Starz announced April 5 that it was joining the parade of major networks to launch an over-the-top service—with an $8.99-per-month fee—that will compete with the likes of HBO Now and Showtime’s OTT offering. Hearing the news, Michael Hong wasn’t mad, even though he had every reason to be.
Just a day earlier, the CEO and cofounder of New York-based Digital Media Rights (DMR) had announced that his company—one of the larger aggregators and multiplatform distributors of entertainment content—was making OTT a major priority. To that end, they are launching Midnight Pulp and Asian Crush, $4.99-per-month services that will offer approximately 300 films and TV programs each (horror, paranormal and sci-fi for the former, subtitled Asian movies and TV programs for the latter).
And along with those two channels, it is dipping into its 7,500-plus licensed titles to launch an additional three OTT channels in the next couple of months, something that’s a reflection of how quickly viewing habits have changed, according to Hong’s partner, David Chu, president and cofounder of DMR. “It was an important step for us to develop our own OTT channels across a range of devices,” Chu said. “By expanding beyond our core aggregation business, the excitement now begins on building our brands in the marketplace.”
But the Starz announcement all but eclipsed DMR’s OTT news. And Hong? He was just fine with that. Actually, most indie OTT operators Next TV spoke with said the same thing: They don’t view HBO, Starz and the other big OTT companies as competitors.
“This may surprise you, but I’m bullish about the OTT world for independents,” Hong said. “A lot of [audience] needs aren’t being met by the major cable operators, and the whole barrier for [OTT] entry is different for indies. Everything from marketing to distribution is more cost effective…we can be more nimble and flexible.
“If you’re creative in your approach and you have good content, you’re in good shape.”
BROADBAND OF GOLD
Indie OTT companies are seeing the same thing everyone else is—fewer and fewer pay-TV subscribers every quarter, and more and more broadband-only households. According to recent research from Leichtman Research Group, U.S. pay-TV providers lost a net 385,000 video subscribers in 2015 (up from 150,000 in 2014 and 100,000 in 2013). But the industry added 3.1 million net internet subscribers that same year (most of those from the same cable companies that lost video subscribers).
“The top cable and telco broadband providers in the U.S. cumulatively now account for nearly 90.5 million subscribers in the U.S., yet the industry added more broadband subscribers in 2015 than in any year since 2010,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group. “The number of broadband subscribers in the U.S. continues to increase, with the top broadband providers adding more than 6.1 million net broad-band subscribers over the past two years, and cable companies accounting for 97% of these net adds.”
It’s those broadband households (with Leichtman’s research also showing that 57% of American households have at least one SVOD or OTT service) that independent OTT services such as YipTV want to target, according to Mike Tribolet, cofounder and CEO of that mobile OTT cable service (with a premium membership running $15 a month) geared toward Spanish speakers.
“YipTV stands out as a mobile cable operator by focusing on the Hispanic market that is vastly underserved,” he said. “Listening to our customers’ needs is the No. 1 priority throughout the company. We have built our channel lineup and our business based on customer feedback. So far, it’s working.”
Tribolet said that indie OTT operators need to be careful with their pricing, and have a service that’s scalable and secure, but most of all, they must know their niche and “have content that is relevant to your targeted customers.”
And finding certain niches has been the name of the game for indies so far. Love British TV? Subscribe to Acorn TV for $4.99 a month. Anime? FUNimation Now, launched earlier this year, has you covered for $4.99 or $7.99 per month, depending on how much you want.
You can get a bunch of Korean content for a buck a month at DramaFever. Black entertainment? Urban Movie Channel will run you $4.99 a month. Indie Crush and Latin Crush from DMR are in the pipeline. And those are just the tip of the OTT iceberg out there for consumers to subscribe to.
Los Angeles-based independent distributor Cinedigm runs three OTT channels—documentary-centric Docurama, faith and family channel Dove and Comic Con convention fan-based CONtv, each for less than $5 a month, or about what it would cost you to rent a film for a night via your cable provider.
Erick Opeka, executive VP of digital networks and head of the OTT division at Cinedigm, said the technology over just the last few years has made it inexpensive and easy for content owners to get into the OTT space, and do it quickly.
And pricing is important—his company’s internal research shows that the $5 a month price point is almost key for any indie OTT operator. “Consumers are looking for sidecar services, and most of the customers we’re targeting are Netflix, Hulu or Amazon Prime subscribers, and we’re giving them a niche subscription to content in a vertical they really care about, and we think that for consumers already subscribing to more expensive SVOD services, being able to add a niche vertical for [cheap] is highly desirable,” Opeka said. “What we’re finding with consumers…is that most of the people [subscribing] are cord-cutters, depending on the demographic.”
He said people are building their own bundle of services they can find online, instead of paying one company for everything, to get exactly what they’re looking for.
Shane Cannon, CMO at Vidgo—a new OTT service announced at this year’s Consumer Electronics Show, offering live TV and VOD—echoes the idea; price is the major issue facing indie content owners.
“Indie OTT services have a bit of an uphill battle,” he said. “We believe consumers aren’t willing to support more than two video subscriptions simultaneously—the less user names and passwords the better.”
But the more options, the better, according to research from Parks Associates. Their data finds that a full 70% of American homes have at least one OTT service, and that number isn’t likely to go down.
“In the U.S. and Canada, the quickly increasing volume of new options is driving high numbers of online viewing of TV and movies,” said Brett Sappington, director of research for Parks Associates. “Each service is bringing new experiences for consumers, and many are providing new content that is unavailable elsewhere.”
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