New NBCU On-Demand Service Seeks U.K. Niche

Consumers In The U.K. this month were introduced to Hayu, NBCUniversal International’s new, all-reality TV subscription video-on-demand service. And according to Jay McNamara, executive VP of strategy development and analysis, the reasoning behind launching Hayu was pretty simple: nobody else had done it yet.

“In terms of the creation of Hayu, our research revealed an unmet consumer demand, outside the U.S., for reality/unscripted programming on an SVOD basis,” he said. “While the market-wide SVOD explosion has focused on meeting demand for film and scripted series, this has not satisfied the demand for reality content, since the larger SVOD players have not made this a focus of their content strategy.”

There’s no other SVOD service out there that offers only reality programming, with a £3.99-per-month ($5.64 U.S.) Hayu subscription giving users more than 3,000 episodes of reality content (including Keeping Up With the Kardashians and its spinoffs; The Real Housewives; Million Dollar Listing; and the Top Chef franchises), with newly broadcast episodes debuting the same day as their U.S. premiere. And while Australia and Ireland are getting the service as well, NBCUniversal’s decision to launch Hayu in the U.K. first could be telling.

“It’s still very early days for channel-brand-led, direct-to-consumer services [in the U.K.] and the margin squeeze on the traditional linear business in the U.K. and much of Europe is far less of an issue, because pay TV is still very strong and growing. No cord-cutting in the U.K. yet,” said Guy Bisson, research director for London-based research firm Ampere Analysis.

March data from Bisson’s firm estimates that while only 43% of American homes have pay- TV only (with 57% having both pay TV and SVOD), 63% of U.K. homes are pay-TV only, with 37% (and growing) supplementing their content with an SVOD service. Unlike in the U.S., where consumers are increasingly kicking pay-TV services to the curb in favor of SVOD and over-the-top, U.K. consumers are simply adding SVOD to the pay-TV services they already have, Bisson and others agreed.

“The picture is clear: SVOD homes are not swapping out their traditional TV for SVOD, they are using SVOD services to get even more of what they already have,” read a March 22 research report from the Broadcasters’ Audience Research Board (BARB), the U.K.’s audience measurement and TV ratings firm, owned by the country’s biggest TV players (the BBC, Sky and others).

The BARB report found that while the number of U.K. pay-TV subscribers has remained mostly flat since mid-2013, as of the end of 2015, a quarter of U.K. homes subscribed to at least one of the country’s three main SVOD suppliers: Netflix, Amazon Video or Sky’s Now TV. That’s up from 14% after the first quarter of 2014.

Netflix first launched in the U.K. in 2012, and has been mostly mum on its subscriber base there ever since. However, according to BARB’s new data, Netflix added 1.4 million U.K. subscribers in 2015, putting it past 5 million nationwide. During the same year, Amazon added approximately 500,000 subscribers, for about 1.6 million total, while Now TV picked up about 300,000, for just under a million total.

“The picture we glean from the [survey] does not support the more evangelical rhetoric about the evolution of SVOD heralding the end to mainstream TV as we know it,” the report read. “The data suggest[s] that SVOD appeals to households who already consume a great deal of TV.” A BARB spokeswoman declined to comment further on the report.

The market exists in the U.K. for non-linear TV content, according to a mid- January report from Parks Associates. A survey of 10,000 broadband households across Western Europe found 55% of broadband homes in the U.K. said they watched Internet video on an Internet-connected device, and nearly 20% said they recently used Netflix. This despite more than half of pay-TV subscribers there already paying for Sky.

“In the U.K. market, online VOD is actually dominated by the BBC’s iPlayer and similar options from iTV [iTV Player], Channel 4 [4oD] and Channel 5 [Demand5],” said Brett Sappington, director of research for Parks Associates. “The percentage of U.K. broadband households that use these broadcast catch-up options on a monthly basis rivals or exceeds the number that use Netflix, Amazon, or Now TV.”

Ampere’s data also noted that U.S. pay-TV providers have mostly avoided collaborating with SVOD counterparts, unlike some European players, and found that more than 8% of U.K. homes are SVOD-only today, by far the largest in Western Europe.

NBCUniversal isn’t the only player that has seen how U.K. consumers treat SVOD a little differently than U.S. consumers—in late November, Disney launched its £10-per-month ($14.11 U.S.) DisneyLife streaming service, offering both new and catalog titles. And lesser-known movie services such as Mubi and have already been holding their own against the top U.K. SVOD players for years. NBCU is hoping it and Hayu can join them.

“The main three services continue to grow… and any other SVOD service can’t compete on a ‘me too’ basis, it has to offer something different,” said David Sidebottom, senior market analyst at U.K.-based media research firm Future-source Consulting. “NBCUniversal have clearly targeted a specific demographic— for whom social media is heavily ingrained in their lifestyle—with a focused product [that] provides a more immersive experience than current linear TV or VOD services for these TV series.”

NBCU’s McNamara: The Right Time For SVOD Reality Overseas

Jay Mcnamara, executive VP of strategy development and analysis for NBCUniversal International, spoke with B&C contributing editor Chris Tribbey about Hayu joining the ever-growing chorus of international subscription video-on-demand services, the technical challenges of getting the service off the ground and the social media integrations crucial to its success. An edited transcript follows.

What led NBCU to launch in the U.K., Ireland and Australia, and how much room is there to grow outside of those areas? It just made good sense to take a phased approach for the launch of a brand-new service and brand. And we felt that it was best to start with the markets that demonstrated a really strong affinity for U.S. reality/unscripted content. We found there was a particularly strong consumer appetite for U.S. reality content in [those three areas].

What unique technical challenges exist with getting an SVOD/OTT service running smoothly in each region? The core challenges arose from the fact that there was no template for Hayu, since it’s the first of its kind. We designed Hayu to have bold and beautiful features and aimed to build a very different user experience compared to other more general entertainment services by creating a simple, slick, intuitive interface that integrates news feeds and social media, too. There is also the additional complexity of adding most of the content to the service the same day as it launches in the U.S., which entails adding multiple new episodes to the service every week. We are thrilled with the resulting 360-degree experience that allows users to both lean out [watch streaming content] and lean in [interact with the content and celebrities].

Speak to the social media aspect of Hayu—how crucial is the integration of social media to its success? Knowing that our core demographic prioritizes social agility, we think it’s a must. We wanted to complement their natural behaviors and put content in their hands that they could interact with and proactively share with their social circles, creating a highly active community of reality fans. They also love the curated and editorialized environment, which allows them to comment and respond to what’s hot and trending. And, uniquely, users don’t have to subscribe to access the short-form content or the news and social feeds since these immersive features sit outside the Hayu paywall.