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From the editors of FierceCable

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SVOD LAUNCH STRATEGIES: TURNING IT UP TO 11

Subscription video appears to be all the market for large bundles of pay-TV services. rage these days. Seemingly dozens of new SVOD services are popping up across all corners of the However, there remains a significant amount of market, targeting virtually every niche uncertainty in the nascent but potentially explosive imaginable, from soccer fans to addicts. The SVOD space, most notably how players both big result is a dizzying array of announcements, price and small will be able to rise above the crowd. points, go-to-market strategies and brands, all jockeying for position in a market that many expect This Fierce eBrief will delve into this question and to eventually eclipse the traditional, established more in two parts.

June 2017 1 SVOD LAUNCH STRATEGIES: From the editors of FierceCable TURNING IT UP TO 11

PART 1: SURVEYING THE FIELD By Rob Pegoraro

The over-the-top video industry is currently appeal of niche content when it launched Anime dominated by big names like ’s Sling Strike in January. TV, , , AT&T’s DirecTV , ’s PlayStation Vue, YouTube TV and the new “Anime content can be difficult to find in one place, with Live TV. But sitting on a tier below and there’s a gap in anime subscriptions currently those heavyweights is a wide and growing range of available in the U.S.,” the spokesperson said. “There’s smaller, more specialized streaming options. a passionate group of fans who would love to have anime content all in one place, and to do that, A look at Amazon’s Channels storefront—an option it made sense to create a separate and dedicated for easy subscription signups launched in December channel.” 2015 as “Streaming Partners”—suggests this range. Beyond obvious, name-brand fare like HBO, The same diversity is on display at the Showtime and , there’s the Amazon-owned Channel Store, where you don’t have to scroll down Anime Strike, the yoga-centric Gaia, the self- its most-watched list too far to start seeing such explanatory TheSurfNetwork and many more. unlikely items as the Anglophilic Acorn TV and the Jehovah’s Witnesses channel JW Broadcasting. “Our niche subscriptions, like Acorn TV, Indie ShortList and CONtv, are all performing really And these channels, unlike the random things you well,” an Amazon spokesperson said. “So, while we’ll can find on YouTube, support themselves with continue to add the bigger-name subscriptions, like traditional paid subscriptions—hence the common HBO and , it’s equally important to us that shorthand “SVOD,” short for “subscription video on we’re growing this more niche offerings.” demand,” for them.

Amazon made a with its own money on the “There’s something for everybody on the internet,”

June 2017 2 SVOD LAUNCH STRATEGIES: From the editors of FierceCable TURNING IT UP TO 11 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- SVOD service launched in 2015 by founder , 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. North added that a “multitude” of the company’s “Our subscribers are all ages, although many are subscribers also pay for Netflix and Amazon Prime closer to middle age, and have some disposable video. income to feed their curiosity,” CuriosityStream COO Peter North said in an e-mail. He added that A PITCH FOR SOCCER FANS many have been disappointed by the turn of ad- An upcoming video service, the English Football supported documentary channels towards shallower, League’s (EFL) iFollow, is taking an opposite glitzier programming. 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. “Networks that used to focus on factual content That’s a steep price, but EFL executives point to the intensity of fans’ demand. have broadened the appeal of their content “Our research tells us that, at this point in time, most subscribers will sign up purely because they in pursuit of advertising cannot access the majority of EFL games via a impressions and ratings. Fortunately, cable TV sports bundle,” marketing director Drew we’re not subject to those same Barrand said in an e-mail. pressures.” The league plans to market this new SVOD service on the sites of individual clubs as well as during the – Peter North, COO, CuriosityStream 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. “Networks that used to focus on factual content have broadened the appeal of their content in “In alone, for example, we know pursuit of advertising impressions and ratings,” he that there are fan club branches for the majority of said. “Fortunately, we’re not subject to those same EFL Championship clubs, reaching many hundreds pressures.” of fans each,” Barrand wrote. “As such, in addition

June 2017 3 SVOD LAUNCH STRATEGIES: From the editors of FierceCable TURNING IT UP TO 11

“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 EFL’s iFollow is opting for web viewing only. But word-of-mouth amongst these fan networks will since fans will see it as an option on the sites of play a significant role in driving awareness and sign- their favorite clubs, that should make the service an ups for iFollow.” easier bookmark than the average web video feed. If the EFL can make that work, it will get the bonus DISTRIBUTION SCHEMES of not having to share any of the revenue with a platform owner. Apple, for example, keeps 30% EFL’s iFollow and CuriosityStream are also of subscription revenue in the first year, then 15% taking different approaches in how fans will afterwards. watch. CuriosityStream is agnostic about playback hardware, offering apps for Roku, Apple TV, Some have argued that niche SVOD services, like Android, iOS, One and Amazon FireTV. The CuriosityStream and iFollow, will benefit from the upside: A potential viewer almost certainly has the “long tail” of the internet: That the combination of right hardware. The downside: Finding any one app endless storage and effective search features mean in a crowded marketplace like Apple’s App Store, even obscure content can make money. Google’s Android Play Store or Roku’s Channel Store can be a challenge. Entner said that may well be true, but warned SVOD services not to get too greedy. “You are the proverbial sand on the beach,” Recon Analytics’ Entner said. “What you have often there happening is the rights owner being star-struck by these billion-dollar “We’ve been lucky enough to earn prominent deals that the English Premier League can do, and placement on some very large app marketplaces, then sometimes they may overprice it,” he said. He such as iTunes and the Roku Channel Store,” advised keeping a humbling reality in mind: “The l CuriosityStream’s North said. “Those happened in market is way too small!”

