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Can niche streaming services co-exist with the giants of OTT?

The drive for streaming exclusives offers niche TV services an opportunity

Whether you’re anime-obsessed, only ever watch slashers or get your kicks from wrestling, chances are there’s a streaming service specializing in your particular peccadillo. And while unlikely to ever threaten OTT’s giants, it is in these niche spaces that the ad-supported video-on-demand model could really find its home. We take a look as part of The Drum’s deep dive into the future of TV.

If you need evidence of just how entrenched the biggest streaming platforms are, look no further than your remote. Devices from the latest smart TVs to new-gen consoles have controllers with buttons dedicated to launching Netflix, Disney+ and other streaming services. Small wonder that with such penetration, Omdia predicts that all the growth in pay TV will come from streaming services over the next few years.

At the same time, it’s tough at the top – particularly as competition among the big players heats up. Netflix is spending an estimated $17bn on content in fiscal 2021, in part to fend off that competition having missed its own subscriber acquisition targets. That led to a spate of acquisitions as those services seek to produce exclusive content in-house to distinguish themselves from peers.

Despite this, Netflix’s founder and co-chief Reed Hastings believes its competition is still primarily linear television and YouTube, suggesting that the company believes there is still headroom for those SVOD (subscription video-on-demand) giants to grow further – particularly around TV content.

Among those giants, however, are some smaller SVOD and AVOD (advertising-based video-on-demand) services. While Netflix, Disney+ and Prime offer a buffet of television content that is produced in-house and of all genres and formats, these smaller streaming services are pinning their hopes on appealing to niche audiences. Whether that’s licensing indie TV content for demographics otherwise overlooked or specializing in a particular genre, these services are betting that specialization will reduce subscriber churn and provide a surer future.

And as the high-profile failures of YouTube Red and Quibi have demonstrated, however, even the players with the deepest pockets aren’t guaranteed to succeed in streaming TV.

Nice and niche

Streaming services such as Crunchyroll and Funimation have specialized in bringing content that was previously unavailable over to new shores. Buoyed by the popularity of anime in Japan and the success of linear TV blocks such as Adult Swim, these services have acquired the international distribution rights for popular series including Attack On Titan and Demon Slayer. Crunchyroll has also begun producing its own in-house anime series.

KweliLive (slogan: ’our culture, curated’) instead focuses on producing a variety of television content that speaks to its primarily Black audience. True to that mission, it also touts that 60% of subscription revenue goes to support the content creators.

Some services double down on entertainment content that exists to some extent on the larger platforms or linear TV. NextUp is a UK-based streaming service that is dedicated solely to stand-up comedy, with a smattering of documentaries fronted by stand-ups. WWE Network is – after a few wobbles – the streaming arm of the wrestling-based entertainment company and boasts 1.5 million paying members as of October last year.

Even more niche, Nightflight Plus focuses on archiving and curating ’weird’ television content that otherwise wouldn’t be viable on the larger platforms. The hope with services like Nightflight – and to some extent Shudder – is that audiences less interested in the ’safe’, more homogenized cinematic TV available on larger platforms will gravitate to these ultra-niche services.

Sustainable streaming

Given the variety in streaming content, it’s unsurprising that the means of generating revenue is equally diverse. Some smaller services, including Tubi, are exclusively focused on being ad-supported (AVOD) in part because they believe they can’t compete with the larger players in terms of charging a recurring fee.

Tubi’s founder and chief exec Farhad Massoudi says: “AVOD is the unequivocal future for content creators, providers and brands. With the saturation of subscription streaming services, AVOD will increasingly be used as a complementary service to consumers’ favorite SVODs to access more of their favorite content, without paying more.”

Still others operate hybrid models, with Crunchyroll offering early access to new episodes and other perks via its Premium plans in addition to its free-to-access basic plan. Others emulate the subscription-based price plans of Netflix and co, with fees that are on parity with or only slightly less than the streaming giants’ monthly prices.

However, the cost of acquiring content and running those streaming services is profound. Curiosity Stream, a US-based provider of documentary TV services with a user base of 15 million, posted a net loss of nearly $40m for 2020, despite doubling its subscriber numbers over the course of the year.

Additionally, many of the issues that face the larger services also impact the niche services. Discovery is an issue, as is the fact that many of the larger services often at least dip their toes into that niche content, providing an impetus for consumers to sign up to them instead. To some extent, despite their advantages in terms of specialization, the niche services are constantly butting up against the sheer spend of the giants.

Connected TV

It’s no surprise, then, that the lure of existing as a separate channel within those larger services is attractive – and potentially mutually beneficial. Shudder, for instance, has a proportion of its content available as a separate service on Amazon Prime in the UK, as are Britbox and FunimationNow. This has the dual benefit of granting Prime Video a wider selection of exclusive content as it competes for consumer attention, while it also helps with discovery and promotion of Shudder’s wider content.

It’s part of a wider trend of consolidation among the wider streaming ecosystem, which has seen many of the niche services acquired by larger broadcasters with an eye on their own futures. For instance, Fox bought Tubi, Sony Pictures bought Christian-focused streaming service Pure Flix and the WWE Network is now part of Peacock. Crunchyroll, too, is up for sale, with an anti-trust investigation into its acquisition by Sony ongoing as of this article going live.

Ampere Analysis believes it means that non-niche streaming will ultimately become the dominant form. Its research director Guy Bisson says: “AVOD, studio-direct streaming launches, the strengthening of local and broadcaster-led streaming, and the turbo-boost that came out of the blue in the form of Covid-19 have brought the industry to a pivot point. In 2021, compounding is here to stay in every portion of the streaming value chain.”

So, while audiences may still be able to seek out and subscribe to the niche services that appeal to them, the most influential players within the industry are still set to be those that have their names emblazoned on television remotes. It may be possible to survive as a niche streaming service, provided it’s done in the shadow of one of the giants.

From late April until early May, The Drum is taking a deep dive into what’s in store for the small screen as we launch our Future of TV hub.