There’s a new gold rush in the world of entertainment media: subscription streaming services. Companies looking to claim a piece of the subscription video-on-demand (SVOD) market are launching nearly every week, creating even more ways for consumers to watch movies and TV shows. In an increasingly fragmented marketplace, which ones stand a chance?
The answer depends on the type of platform. Some of them are premium cable companies following HBO’s lead in creating SVOD services for cord cutters, while others are specialty streaming upstarts catering specifically to movie fans. There are now platforms for independent films (Sundance Now, Tribeca Shortlist), arthouse and foreign films (Fandor, Mubi), classics (FilmStruck), horror (Shudder), stories centered on gay men (Dekkoo), ’70s blaxploitation films (Brown Sugar) and Hollywood golden age movies (Warner Archive). And this is just a small sample of what’s available to consumers today.
As Netflix grows its subscriber base to more than 80 million, it has to appeal to the largest audience possible, leaving no room for content on the margins that doesn’t hold enough viewers. One of the reasons there are so many new platforms is that streaming giants like Netflix and Amazon Video are shedding non-exclusive content, in particular movies, and spending billions on original programming, with a heavy focus on serialized television shows.
“It really is an exciting time” said Felice Oper, the chief distribution officer for Fandor. “As they’re cutting them, we’re picking them up.”
Here Comes Everybody
Another factor fueling this trend is the growth in U.S. consumer spending on subscription streaming, which has risen from $2.33 billion in 2012 to $5.04 billion in 2015, according to data from The Digital Entertainment Group. Spending on streaming is on pace to hit $6 billion by the end of 2016.
The net result is a growing content void for movie services, which most companies are attempting to fill by sharply focusing on specific niche audiences. “We don’t want to provide [a service] to the LGBT community because we can’t. That group is too diverse,” said Brian Sokel, chief operating officer of Dekkoo. “We had to break off a piece [of that audience] and attack it in a clean simple way, by providing films for and about gay men.”
The guiding principal driving most of these services is to tap into the passion and dedication of a specific fanbase and make their service essential to them. Some services are able to do this by building off an already well established library. The Urban Movie Channel (UMC), created by Black Entertainment Television (BET) founder Robert L. Johnson, launched in 2015 with roughly 100 titles already owned by Johnson’s RLJ Entertainment. The service has grown its library to more than 200, including original feature films and series developed in-house.
“We want to find our own ‘Empire’ where the only place you’ll be able to get it is UMC,” said Traci Otey Blunt, executive vice president of UMC. “Johnson’s vision is to create a destination and a home for the urban and African-American creative community so they can showcase their work.”
Curation is Key
One streaming service that launched with an extensive library is FilmStruck, a joint venture between The Criterion Collection and Turner Classic Movies. FilmStruck offers hundreds of hard-to-find, critically acclaimed movies and bonus features for $6.99 per month, playing titles from Criterion, Janus Films and Zeitgeist as well as movies from Hollywood studios like Warner Bros. Even though the target demographic for FilmStruck is a niche audience almost by definition, there’s still a significant addressable market of consumers who want a well-curated movie platform, Criterion President Peter Becker told IndieWire in a recent interview.
“It’s not like we’re looking at a universe of 100 million potential subscribers, but the potential audience of fans of our kinds of films who are willing to explore our streaming service is easily 10 times as big as the audience I think we’re reaching on a regular basis [with DVDs and Blu-ray].”
Prior to FilmStruck, Becker’s Criterion Collection was available for streaming to Hulu Plus subscribers. A deep library of hundreds of Criterion films were listed in alphabetical order on Hulu’s platform, making it hard to navigate unless the user did a search for a specific title. With the new FilmStruck app, Criterion customers are now able to explore the collection with a sleek user interface that allows for a number of different ways to browse, while also offering a top layer of rotating curation that highlights specific directors, themes, or eras.
