January 11, 2021
We are entering a new phase of hyper-competitive digital distribution that will make 2021 a critical year with massive growth for some, while many others will fight for survival.
The primary factor driving this explosive period is well known, as the Hollywood studios have made a bold and dramatic commitment to the SVOD distribution business model. Netflix certainly paved the way for this consumer revolution, but Disney+ reaching its astronomical 86 million subscribers in less than one year showed there is significant demand, and opportunity, for others.
HBO Max may have stumbled out of the gate with high prices and distribution issues, but parent company Warner Bros.’ commitment to release its entire 2021 theatrical film slate simultaneously on the streaming service may be one of the boldest steps yet.
And we still expect to see Paramount+ making its bow later this year, absorbing CBS All Access and Viacom assets under one streaming service.
Perhaps the most impressive and important aspect of the studios’ programming and distribution transformation has been their willingness to self-disrupt their legacy businesses. To grow SVOD, studios had to devalue their lucrative existing businesses of pay-TV and packaged media, which have been their profit backbone for the past 25 years. They have taken premium content from those traditional outlets and focused it on their new tech-based SVOD platforms. They did it with speed and an unwavering commitment, neither of which are hallmarks of large multinational corporations. In doing so, they deserve credit for recognizing both the threat and the opportunity presented by Netflix, the streaming pioneer that effectively birthed the business more than a decade ago when it segued from renting DVDs by mail to streaming movies over the Internet and charging a low monthly subscription fee for unlimited access.
The focus of my career has always been on independent content distribution, and clearly the macro SVOD trends are going to have an equally significant impact on the smaller SVOD channels we have seen form over the past five years. While I was president of Cinedigm, we launched several niche programming channels targeting passionate audiences in genres like faith and family and documentaries. Soon, hundreds of these niche SVOD channels were formed and many found initial subscribers with the aid of channel OTT aggregators like Amazon Channels and SlingTV.
That initial growth has recently slowed, as consumer dollars came under pressure from the proliferation of high-profile, big-budget streaming services like Disney+, HBO Max and Peacock. Consumer spending shifted to the “must have” services, which means these smaller OTT channels need to innovate and pivot to refine their business model to remain financially viable.
I believe the way forward for these niche services starts with a flexible business model that keeps SVOD active with special premium content for their most loyal customers but also utilizes an AVOD offering to find new more casual consumers and lower the bar for consumer sampling. We have seen AVOD platforms become well capitalized, as major corporations like Viacom bought Pluto and Fox bought Tubi in the last year. Suddenly the quality of content has risen in AVOD, and this business model is rapidly becoming the most important digital outlet for independent content.
Transitioning your niche SVOD channel into a hybrid AVOD and SVOD offering will be vital to remain relevant in the next year. I also feel you must look at your core audience and determine what other competitors service that same audience to look at possible consolidation as a way to secure better economies of scale.
Finding efficiencies in operating expenses, marketing efforts and amortizing your content costs across numerous outlets is critical for independents to reach profitable operations. There are some great niche services that address passionate fan bases, but they need to implement some of these transformative strategies in order to survive.
I commend the studios for making hard and often disruptive moves on their legacy businesses so they could quickly and fully embrace the new digital reality they faced. I also challenge independent content producer to fully reach their digital potential by embracing diverse business models and innovative ways to work with other moderate OTT services so they can be a part of the new streaming digital landscape.
Bill Sondheim is the president and CEO of Greenfield Media, a consultancy in the home entertainment sector. An industry veteran, he is the former president of Cinedigm Entertainment, Gaiam Inc., GoodTimes Entertainment and PolyGram Video. He can be reached at Bill@greenfield-media.com.