Netflix, Amazon Prime and Hulu have all but locked up the mass-market entertainment options for subscription video-on-demand services.

In their wake, a flurry of more targeted services have surfaced. Today, there’s no shortage of over-the-top SVOD services from startups and well-heeled media conglomerates trying to gratify individual desires away from the traditional world of pay TV.

Turner is trying to appeal to film aficionados with FilmStruck. NBCUniversal’s Seeso is shooting for laughs. And Shudder, owned by AMC Networks, hinges on horror.

Even Amazon, which is becoming an SVOD kingmaker of sorts with its ever-expanding Amazon Channels aggregation service, has launched a niche service of its own, called Anime Strike, that takes aim at Crunchyroll, a standard bearer in the OTT sector.

But consumer buying habits indicate that many of these focused SVOD services face an uphill battle as they look to lure in enough customers to drive significant scale.

This struggle for scale could, ironically, play into the hands of traditional MVPDs, which are starting to integrate and monetize complementary OTT services and already have direct relationships with millions of consumers.

The average U.S. broadband home now subscribes to between one and two SVOD services, according to a new study from Parks Associates. And though 60% of those homes subscribe to some sort of video-streaming service, just 10% of those households — a group of “avid viewers” — take more than two, Glenn Hower, senior analyst at Parks Associates, said.

Simply “finding the audience” is a big challenge for any SVOD service that’s not Netflix, Hulu or Amazon Prime, Hower said.

Another complication is creating a business with a competitive price that can turn a tidy profit. Parks’s research pins the average spending on an OTT SVOD service at about $8 per month.

“There are some instances where services are getting more creative with their business models,” Hower said. OTT services such as Hulu and CBS All Access, for example, offer both ad-free tiers and ones that are supplemented by commercials.

SVODs are using an array of tactics and strategies to help them stand apart, creating new forms of aggregation services, service packaging and bundling, special perks, and forging a sense of community among like-minded viewers.

“For us, a big learning has been that you kind of have to do everything,” Matt Hullum, CEO of Rooster Teeth, a digital-first content studio focused on comedy and gaming, said. “We’ve embraced the concept of making our service more of an experience … a more well-rounded, holistic experience for our audience and our community.”

Rooster Teeth has also doubled down on offering ancillary benefits that are fine-tuned to its viewership. Last year, it launched a two-tier strategy, with subscriptions tailored to its core fans and to “superfans” willing to pay a premium for extras, such as VIP tickets to Rooster Teeth events.

The higher-end offering, called Double Gold, costs $34.99 per month and offers 10% discounts on Rooster Teeth merchandise and a monthly box of goodies that’s valued at more than $60.

The approach appears to be working, as Rooster Teeth’s paid subscriber base has about doubled in about a year and now sits above 200,000. That’s in addition to the 28 million who subscribe to its YouTube network and the 3 million visitors to its RoosterTeeth.com hub.

“We have a definitive audience, but I wouldn’t say it’s a niche audience. It’s not a small group,” Hullum said.

Developing and offering strong content is still critically important, but interacting with the community and offering opportunities that go beyond that content is key to establishing a stickier experience, he said.

SVOD services are also trying to stand apart by allowing users to download videos so viewers can watch without a high-speed Internet connection, Dan Taitz, chief operating officer of Penthera Partners, said. “It’s not a replacement for or substitute for streaming, but a great add-on for consumers,” he said.

And it’s an add-on that’s getting added on more frequently. Amazon Prime has been offering downloads for years, and Netflix recently added that option for certain pieces of content, including many of its original series.

“The tide is shifting so that it [downloading] is more standard,” Taitz said. Penthera, which makes a video-downloading platform called “Cache & Carry” that counts Comcast among its customers, is in talks with several SVOD services about adding offline viewing to the mix, he said.

While those players will need to integrate a downloading capability into their streaming platform, obtaining the rights for downloading is the bigger issue for some OTT services. “But I think the content owners are coming around,” Taitz said.

SVOD In the Age of Aggregation

While a sense of community and special perks are luring SVOD subs, those services are also looking to a tried-and-true tactic from the traditional pay TV world — packaging and aggregation — to help move the needle.

Among the standout examples of this are Amazon Channels, an option from Amazon Prime that debuted in late 2015, and VRV, a newer offering from Ellation (a portfolio company of Otter Media, the OTT joint venture of AT&T and The Chernin Group) focused on a core anime audience with adjacencies into areas like gaming, science fiction and animation.

Amazon Channels has already expanded to about 100 SVOD partners, including recent additions of HBO and Cinemax, from the 30-plus that were on board at launch.

