Who’s That Nipping at the Heels of the “Big Three” SVOD Services
Kathi Chandler-Payatt, Executive Director, Entertainment Industry Analyst ;
The “Big Three” U.S. SVOD players – Netflix, Hulu, and Amazon Prime Video – receive a lot of media attention for their original runaway hits (“The Handmaid’s Tale”), award-winning series (“The Marvelous Mrs. Maisel”) or meme-spurring content (“Bird Box”). Once in a while, news about a smaller player, such as CBS All Access, will pop up, but news coverage about these niche platforms remains sparse. Even so, the volume of niche players is surprisingly hefty, even though Netflix is the acknowledged leader in the U.S. Although there is a tsunami of content available, the “Big Three” don’t fully service the needs of all audiences and some platforms have survived quite well as minor fish faithfully providing specific genres smaller audiences.
There are 165 over-the-top (OTT) platforms operating in the U.S., not including transactional video-on-demand (TVOD) platforms or TV Everywhere platforms run for MVPD subscribers (e.g., Go90). Many of the niche players have famous parents, for example Crunchyroll and VRV is run by Ellation Studios, which is owned by Otter Media, which is owned by AT&T-Time Warner.
Although the smaller players don’t have tens of millions of subscribers, some have served audiences for up to 10 years and have growing subscriber bases, albeit at a much slower rate than Netflix. Platforms like Crunchyroll (launched in 2008, the same year as Hulu), Acorn TV (launched in 2011, the same year as Amazon Prime Video) and CBS All Access (launched in 2014) have successfully carved out value propositions that compel certain enthusiast groups to open their wallets. As wallet size is fixed but content grows at an exponential rate making discovery challenging, a strong brand message that cuts through the noise is everything.
Peak OTT frenzy didn’t occur until a few years after bingeing became the new normal in 2011. SVOD platform launches doubled between 2014 and 2015, when several linear content creators developed competitive offerings, including CBS News and All Access, Urban Movie Channel (owned by AMC), HBO Now, Showtime OTT, and Tribeca Shortlist (owned by Lionsgate). At the same time, smaller services sought enthusiast fanbases, hoping they were large enough for the economics to make sense. Every year after 2015, there has been a steep drop off in new platform launches, but relatively few services have shut down, like Fullscreen and FilmStruck, which is how there are still 165 unique platforms today.
Over the last 20 years, platforms have risen to address a range of tastes. Platforms offering only movies, kids content, sports, TV, or movies and TV make up nearly half of all services. The next quartile is regional programming from Asia and Latin America, news, lifestyle, music, unscripted and documentaries. The last quartile is the long tail, which is not to say that some of these aren’t robust services; it just means there aren’t many of them, and that could be a good thing. For example, there are only two British-focused services, Acorn TV and Britbox, and both are owned by AMC. Both Acorn TV and Britbox are increasing their subscribers, reaching 450,000 and 400,000 subscribers in 2018, respectively. While still nascent, AMC has identified an audience that will pay for specific content and seeks to monopolize this genre with its two services.
The strategy behind platform launches has drastically changed since 2015, when many companies – afraid of obsolescence – were racing to market. There is now a more measured and calculated approach that relies on crunching data to see what works and doesn’t work when creating smarter content catalogs. When comparing the past three years to the past twenty years, new platforms are choosing not to have mixed revenue models (i.e., AVOD and SVOD, or SVOD and FVOD) and more are choosing to be SVOD-only, in order to lock in subscribers.
While the “Big Three” have the budgets to license Hollywood blockbusters and give top showrunners first-look deals, there is still room for other services to specialize. The 23 specialized services that launched between 2017 and are expected to launch in 2019 have bloodlines with deep pockets. Even if we remove the four that haven’t launched (WarnerMedia, Apple, Disney+, NBCU-tentative), we are left with 19 companies. Ten of the 19 companies are from major studios, as follows:
- Britbox (AMC)
- Laugh Out Loud (Lionsgate)
- Pantaya (Lionsgate)
- Boomerang (WarnerMedia)
- Stage 13 (WarnerMedia)
- DC Universe (WarnerMedia)
- ESPN+ (Disney)
- ET Live (CBS)
- CBS Sports HQ
- Fox Nation (FOX)
The landscape is changing where historically dominant content owners launch niche services, effectively creating a pay TV channel strategy. We can look forward to a better tomorrow, as consumers ultimately get what they’ve asked for: namely, to select and pay only for the content they want, which means platforms will capture higher profit margins than they could have in linear arrangements.