SVOD Start-ups: How I Learned to Stop Worrying and Love Niche Content

In the face of an uncertain and disrupted future, and having witnessed the rise and rise of Netflix, media companies large and small are developing and launching over-the-top (OTT) video streaming platforms. In the subscription VOD (SVOD) market, Netflix, Amazon and Hulu have already achieved a level of dominance which seemingly will not be challenged without one or more of the ‘Big Media’ companies radically changing their business models. And that doesn’t look like it will happen any time soon.Instead, for companies looking to get in on the SVOD action, a lower risk way to experiment has been to pursue streaming models based on mining content niches. The past two years have seen dozens of OTT SVOD platform launches in every imaginable genre of content.Looking at the top 10 streaming services by subscribers, a list dominated by premium TV providers (Netflix, Amazon, Hulu, HBO Now) and major league sports (MLB.TV, NFL Game Pass), three niche content services have made the list: WWE Network (wrestling-themed entertainment) with estimated annual subscription revenues of $146m, Crunchyroll (Japanese anime) with estimated revenues of $62m, and The Blaze TV (Glenn Beck’s media network) with estimated revenues of $48m. Other notable ‘specialized’ SVOD offerings include Acorn TV (British TV drama) with estimated revenues of $16m, and Feeln (‘feel good’ TV movies owned by Hallmark) with est. revenues of $14m. Learnings for Programmers and Networks So what are the learnings for programmers and networks looking to launch new SVOD start-ups? Firstly, broader is not necessarily better. The promise offered by niche is in the ability to break through the clutter of available content offerings and market directly to the ‘super fans’ of a particular genre or content type. The argument goes that by offering a highly targeted selection of content, platforms can avoid having to compete with deep-pocketed incumbents (e.g. Netflix, or traditional pay TV networks) who are in the business of serving up more general, mainstream programming. Another argument for niche is that it may be possible to reach the target audience without a large traditional advertising spend, by using more cost effective tactics like social media, PR and targeted online advertising.But before rushing to launch the world’s first OTT streaming destination dedicated to, say, fans of ultimate Frisbee, there are some caveats. To succeed, niche content offerings do need to have a very clearly defined target audience, but it is sometimes easy to forget that there also needs to be a latent need for the product being offered. And even more crucially for a video streaming service, that need must also be one that is not already being adequately met by Netflix.It’s as important for programmers to develop an effective go-to-market angle as it is to concentrate on a specific niche. Simply basing a streaming service around a genre, e.g. ‘comedy’ or ‘film’, is probably going to be too broad to cut through the noise and gain traction. Yes there are a huge number of comedy and film fans out there, but without further segmentation these fan bases are likely too nebulous as a target audience, and not easily identifiable via built-in online or social communities. A smarter, more specialized approach might be to target urban comedy fans, as Lionsgate is trying with its forthcoming Kevin Hart-fronted streaming service. Or focusing on curation for arthouse movie fans which is how Mubi gained a foothold.When launching a niche streaming service programmers shouldn’t feel compelled to water down or compromise their editorial voice or concept through fear of turning off ‘mainstream’ consumers. By trying to appeal to a wider audience the risk is that you miss the target altogether, by alienating or just not appropriately targeting the core.The job of subscriber acquisition is the single biggest challenge for video streaming start-ups and the first subscribers to any niche SVOD service are likely to be the most ‘rampant’ fans of the category. These fans will be more likely to subscribe if the editorial concept and content offering speaks directly and authentically to their passion – in this case, the more specialized the better.Finally, the importance of having exclusive content on a streaming service cannot be overstated as an effective driver for subscriber acquisition and retention, as well as for generating valuable press and profile. NBC Universal’s Seeso is a niche SVOD player that has received a publicity bump from executing an exclusivity strategy, for example acquiring worldwide rights to comedy documentary, ‘The Pistol Shrimps’, at the 2016 Tribeca Film Festival.That said, start-up economics are tough - exclusive content is expensive and programming budgets are usually the first casualty when launch budgets need to be trimmed. Considering the real world cost issues, operators who have the ability to create content in-house (or those who have access to existing content libraries) will find themselves at an advantage over those who have to license all their content from 3^rd parties. Where is the White Space? Having considered some of the conceptual, audience segmentation and programming issues, where is there white space for programmers looking to launch new SVOD streaming services? A June 2015 white paper on prospects for the US OTT market, from consultancy MTM, offered some predictions drawn from interviews with a range of executives across the premium streaming space: “Major areas of opportunity with significant growth potential are expected to include sports, kids, specialist film and TV (e.g. anime, foreign drama), expat and ethnic services (e.g. Korean, Hispanic)”.Another area of opportunity, also identified in the MTM report, is celebrity / personality-oriented services. Glenn Beck is already a big fish in the specialized SVOD space, but Lloyd Braun’s Whalerock Industries also looks to be one of a number of key players developing celebrity-driven OTT products - starting with the entire Kardashian family. Another personality who has successfully leveraged direct-to-consumer distribution is Louis CK.But here also a note of caution. Simply being famous, and even having a large social media footprint, does not necessarily mean that consumers will pony up their hard-earned cash for your content. The growing list of failed celebrity Kickstarter campaigns is evidence of this. For celebrities looking to monetize via paid video subscriptions, just as for other specialized streaming start-ups, the fans need to be not only passionate but, crucially, engage-able. 

TV[R]EV is written, curated and incubated by the BRaVe Ventures team. Find TV[R]EV on Facebook and Twitter, and sign up for the newsletter to stay up to date on the TV[R]EVOLUTION.