Xbox One and Amazon FireTV. The upside: A potential viewer almost certainly has the right hardware. The downside: Finding any one app in a crowded marketplace like Apple s App Store, Google s Android Play Store or Roku s Channel Store can be a challenge. You are the proverbial sand on the beach, Recon Analytics Entner said. We ve been lucky enough to earn prominent placement on some very large app marketplaces, such as itunes and the Roku Channel Store, CuriosityStream s North said. Those happened in EFL s ifollow is opting for web viewing only. But since fans will see it as an option on the sites of their favorite clubs, that should make the service an easier bookmark than the average web video feed. If the EFL can make that work, it will get the bonus of not having to share any of the revenue with a platform owner. Apple, for example, keeps 30% of subscription revenue in the first year, then 15% afterwards. Some have argued that niche SVOD services, like CuriosityStream and ifollow, will benefit from the long tail of the internet: That the combination of endless storage and effective search features mean even obscure content can make money. Entner said that may well be true, but warned SVOD services not to get too greedy. What you have often there happening is the rights owner being star-struck by these billion-dollar deals that the English Premier League can do, and then sometimes they may overprice it, he said. He advised keeping a humbling reality in mind: The market is way too small! l 4
5 PART 2: EVALUATING THE AGGREGATORS By Kendra Chamberlain Following years of explosive growth, the SVOD market is now experiencing some maturation. According to Parks Associates, 2016 was the first year since 2012 to see fewer OTT services launched than had launched in the previous year. It s maybe an early indication that the growth in new services in the OTT market might be slowing down, said Glenn Hower, senior analyst at research and consulting firm Parks Associates. We re entering the next phase of the market, which is revolving heavily around differentiation. Many of these niche services are surviving, and in some cases thriving, on their own by offering content to very specific audiences, from WWE enthusiasts to anime fans to Criterion Collectionstyle cinefiles. The most successful of these niche services are hovering around the 1 millionsubscriber mark. Still, it s hard to deny the opportunity for them to benefit from aggregation. A big part of it is a broader addressable audience, Hower said. By We re entering the next phase of the market, which is revolving heavily around differentiation. Glenn Hower, senior analyst, Parks Associates aggregating with more of a centralized offering, now they have access to a broader customer base. That s placed two forces at work on these smaller OTT services: the need to differentiate from other competitors, and the opportunity to aggregate with other services to attract more viewers. So far in the OTT space, there are two players that have taken up the role of aggregator: Amazon, through its Channels experiment, which offers subscriptions to some 100 OTT services; and VRV, a digital video bundle from Ellation. 5
6 ELLATION Otter Media s Ellation, a subsidiary of AT&T and The Chernin Group s Otter Media, has amassed a handful of niche SVOD services, including Crunchyroll, Geek and Sundry, Rooster Teeth and others. Ellation s video bundle, called VRV, offers access to a group of eight SVOD services for about $10 per month, and another five web channels can be purchased a la carte. As an aggregator, VRV is still targeting a relatively small niche audience interested in anime and so-called geek culture. But its individual services benefit from wider exposure to new and relevant audiences. That s going to draw people who are interested in similar types of content, said Ali Choukeir, research analyst at S&P Global s Kagan, a market research firm. Choukeir added that this model could be replicated throughout other content verticals, such as comedy, sci-fi or sports. That s a good model to try. Whether that works out in the long run, I don t know, he said. VRV is still very new. AMAZON CHANNELS Amazon has created a central marketplace for viewers to build their own web video bundles from some 100 SVOD OTT services. The biggest benefit for Amazon is that the SVOD marketplace helps bolster the wider Amazon ecosystem. [Amazon] Prime is a huge, massive thing, it s not just video, they re allowing users to go to one spot to get their digital services all in one, Choukeir said. They want to be a one-stop shop for whatever you need, whether that s apparel or groceries or video. Analysts agree Amazon s model has strong potential. Consumers benefit from having a single billing solution to help them manage their OTT subscriptions. The SVOD channels benefit from the wider distribution, and Choukeir noted that some services have reported significant growth through the program. But Amazon doesn t release any subscriber numbers for its Prime service, so it remains unclear how many of Amazon s Prime subs are actually taking advantage of the marketplace. IS THERE ROOM FOR FACEBOOK, GOOGLE AND TWITTER? Given the size and scope of the market, there s plenty of room for other players to step into the role of an SVOD aggregator. And as social media networks increasingly focus their efforts on video, couldn t Facebook, or Google, or perhaps Twitter make a similar play? I think it s entirely likely that any of those other players could play in this space, Hower said. Google s YouTube, for example, could well grow into an SVOD aggregator, though YouTube s early experiment with paid channels didn t pan out very well; today, the company appears to be more focused on bundling live TV channels together, rather than bundling web video services. And video strategies for Twitter and Facebook haven t exactly lined up with subscription channels, at least not yet. Facebook has forged its path in the social experience and video plays a part in that but whether premium video or longform video is going to be a bigger part of that, I m not entirely sure yet, Hower said. The same can be said for Twitter. Twitter is going after news and recent events [with video], which plays really well to their type of users, and why people go to Twitter in the first place to catch up on what s going on, Choukeir said. Does that lead to a service like Amazon? I don t really see it. Further, Twitter, Facebook and other large internet players continue to work to bolster their advertising revenue, rather than their content holdings. But they may still get into the business of bundling niche web channels at some point in the future. Twitter and Facebook are really looking to get into video, said Michael Inouye, senior analyst at ABI Research. They could do a packaged service or something like it. 6
7 STREAMING MEDIA PLAYERS AS AGGREGATORS As the world of subscription-based OTT services has expanded, the role of aggregation has somewhat fallen on the hardware players. Apple, Amazon, Roku and Google have amassed huge libraries of content apps for their connected TV platforms, which function more or less as marketplaces for viewers to assemble their own bundles of web channels. Amazon, once again, could be poised to be the leader in this space, because it has both the Fire TV media player, its own transactional and subscription OTT service, and consolidated billing across its 100 channels into one Prime membership. The channel business works in their favor, Hower said. It s more in their DNA, considering how active they ve been in the transactional space. Apple has made moves to do the same. It offers a slate of subscription content apps through its Apple TV platform that users can manage through their When you bring a lot of these specific services that are niche services, and you pull them all together, you create a service that s a little bit awkward to view, because you have to go to different interfaces or different portals to access the content. Michael Inouye, senior analyst, ABI Research Apple accounts. Roku and Google s Chromecast and Android TV products offer much larger channels selections, but without the convenience of consolidated billing. Whatever the platform, OTT aggregators will still face the perennial obstacle of harmonizing the user experience across disparate web video services. When you bring a lot of these specific services that are niche services, and you pull them all together, you create a service that s a little bit awkward to view, because you have to go to different interfaces or different portals to access the content, Inouye said. That s where these partnerships don t work out. l Vindicia, an Amdocs company, provides enterprise-class subscription billing solutions that keep consumers connected to the subscriptions they love, and businesses connected to the revenue they need. Vindicia has processed over $24.8 billion, generating over $90 million in annual revenue for clients such as BBC, Lionsgate, Comic-Con, TransUnion Interactive, Allrecipes, and Texture. 7
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