New NBCUniversal On-Demand Service Seeks Niche in U.K.

Related: NBCU’s McNamara: The Right Time for SVOD Reality Overseas

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 Cheffranchises), 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 channelbr-and-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 Futuresource 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.”