Amazon hasn’t put an exact figure on the performance of Amazon Channels, but said Prime members now have “millions” of video subscriptions through the service.

The performance of Amazon Channels so far is “a validation of this platform idea,” Michael Paull, vice president, digital video at Amazon, said, noting that it presents consumers with “one simple, integrated experience” that does not require subscripers to hop from app to app.

“As we’re seeing this evolution of the TV space, we’ve been very, very focused on providing a great experience and reducing pain points,” he said.

DISCOVERABILITY IS KEY

Amazon Channels will continue to expand, Paull said. “I don’t see a ceiling on the number of services that we would want on our platform,” he said, saying Amazon is in a unique spot because it has a large customer base and access to data that enables it to craft targeted marketing messages and match consumers to SVOD services that fit their interests.

Bundling SVOD services and being able to match them to the consumer “is a tremendously powerful marketing concept,” Colin Dixon, founder and chief analyst of nScreenMedia, said. “Discoverability” is a major issue that new and more niche-focused SVOD services need to overcome, though, he added.

“Our vision is to offer a complete over-the-top video solution, where we provide the most choice through the widest selection of the best content all in one experience,” Paull said.

That strategy varies greatly from the one being implemented by VRV, which focuses on services that connect with fans of anime, gaming and animation.

In addition to selling those SVOD services individually, VRV also offers a deeply discounted bundle though a “Combo Pack” that combines eight services for $9.99 per month — Crunchyroll, Mondo, Funimation, Rooster Teeth, Cartoon Hangover, Nerdist, Geek & Sundry and Tested. Those networks would cost a total of more than $33 if purchased individually.

VRV is also selling those services, as well as Ginx, Machinima, Rifftrax, Seeso and Shudder, on an a la carte basis. Of that group, Cartoon Hangover and Mondo are exclusive to VRV.

VRV soft-launched its service late last year and expects to ratchet up marketing efforts this year. It hasn’t disclosed any subscriber numbers.

“We’re definitely exceeding our expectations,” Mike Aragon, VRV’s general manager, said. “We’re seeing great usage across all of the channels.”

The budding SVOD aggregation service will also be looking to gain more traction in the coming weeks by adding an account-linking feature could help to expose existing subscribers from services like Crunchyroll to VRV’s broader subscription slate and bundle.

Dixon is also a fan of VRV’s decision to stay focused with a service that’s designed to “superserve one set of consumers.”

But one lingering question hanging about VRV’s approach — and all newcomers to the space — is how it makes money through its deeply discounted bundle.

“We have a very unique way of looking at the economics,” Aragon said, adding that the plan for now is to band together with partners and focus on growth and engagement with the new platform. “We’re confident that we’ll have a healthy and profitable business. SVOD services are about scale. Our message to our partners is: ‘Let’s get to scale and let’s get to scale together.’ ”

VRV is initially offered in the U.S., but has plans to launch internationally, “With the fan base we’re targeting and serving, there are no borders for that,” Aragon said.

Some SVODs see bundling as an ancillary, but not necessarily core, method to bring more subscribers on board.

Rooster Teeth is among the first SVODs to work with VRV. “We really like it in the sense that it gets us on a lot more platforms instantaneously that we aren’t able to access right away,” Hullum said. “It helps us get connected to new audiences that may not have noticed us before. For us, [VRV] is a good first opportunity to try out bundling.”

CuriosityStream, the nonfiction-focused SVOD service launched in mid-2015 by Discovery Communications founder John Hendricks, sells its service directly and through Amazon Channels.

Most subscribers are still being obtained directly, though a smaller portion of them find the Amazon Channels process easier, Elizabeth Hendricks North, CuriosityStream’s CEO, said.

“It’s been a healthy partnership for us,” she said of the Amazon Channels deal. “It’s been positive on our end.”

Despite the benefits of bundling, having a direct relationship with customers remains critically important. Prescription: Nutrition, a docuseries from CuriosityStream that went live earlier this month, was created because it was the top vote-getter when customers were asked to weigh in on possible new series.

“This direct relationship [with the audience] … is important because you can create content that speaks directly to them,” Hendricks North said.

DramaFever, the U.S.-based SVOD service that specializes in Korean TV and films and other international fare, has also turned to Amazon Channels to help drive more exposure. But instead of tapping Amazon Channels to offer the full SVOD service, it’s using that conduit to market DramaFever Instant, a version that offers a subset of the service’s full library.

The idea there is to provide a smaller sampling of the service, and hope it also entices some to upgrade to DramaFever’s primary SVOD service, Tim Lee, DramaFever’s director of licensing, said.

DramaFever on Set-Tops?

