Niche VOD: Can it survive in the age of TV Anywhere?

Sarah Paris-Mascicki, Product Marketing Manager, Cloud DVR, Ericsson

Sarah Paris-Mascicki, Product Marketing Manager, Cloud DVR,

Guest post by Sarah Paris-Mascicki, Product Marketing Manager, Cloud DVR, Ericsson

In the age of TV Anywhere, VOD (video on-demand) is growing by leaps and bounds. According to Frost and Sullivan, the global VOD market is set to more than double from 2013 to 2019, owing to changing consumer behaviors, video viewership patterns, and continued uptake of smart devices.

A recent Nielsen report further demonstrates the vitality of the VOD market, revealing 41 percent of American households have access to at least one subscription-based video on-demand (VOD) service. As the popularity of VOD content increases, the internet era of television will enable the greatest period of unprecedented disruptive transformation – and TV players must find ways to establish or re-establish their value continually in order to delight the TV consumer every day.

VOD platforms allow niche filmmakers to connect with specific target audiences, uninhibited by geographic boundaries. This shifting landscape has had the desirable effect of extending the reach of subtopics that might not make the cut with a more mainstream audience. As market saturation increases, new entrants and industry leaders will need to determine whether to take the niche-content route to differentiate their services, or focus on attracting a mainstream audience to drive up their subscriber base.

The VOD players leading the pack

There are several key players dominating the VOD space and each has its own claim to fame: Netflix has primarily focused on offering an expansive movie collection while Hulu uses its broad spread of TV series as its key draw. Despite their contrasting models, all of these providers are also looking to expand their collections across categories and audiences to meet ever-diversifying personalities and needs, offering personalized discovery in order to correspond with their viewers’ tastes, moods and needs.

Yet library expansion is just one approach to increasing market share. For the providers striving to grow alongside, or perhaps even overtake these dominant services, they face a number of challenges with regards to scaling up, not least of which includes the cost of content acquisition and licensing. Not only is this process costly, it is also time-consuming and often complicated by geographical restrictions that make gaining multi-territory rights for a title, financially prohibitive. Content is also normally licensed to different distributors for limited periods of time, and while this dynamic is changing in favor of VOD services, ensuring a continuous flow of high quality content across an expanding library, and with a high RPU, is no easy feat.

One approach adopted by leading and emerging SVOD providers to circumnavigate this expense is reviving successful TV shows that were canceled on largely positive terms, as well as the creation of original content. House of Cards and Orange is the New Black are huge successes for Netflix, and Amazon has quietly been building up its own catalogue of original shows. For newer entrants however, the stakes associated with expansion through any of these approaches are high. They must ensure that increasing choice doesn’t come at the cost of offering less targeted or attractive content, and equally, that is an affordable and sustainable route to take.

The Niche approach and the impact of VOD platforms

As an alternative to competing with the likes of Netflix by leading on mainstream content, other streaming services have chosen to focus on a smaller market by delivering less costly, more specialized content. A prime example is CuriosityStream, the brainchild of Discovery Channel Founder, John Hendricks. The ad-free subscription VoD service offers over 800 titles. However, instead of trying to create the entire TV experience, CuriosityStream aims to satisfy viewers with an interest in educational documentaries, scientific curiosities and the latest in high-definition video. By offering a full range of tiered pricing for content, ranging from basic SD through to 4K resolutions, CuriosityStream is also widening the catchment of its potential audience.

MUBI takes a distinctly opposite approach to the strategy of larger VOD services that are focused on continuously expanding their library. Every day, a new film, hand-selected by a team of MUBI movie experts, is made available for 30 days. There are only ever 30 movies available at any one time. MUBI’s focus is independent, cult or art-house films, tailored to a specific target audience for a cost of $4.99/month.

Signs of struggle

Children’s content is particularly lucrative and has spurred forth a number of niche services including Toon Goggles, a freemium service that offers animation, games and live content. However, they are not the only services recognizing the potential of this audience, and Hulu, Amazon and Netflix have also heavily invested in this space. Their libraries focused on children’s content are diverse and their distribution options are broad, reaching most devices. This has created a huge challenge for even the most premiere niche content owners.

Sesame Workshop, the nonprofit educational organization behind, Sesame Street had attempted its own subscription driven VOD service, “Sesame Go” in 2014. It provided an ad-free, child-centric UI and leaned on a very strong brand. However, in August 2015, Sesame Workshop announced a deal with HBO that will make the next five seasons of the iconic series available on HBO and its multiplex channels, with the consequence of winding down Sesame Go. It seems even with the power of Elmo and Big Bird, the little guys might not make it past S-VOD giants.

Can niche-providers stay afloat?

It’s still a guess whether the Amazons, Hulus and Netflixes of the world will completely dominate this area or whether, on the contrary, as consumers become more comfortable and more sophisticated at navigating the expanding library of online content, they will proactively seek out the channels they know they enjoy. While the convenience of aggregated services such as HBO and Netflix that offer multiple genres in the one place is a big pull, the ability to choose from a selection of content that meets your particular mood, or interest of the time, will increasingly appeal to an audience that expects the luxury of TV Anywhere. How well these providers are able to position themselves to increase their exposure with their target audience, as well as offering the quality of content they enjoy, will play a significant role in determining each nice-content provider’s survival.

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