Going niche: Competing with the OTT giants

Most discussions about the future of the OTT television market centre on the titanic struggle for audiences between pay-TV platforms, Hollywood studios and a handful of technology disruptors (Netflix, Amazon, Google, Apple, Alibaba etc).

But this focus on the industry’s major players often overlooks OTT’s potential as a platform for niche subscription services.

Market analyst Ovum, for example, predicts that Amazon and Netflix subscribers will account for just 15% of the pay-TV/pay-OTT universe by 2022.

Ovum’s assessment is that “we are entering a post-OTT era where all types of services will be available on all types of devices.”

Of course, launching such niche OTT services is not easy. The market is littered with high-profile, well-resourced failures like Shomi, Seesu and Watchever – which have all provided cautionary tales about the risks of entering this arena. So what is the key to creating an economically-viable OTT subscription service?

The first, and most obvious, point is that you need compelling content that customers are willing to pay for, says Ben Lavender, Chief Product Officer at the world’s largest sports streaming service DAZN. “We have the exclusive live rights to a wide range of premium sports properties such as UEFA Champion’s League, Premier League and Serie A. We are currently active in Germany, Austria, Switzerland, Japan, Canada, the US and Italy, with the line-up of rights varying by territory. But in Japan, for example, we are a one-stop shop for premium sport.”

Live sport is an obvious area of opportunity for pay-OTT. Firstly, it has already been proven to work by pay-TV and, secondly, the likes of Netflix and Amazon have not yet entered the market in a big way.

It’s for this reason that streaming services like DAZN, MLB.com and WWE Network have managed to establish themselves. The catch of course is that premium sports rights are expensive (DAZN recently paid $1bn for a raft of pay-per-view boxing rights in the US).

So how has DAZN managed to make its mark without breaking the proverbial bank? “Well it helps that we are backed by a well-resourced organisation, Access Industries,” says Lavender. “But we also take a very data-driven approach to rights acquisition and entering new territories. We constantly monitor the performance of rights and don’t renew if they aren’t delivering the kind of return on investment we expect.”

In addition to must-have content, Lavender identifies a few other key points that DAZN has focused on. “The service is easy to join and easy to cancel,” he says, “and it’s available on 95% of all devices. It’s crucial you make everything as easy and seamless as possible, so payment is also straightforward. On the content side, we’ve invested in production (e.g. number of cameras, HD, etc.) and the quality of the service. Sports fans go berserk if you miss a key piece of action so we have worked hard to make latency as low as possible. We’re also starting to spend money on original content to support our live rights.”

The obvious question is whether DAZN’s model (paid-for premium content) can work in other genres. The failure of NBC Universal’s comedy service Seesu may suggest not, but then there are a few niche streamers that have established themselves – notably Crunchyroll (anime), DramaFever (Korean drama) and Walter Presents (curated non-English language drama).

In a similar vein, BBC Studios, the commercial arm of BBC, and ITV, the UK’s biggest commercial broadcaster, recently launched Britbox, a service that offers high-quality British TV to North American audiences for $6.99 a month.

Picking up the story, Britbox North America President, Soumya Sriraman says: “Netflix and Amazon are trying to be everything to everyone, but we believe that many consumers are still seeking services that cater to their passions. We know there is a large North American audience that is in love with the kind of cool, accessible and aspirational programming that is produced out of the UK.”

But how do you transform that topline observation into a paid-for proposition? According to Sriraman, it’s about ensuring your service is the best possible iteration of what it claims to be: “You have to be completely audience driven and never let them down. Britbox has 4000 hours of content on it at present, which makes it the largest collection of British content available to US and Canadian customers. It has some archive classics but also brand new shows that are available within hours of UK transmission, such as The Bletchley Circle San Francisco. And we add around 50 hours of content a month.”

Like Lavender, she also stresses the importance of making the service as glitch-free as possible. “We talk about the need for it to be frictionless for consumers. We put a lot of emphasis on customer service, which is one reason we have high retention of subscribers.”

There are no figures as yet on Britbox take-up, but Sriraman is bullish about the international growth potential. “This isn’t a brand that was conceived solely as a service for North America.”