The surging SVOD market has largely been the domain of the retail OTT platforms. But pay TV providers are starting to get into the act.

TiVo, for example, already integrates services like Netflix and Hulu into its MSO-supplied platform. Dish Network has also taking similar steps on its broadband-connected Hopper DVRs, and Comcast has started down that path by integrating Netflix with X1.

DramaFever, acquired by Warner Bros. last year, is also in talks to integrate its SVOD service on MVPD set-tops, Lee said.

Dixon believes that pay TV operators must open up their platforms to OTT because consumers can and will go outside that universe to seek out the content they want. “Operators have an excellent opportunity to do what Amazon is doing for their customers,” he said. “But to do it, they have to move to a more open model. In my mind, the most important thing Comcast could do is … to get [its] guide on everybody’s television. That’s their anchor. If they’re not the guide, then Amazon is the guide, and they get all the incremental revenue.”

Although two to three over-the-top SVOD services appears to be where most households max out, the threshold may rise as more video dollars move away from traditional pay TV.

“Then, it’s a different calculation,” Dixon said.

When the words over-the top and streaming video are uttered, “millennials” typically isn’t far behind.

After all, the younger set, which tends to include a small-but-growing group of cord-cutters, has played a major role in setting the pace of change for the pay TV industry. But not all OTT services are specifically tailored to meet the needs of those groups.

One of them, Feeln, a subscription-VOD service that is part of Hallmark Cards, has found success with a library focused on an older generation of consumers.

“We have more subscribers in their 60s than in their 20s,” Rob Fried, Feeln’s founder, explained, noting that Feeln’s audience is also mostly women.

Feeln is a mature service in more ways than one. In addition to targeting an older demographic, it’s been around for almost a decade, making it a veteran of the OTT market in terms of Internet years.

EARLY ADOPTER

But the service wasn’t always called Feeln and it didn’t always have an important link to Hallmark. The company’s origins were based in video production and an early desire to deliver short-form content directly to consumers.

Before the service was founded in 2007, Fried, a fi lm producer at heart, began to write and develop a collection of short films that, he says, “were life-affirming, inspiration stories” with the help of fi lm-school students and recent graduates. But Fried said he wanted to get the work out to the public without “the interference of the Hollywood machine” that tends, in his view, to make films more expensive and to sometimes veer away from a producer’s original aims.

Though broadband was not nearly as ubiquitous as it is today, Fried said he believed then that the time was right to start to take his content direct to the consumer rather than distributing it through advertising partners or outside exhibitors.

“The premise was to connect directly, the filmmakers — in this case, me — with the viewers,” he said.

Fried then launched what was called Spirit- Clips, a service that focused on his short films. That name, he acknowledged, was problematic in part because Fried had to spend time restating or respelling it to others. And while the service’s focus resonated with the faith-based community, that affinity also kept some people away.

“We had a hard time getting on some platforms … because [they] didn’t want to show precedence for one faith-based company versus another,” he said.

Fried said the ultimate direction and focus of his SVOD service took a big turn when Brad Moore, president of Hallmark Hall of Fame Productions, stumbled on SpiritClips, liked its short films and then inquired if there was a way to have the service include the venerable Hallmark Hall of Fame made-for- TV movie collection. Both sides bought in and Fried’s company became part of Hallmark Cards in 2012.

“I realized at the time that [SpiritClips] was no longer a short fi lm company, but a content company with a sensibility,” Fried said. “And I needed to not just produce original content, but also [offer] licensed content of varying lengths to keep the subscribers happy.”

And then there was the name. Fried wanted to use the well-known Hallmark brand, but the concern was it could cause confusion with cable network Hallmark Channel, owned by Hallmark-controlled Crown Media Holdings.

To keep the two services distinct and separate, the name of the service was changed to Feeln in September of 2014. Feeln currently sells for $3.99 per month or $23.99 per year, but there are plans to raise the price in a couple of months.

“The growth since then has been quite strong,” Fried said. Feeln won’t disclose the exact numbers, but Fried said the service has been growing at a rate of “well over 200% a year,” with subscribership in the “hundreds of thousands.”

Feeln’s library includes about 1,000 pieces of content, including a new original scripted drama, The Eleventh, with Cloris Leachman, Ed Asner, Florence Henderson, Chris Atkins and Tracy Nelson, which follows a young girl’s journey as she gets to know her estranged grandmother. Feeln was also behind the recent reboot of the 1980s animated series Rainbow Brite, featuring the voices of Emily Osment and Molly Ringwald.