It’s one of many examples of how curation is viewed as the most important component of the speciality services. For Fandor, whose library has grown to 6,500 titles, there is an emphasis placed on a user experience based on targeted recommendations versus abundance of choice. The company has a large team that focuses on data analysis, looking at what is being watched, how it’s being watched, when it’s being watched, and what is the most successful. The team helps Fandor curate based on viewer behavior.
One company that has taken a particularly unique approach to curation is Mubi, which operates on the premise that too much choice actually frustrates customers, many of whom prefer to have quality films chosen for them. (There is also a free, ad-supported film and TV service called Tubi TV, which offers 40,000 titles, more than 40 genre categories —including “Not on Netflix” — and has content partnerships with Paramount Pictures, MGM, Lionsgate, Starz and more).
Mubi adds one new film per day to its library and offers each of its titles for just 30 days.
“In order for you to create a space for yourself in the U.S. and become successful, you need a very clear differentiation to Netflix,” Mubi founder Efe Cakarel told IndieWire in a recent interview. Though Cakarel says that competing with Netflix isn’t a realistic goal for any SVOD company, he believes that many of his competitors are still trying to cast too wide a net rather than focus on making a niche play in the streaming market. “Everybody else is trying to give as much content as possible and trying to satisfy everyone,” he said. “In return, there is a very large audience that they’re not really satisfying.”
Finding the Devices
For each service, the level of curation is often only as good as their apps. One of the first hurdles for any company that wants to claim a piece of the SVOD market is making the service available on every device possible, an expensive proposition due to the variety of OTT devices that consumers use to watch movies and TV shows.
“If you can’t get on all the Smart TVs, PS4, Xbox, Chromecast, Fire Sticks and Roku, then you just can’t possibly compete,” said Martin Warner, a serial entrepreneur and CEO and founder of the transactional video-on-demand (TVOD) service Flix Premiere, which charges customers on a per-title basis like iTunes.
Just getting the technical backend ready for launch can be an obstacle in and of itself. FilmStruck had to delay the launch of its new streaming platform for roughly two weeks due to issues with the sign-up process, and finally made its service available on Apple TV on December 1, a month after its launch. The company has yet to announce an app for Smart TVs.
One of the appeals of cord-cutting is moving away from cable television packages, where customers had to pay a premium for a channel like ESPN even if they weren’t a sports fan. The a la carte consumer experience, meanwhile, could let users chose only the specific content they want.
Yet as more specific niche streaming services start to emerge, consumers are having to spend cable-like money to piece together different entertainment offerings. It’s for this reason many believe the future of SVOD is in packaging, pointing to Amazon’s channels approach of adding specialty services at reduced cost to Prime subscribers.
“The reality is that there are very few services that will exist out there as full fare premium [service],” said Oder. “You’re going to see a lot of tiered packages emerge as well where you have the skinny bundle then you have add on packages.”
Fandor recently cut a deal where Prime users could get access to Fandor films for a reduced cost of $3.99 per month, versus the normal $7.50 (yearly) and $10 (monthly) cost of the standalone service. Oder believes Fandor’s standalone service is still a key to their business, but that the way the company’s business will expand is by being a “value-add” within a movie package alongside a mainstream movie channel like Starz.
Facing the Future
Because streaming video is still in its infancy, it’s impossible to know which business models will ultimately be sustainable. Yet most are keeping a close eye on Amazon, which is putting a heavy emphasis on bundling with their $99 a year Prime serving as a base “skinny” package to which users can add programming. Last month, the Wall Street Journal reported Amazon was in talks with all the major sports leagues about Prime subscribers having the ability to add live sports channels to their subscription.
While most of the speciality streaming services IndieWire spoke with weren’t quite as bullish as Fandor about bundling, believing that remaining a standalone service is viable model, they all emphasized the same first step: to build a dedicated user base which will be an asset no matter which direction the SVOD market turns.
“Anybody who is a real fan of anything knows you become dedicated to a quality service that feeds that passion,” said Sokel. “Once you have that type of connection, the audience will keep coming back.”