June 2017 4 SVOD LAUNCH STRATEGIES: From the editors of FierceCable TURNING IT UP TO 11

PART 2: EVALUATING THE AGGREGATORS By Kendra Chamberlain

Following years of explosive growth, the SVOD market is now experiencing some maturation. “We’re entering the next According to Parks Associates, 2016 was the first year since 2012 to see fewer OTT services launched phase of the market, than had launched in the previous year. which is revolving heavily

“It’s maybe an early indication that the growth in around differentiation.” new services in the OTT market might be slowing down,” said Glenn Hower, senior analyst at research –Glenn Hower, senior analyst, Parks Associates and consulting firm Parks Associates. “We’re entering the next phase of the market, which is revolving heavily around differentiation.” aggregating with more of a centralized offering, now they have access to a broader customer base.” Many of these niche services are surviving, and in some cases thriving, on their own by offering That’s placed two forces at work on these smaller content to very specific audiences, from WWE OTT services: the need to differentiate from other enthusiasts to anime fans to Criterion Collection- competitors, and the opportunity to aggregate with style cinefiles. The most successful of these niche other services to attract more viewers. services are hovering around the 1 million- subscriber mark. So far in the OTT space, there are two players that have taken up the role of aggregator: Amazon, Still, it’s hard to deny the opportunity for them through its Channels experiment, which offers to benefit from aggregation. “A big part of it is a subscriptions to some 100 OTT services; and VRV, broader addressable audience,” Hower said. “By a digital video bundle from Ellation.

June 2017 5 SVOD LAUNCH STRATEGIES: From the editors of FierceCable TURNING IT UP TO 11

ELLATION IS THERE ROOM FOR , GOOGLE ’s Ellation, a subsidiary of AT&T and AND ? The Chernin Group’s Otter Media, has amassed Given the size and scope of the market, there’s a handful of niche SVOD services, including plenty of room for other players to step into the , Geek and Sundry, and role of an SVOD aggregator. And as social media others. Ellation’s video bundle, called VRV, offers networks increasingly focus their efforts on video, access to a group of eight SVOD services for about couldn’t Facebook, or Google, or perhaps Twitter $10 per month, and another five web channels can make a similar play? be purchased a la carte. “I think it’s entirely likely that any of those other As an aggregator, VRV is still targeting a relatively players could play in this space,” Hower said. small niche audience interested in anime and so-called geek culture. But its individual services benefit from Google’s YouTube, for example, could well grow wider exposure to new and relevant audiences. “That’s into an SVOD aggregator, though YouTube’s early going to draw people who are interested in similar experiment with paid channels didn’t pan out types of content,” said Ali Choukeir, research analyst at very well; today, the company appears to be more S&P Global’s Kagan, a market research firm. focused on bundling live TV channels together, rather than bundling web video services. Choukeir added that this model could be replicated throughout other content verticals, such as comedy, And video strategies for Twitter and Facebook sci-fi or sports. “That’s a good model to try. haven’t exactly lined up with subscription Whether that works out in the long run, I don’t channels, at least not yet. “Facebook has forged its know,” he said. “VRV is still very new.” path in the social experience—and video plays a part in that—but whether premium video or long- AMAZON CHANNELS form video is going to be a bigger part of that, I’m Amazon has created a central marketplace for not entirely sure yet,” Hower said. viewers to build their own web video bundles from some 100 SVOD OTT services. The biggest benefit The same can be said for Twitter. “Twitter is going for Amazon is that the SVOD marketplace helps after news and recent events [with video], which bolster the wider Amazon ecosystem. “[Amazon] plays really well to their type of users, and why Prime is a huge, massive thing, it’s not just video, people go to Twitter in the first place—to catch they’re allowing users to go to one spot to get their up on what’s going on,” Choukeir said. “Does that digital services all in one,” Choukeir said. “They lead to a service like Amazon? I don’t really see it.” want to be a one-stop shop for whatever you need, whether that’s apparel or groceries or video.” Further, Twitter, Facebook and other large internet players continue to work to bolster their Analysts agree Amazon’s model has strong advertising revenue, rather than their content potential. Consumers benefit from having a single holdings. But they may still get into the business billing solution to help them manage their OTT of bundling niche web channels at some point in subscriptions. The SVOD channels benefit from the future. the wider distribution, and Choukeir noted that some services have reported significant growth “Twitter and Facebook are really looking to get through the program. But Amazon doesn’t release into video,” said Michael Inouye, senior analyst at any subscriber numbers for its Prime service, so it ABI Research. “They could do a packaged service remains unclear how many of Amazon’s Prime subs or something like it.” are actually taking advantage of the marketplace.

June 2017 6 SVOD LAUNCH STRATEGIES: From the editors of FierceCable TURNING IT UP TO 11

STREAMING MEDIA PLAYERS AS AGGREGATORS “When you bring a As the world of subscription-based OTT services lot of these specific has expanded, the role of aggregation has somewhat fallen on the hardware players. Apple, Amazon, services that are niche Roku and Google have amassed huge libraries of services, and you pull content apps for their connected TV platforms, them all together, you which function more or less as marketplaces for viewers to assemble their own bundles of web create a service that’s channels. a little bit awkward to view, because Amazon, once again, could be poised to be the you have to go to different interfaces or leader in this space, because it has both the Fire TV different portals to access the content.” media player, its own transactional and subscription OTT service, and consolidated billing across its 100 –Michael Inouye, senior analyst, ABI Research 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 accounts. Roku and Google’s and Android TV products offer much larger Apple has made moves to do the same. It offers a channels selections, but without the convenience of slate of subscription content apps through its Apple consolidated billing. TV platform that users can manage through their 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 l partnerships don’t work out.”

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, , Comic-Con, TransUnion Interactive, Allrecipes, and Texture.

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