LOYAL AUDIENCE

Fried said Feeln’s demographic focus comes with both advantages and disadvantages. The service’s older viewers are less adaptable and less prone to change than tech-savvy millennials, but they’re also less likely to churn once they sign on.

“It may take them a while to subscribe, but they don’t unsubscribe quickly,” he said.

Feeln’s platform reach is probably broader than many services that skew to younger audiences, though. The service is currently available on Roku players; Apple TV, Fire TV and Android TV devices; Sony and Samsung connected TVs and Bluray players; apps for Android and iOS; Xbox 360; and Web browsers, and it’s optimized for the Google Chromecast. An app for Windows 10 is in the works.

Video is also just one piece of the puzzle, as Feeln also manages an e-card business. “They are subscribing to a lifestyle brand, if you will,” Fried said.

A two-year grace period that shielded veteran Netflix subscribers from a 2014 price increase expires next month, an event some think could cause the subscription VOD pioneer to actually subtract customers during the second quarter of 2016.

The May switchover could be tricky: It’s the biggest price increase since 2011, when the company announced a rate hike for its streaming/mail-order DVD combination from $9.99 to $15.99 per month. Back them the backlash was swift — Netflix stock fell 40%, and customers called for Netflix CEO Reed Hastings to resign.

This time around, the company has been careful, buying itself time in the two-year wait for the initial outrage to wane. And analysts point out that customers intent on keeping the $7.99 price point can do so by dialing back their tier of service to the single-stream, standard- definition Basic Plan.

The pricing details: Netflix hiked the monthly fee for new customers in May 2014 to $9.99, but allowed existing customers at the time to remain at the previous $7.99 and $8.99 monthly rates for two years.

UBS media analyst Doug Mitchelson estimates about 17.8 million Netflix customers in the U.S. (37% of its total base) were at the $7.99 price point. He thinks the $2-permonth increase will be too high for between 3% and 4% of those customers, who will probably cancel service.

‘U.S. MATURITY FEARS’

Netflix is offering those grandfathered customers an opportunity to stay at the $7.99 rate, but they would have to downgrade service to one streaming device in standard definition, as opposed to two streaming devices in HD. While that could offset some of the cost-conscious churn, it isn’t expected to be much.

The churn from the grandfathered base amounts to about half of Netflix’s quarterly subscriber gains; in the fourth quarter it added about 1.5 million U.S. customers. Couple that with a maturing market — subscriber growth has softened in recent periods — and Netflix could be heading into its first negative streaming quarter ever.

“Investor concerns regarding the potential churn from such a large price increase are compounding the U.S. maturity fears already plaguing Netflix’s stock,” Mitchelson wrote. “Add in the fact that 2Q is the seasonally softest quarter, and some investors are even questioning whether Netflix will have its first quarter ever of declining U.S. streaming subscribers.”

In the past several quarters, Netflix has seen a steady softening of domestic subscriber additions, from 2.3 million adds in Q4 2013 to 1.5 million in Q4 2015. Most analysts who follow the company aren’t expecting the worst, but anticipate that the slower growth trend will continue.

Morgan Stanley media analyst Ben Swinburne revised his Q1 subscriber estimate downward to 1.8 million from 2.2 million after the SVOD pioneer missed his Q4 estimates.

“When you have as large of a subscriber base as Netflix, minor changes in churn can have a material effect on net subscriber additions,” Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak said. “I would be surprised if it goes negative even with negative 2Q seasonality, but you cannot completely rule it out. I figure they can do at least a couple hundred thousand.”

Mitchelson said in his report that the bear case for Netflix to lose subscribers in Q2 is unlikely, and he estimated the company would end the period with an increase of about 450,000 customers in the U.S.

Of the customers paying the old $7.99 monthly rate, Mitchelson estimated that 229,000 would churn off in Q2, with another 360,000 dropping the service in Q3.

Swinburne was a little less optimistic. He estimated that total additions would be about 150,000 and paid customer additions would be flat in the second quarter.

Fueling Mitchelson’s optimism is Netflix’s programming lineup. The company, the analyst wrote, has a strong original content slate with hit shows like Orange Is the New Black, Jessica Jones and Daredevil.

This year is expected to be especially strong — Netflix is increasing its original scripted series slate to 31 in 2016 from 16 in 2015 with shows like The Crown, Marvel’s Luke Cage, Frontier and The Ranch and has 10 feature films released or in production.

“We feel comfortable the slate supports our view for low levels of churn,” Mitchelson wrote in a report.

GROWTH MARKET: THE WORLD

While domestic growth is slowing, Netflix’s real opportunity is international, Mitchelson said. UBS estimates that the U.S., which represented 60% of total gross customer additions in 2014, will shrink to 38% by the end of 2016. Taking up the slack will be areas like Latin America, Europe and Australia.

