nScreenMedia OTT multiscreen media analysis

Diversity is distribution key to small SVOD survival

Amazon channels

For small SVOD services to survive, they must find a way to be discovered by the potential audience. Key to this is diversifying distribution, and traditional pay TV could be part of the mix!

Number of multi-SVOD consumers increasing, slowly

The good news for smaller SVOD service providers is that consumers seem to be subscribing to more services. New data from 451 Research shows that 19% of streaming service subscribers are paying for three or more services. The not-so-good news is that number increased just 4% over last year.

In the last year, there has been a big increase in SVOD services. Amazon Channels has over 90 partner services available, and T-Mobile Binge-On lists more than 100 services.* With such a variety and wealth of services available, it must be disappointing for smaller providers to see such a tiny year-over-year increase in the number of multi-SVOD customers.

Worse still, at least two of the multi-SVOD consumer slots are already taken by Netflix or Amazon. 95% of SVOD customers have Netflix, and 82% have Amazon Video.

Diversity in distribution the key

To get around Netflix and Amazon, smaller SVOD services are taking a variety of approaches. Some are signing up for aggregation services like Amazon Channels and VRV. These services take on the heavy lifting of marketing the smaller channels to their users.

Others are signing distribution deals with the emerging virtual MVPD (also called skinny bundle) services. For example, Sling TV has Newsy and Polaris by Maker in its base $20 Sling Orange bundle.

Opportunities opening with pay TV?

The Wall Street Journal reports that smaller TV channels are dying off. This is something nScreenMedia discussed last month, citing the closure of Cloo TV as an example.  There are three reasons the smaller channels are struggling:

  • Pay TV operators are trying to slow rising content costs by cutting rarely watched channels
  • Programmers are focusing resources around the bigger channel brands
  • Smaller TV channels are facing competition from niche online offerings

This dynamic could create an opening for smaller SVOD services.  As smaller niche channels leave the bundle, the minority of viewers watching them may head online to look for a replacement. It is also not a great marketing message to deliver fewer channels and continue to raise pay TV rates.

Smaller SVOD services could help restore the diversity of the bundle, without re-inflating the cost.

Re-inflating the pay TV bundle with OTT

HayU is a reality TV service from NBCU in the UK. Although consumers can subscribe directly to HayU for £3.99 per month, the service partners closely withHayU operators.  HayU developed a specific app to run on Virgin Media’s TiVo set-top box. The service is part of one of Virgin Media’s regular TV packages, the Full House TV bundle. Subscribers to Full House TV can also use the HayU mobile device app.

Wurl and The QYou are taking a slightly different tack. Both are creating content in traditional television formats from online quality originals. They then work with pay TV operators to deliver the content through set-top boxes to the operators’ customers. The operators can add linear-style curated channels right into the TV guide, and full-length shows in the on-demand libraries. Wurl and The QYou share ad revenue with the online content providers.

You can also learn more about how some SVOD services are targeting niches to get around the Netflix juggernaut in this story from last month.

Why it matters

The number of SVOD subscribers with 3 or more subscriptions has increased slightly over the last year.

During the same period, the number of SVOD services has increased a lot.

If the smaller services are to survive they must leverage multiple distribution paths.

Traditional pay TV operators could be part of the overall distribution strategy.

*Some of the T-mobile Binge On services require a pay TV subscription to watch.

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One Comment

  1. This is a good and helpful post, Colin. We also believe there is a growing opportunity for niche SVOD channels to succeed in this new frontier. We’re rolling out a new model to specifically help high-quality affinity content, with a fan base, to seek out diversified OTT distribution strategies. I think you nailed a key piece of the puzzle and I also appreciate that you’ve been focusing your OTT content on more than Netflix, Amazon and Hulu! 🙂

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