Essentially, the DAZN and Britbox models are about offering subsets of passionate fans the kind of high-quality content that they simply can’t get anywhere else. The less the content resembles what is available elsewhere (e.g. Netflix), the more consumers will be inclined to pay for it.

This is why Netflix is so aggressive about keeping content rights close to its chest. And it also explains why CBS made its new Star Trek: Discovery series exclusive to its own recently-launched streaming service CBS All Access. This approach doesn’t always align with that of content creators, which typically seek to monetise their content across as many platforms or windows as possible, but some level of exclusivity has to be a core strategic pillar for SVOD services.

So what happens when we get into hyper-niche areas of content, such as OTT channels for gardening, ballet or model railway enthusiasts? Jon Cody, CEO of LA-based TV4 Entertainment, specialises in this arena – helping companies get services up and running. “We’ve partnered with All3Media on a homes and gardens channel called Inside Outside. We also have a horror channel (Screambox) and a new guitar channel (All Guitar). We’ve recently moved into the health arena and are soon to launch a channel for cancer survivors and carers called Thrive.”

Cody agrees that successful OTT channels start with great content, though he stresses that it doesn’t need to be premium sports rights or high-end dramas. “We partner with IP-owning companies that have interesting archive and we also produce low-budget original content for our channels. This can work as long as you stay focused on aggregating passionate but under-served global communities. At the end of the day, this business is all about getting the maths right.”

According to Cody, cutting through the competition is one of the big challenges for niche OTT services “so they need to pick the right genre and have a clear brand proposition”. In terms of reaching customers, TV4 sometimes syndicates channels to platforms like Amazon and Roku, but is also just as likely to target consumers directly. “Platforms like Facebook and Instagram are a good way to find people who have, in effect, raised their hand to say they are passionate about a subject.”

“Netflix and Amazon are trying to be everything to everyone, but we believe that many consumers are still seeking services that cater to their passions.” Soumya Sriraman, Britbox

Cody says some SVOD failures come about because companies have overspent on content or are stuck with a legacy mindset. There’s also a risk that they just end up producing paid-for services that resemble what audiences can already get for free on YouTube.

It’s important to keep evolving and iterating your service, developing and producing content that audiences have shown strong interest in. Ultimately, they will let you know if you have something worth paying for. For me one of the key metrics to look out for is how long audiences watch content for, because that tells you if the channel is really engaging.”

Nick Nelson, a former Netflix exec, is now Head of Product and Innovation at Ownzones Media Network, another business dedicated to helping content owners get viable niche services up on OTT. “One of our key solutions is Ownzones Connect, a cloud-based programme that helps our clients deliver content to any platform in the world. Our aim is to help media companies and services deliver high-quality video content to their consumers globally, at scale and at low cost.”

Nelson acknowledges there are numerous retail marketing challenges that come with launching a paid-for OTT channel (just as there are with launching a small shop on the high street). Like Cody, he says building a brand in the OTT environment is challenging. There’s also plenty of evidence to suggest that consumers don’t want to be stuck with a bunch of different OTT subscriptions (a point which militates in favour of joining some kind of channel aggregation platform).

Nevertheless Nelson is convinced that the expanding broadband market represent a compelling opportunity for OTT services with great content – even if they only have a small number of subscribers. “Theoretically, a service can be viable at almost any level – depending on how much they are able to charge. You could imagine a premium education service charging around $100 a month, for example.”

One of Nelson’s key take outs from his time at Netflix is “the unbelievably strong focus they put on customer service. And that’s something smaller OTT players also need to keep in mind.” In addition, he stresses the importance of strong customer data “another area where the likes of Netflix and Amazon set a new benchmark.”

Another of his key observations is that companies entering subscription OTT have to be really committed to the market: “Back in the early days of SVOD, I think HBO had a chance to crush Netflix but they weren’t able to untie themselves from their legacy revenue model. A lot of companies fail with OTT because they can’t get their heads wrapped around the future potential of the business. They dip their toe in the water but aren’t willing to forgo existing revenue streams. To my mind, a lot of companies are still very US-focused but the big opportunity is to aggregate audiences from around the world.”