Swinburne, also in a research note, figured international subscriber additions would rise to 3 million in the second quarter (from 2.4 million last year), with full-year additions at 15 million — 28% higher than the 11.75 million added in 2015 and outpacing his estimates for 4.1 million domestic additions in 2016.

Swinburne said he thinks international streaming customers will overtake their domestic counterparts in 2017, with 54.6 million subscribers (compared with 52.6 million domestically), reaching nearly 80 million customers by 2020. Domestic subscribers could reach 60 million in 2020 by his figures.

Wlodarczak added that, while international growth is important, so is stable U.S. growth, which validates Netflix’s increasing its original programming spend.

Though it was short on specifics, TiVo confirmed that it is working on a legal version of Aereo, the failed service that sold access to a cloud DVR paired with a system that captured over-the-air TV signals and redistributed them to subscribers over the Internet.

TiVo reasons that OTA, combined with broadband-fueled over-the-top services, presents an opportunity to help its cable partners target a small but growing number of cord cutters who are seeking less-expensive video and TV alternatives but who are also willing to create their own bundles.

“The question is, how do you do that?” Tom Rogers, TiVo’s CEO and president, said during an interview last week at the INTX show in Chicago. “To us, the answer is pretty clear — it’s kind of the Aereo model, done legally and better.”

What’s not as clear is how TiVo intends to pull it off. Aereo used an array of tiny thumb-sized digital antennas to capture digital broadcast signals before processing them into a format it could then distribute to paying customers for viewing on connected TVs, tablets, smartphones and Web browsers.

TiVo promised to share more about its strategy this summer. “Yes, they are currently developing a product and although they are not releasing any details, they plan to hold a significant event in San Jose in late July to discuss it,” a TiVo spokesperson said when asked to clarify TiVo’s plans.

TiVo acquired Aereo’s trademarks and customer lists for about $1 million in March following a bankruptcy auction. Other parties came away with Aereo’s patents and some of the startup’s equipment. Aereo filed for voluntary Chapter 11 bankruptcy last November after shutting down the service last June, soon after the U.S. Supreme Court ruled that Aereo’s delivery of TV station signals to subscribers without paying a copyright fee violated the law.

While it’s not clear if TiVo plans to recreate the Aereo system and agree to pay retransmission fees, TiVo has been developing and testing a cloud DVR platform.

TiVo has also been targeting cord-cutters with the Roamio OTA, a recently launched four-tuner HD-DVR that blends access to over-the-air TV channels with OTT fare from partners such as Hulu, Netflix and Amazon, and wraps it all into a unified interface. It sells for $49.99 (plus a $14.99 per month service fee), though TiVo is also experimenting with an option that sells the device for $300 with a lifetime subscription to the TiVo service.

TiVo has not released sales data on the Roamio OTA, but has published the results of a survey last week finding that most buyers of the Roamio OTA who identify as cord-cutters came by way of a satellite TV provider.

Rogers said he believes that cable operators are well suited to go after cord-cutters who have fled satellite by offering them a bundle that features OTA and broadband. Frontier Communications has already agreed to feature the Roamio OTA in a future offering that will be pitched to broadband-only customers.

“It’s one helluva cheap way for cable operators to have an OTA/OTT device that says, ‘Satellite cord-cutter, I have a broadband package for you with a video component,’ ” Rogers said. “I think it allows them [the cable operator] to own the low-end and win over satellite subscribers.”

Nielsen estimates the U.S. had more than 12.3 million broadcast TV-only homes at the end of 2014.

Rogers said he also thinks MSOs are positioned to reach the high end of the market by integrating their full-freight TV service with OTT.

“Those two pieces, to me, the cable industry should own,” Rogers said.

The middle, he said, will be covered by other emerging options such as Sling TV, Sony PlayStation Vue and whatever pay TV service Apple ends up assembling.

But he also said he believes cable now has an opportunity to step up and support more OTT integrations on its video platforms.

“This is getting to be too confusing a landscape,” Rogers said. “There are too many different ways for people to put together their own bundle.”

Rogers said he expects cable operators to continue to experiment with different packages that can counteract new skinnier TV bundles.

“I think the cable operators response on pricing is going to be the thing to watch,” he said. “I would be really surprised if cable operators don’t find a way to come up with a bigger package of channels for $50 or $60.”

While that would cost more than Sling TV, which starts at $20 per month and features $5 add-ons, a package of about 80 channels, he said, would ensure that the customer can still get a decent price without having to sacrifice some channels they like.