What is a viable strategy for niche streaming services?
Discussion of the streaming wars tends to focus on the major powers–Netflix, Amazon, Disney, Apple–for obvious reasons. But I watch a lot of international arthouse and classic films so I’m personally more invested in the fate of smaller players like the Criterion Channel.
Reading Matthew Ball’s essays on the major players I started to wonder about the big questions for niche streaming services. Do the content wars matter to them? Can small streamers survive? If so, what does a sustainable strategy for a smaller service look like?
In Part 2, I look at the Criterion Channel in detail and explore its unique potential.
The Big Niche Questions
Every streaming service is essentially a configuration of target audience and content.
Major players target everyone or a very broad demographic segment. Niche players focus on a specific genre audience underserved by the majors.
While the choice of target audience imposes some constraints (potential subscriber base, types of content) the real differences in strategy lie in the approach to content. This is true both at the major level and in the niche market.
This is rather obvious, but worth spelling out how thoroughly the content question permeates every link in a streaming service’s value chain.
Content is both the largest cost and the dominant factor in buyer value. Streaming technology and other aspects of the app experience are more or less a commodity, and Quibi’s struggles suggests form isn’t a viable differentiator if the content isn’t good.
The major questions that define content strategy of all sizes are:
How much of the catalog is owned vs licensed?
How much of the catalog is new content vs existing content?
A large library of owned content, if attractive to the target audience, enables smaller investments in new content. And those investments in turn can be focused on higher confidence bets that extend popular existing IP, like Disney with The Mandaloorian.
A service that has a small or no catalog to spend much more on content and has to choose wisely between new content vs licensing existing. In the indie film space, Mubi had no owned library initially and so designed their entire value around short-term licensing: only 30 films available at a time, each only for 30 days.
Original Content
While the majors can spread original content investments over a large customer base, smaller services have to be more scrappy. Most lean on curating a unique library combined with a small amount of exclusive new content. A few examples:
Mubi: curated monthly rotation of exclusive new indie films with small permanent library, plus more on VOD.
Shudder: Horror, handful of original shows with a rotating catalog.
Britbox: huge back catalog of British TV, with growing roster of originals
Bet+: back catalog of BET shows, new Tyler Perry originals
Criterion: huge permanent film library, small rotating selection of recent films, exclusive commentary and filmmaker interviews
Broadway HD: Rotating catalog of recent and classic musicals
In almost every way spending on new content is much riskier for a niche service than spending on renting hits the audience loves.
The potential investment return is much lower both in terms of new subscribers and retained subscribers. A meager investment budget requires a high hit rate while putting a low ceiling on show quality. The profligate spending of the major services makes it harder to find these diamonds in the rough as talented creators are less likely to need a niche service. Even then, niche services face a significant marketing challenge in building enough buzz to convert a small hit into subscription growth.
As A&E CEO Josh Sapan recently said, “What is uniquely attractive about targeted subscription services, which is somewhat less true of something-for-everyone, big SVOD services, is they are slightly less individual-show dependent.”
If a streaming service could do away entirely with original content and survive entirely on a large owned library they could be far more profitable.
And yet many niche services do invest in some original content and feature it in their marketing, because of a fundamental challenge with the library: access to existing content is not as compelling a motivation to subscribe next month as exclusive access to new content.
Challenges with the Library
A library-focused strategy has to balance creating sustained value for long-time subscribers against changing enough to entice new ones.
The core fanbase for any given genre may be motivated simply by eternal access to the archives, which requires a large library. A thin or too-frequently rotating library will quickly disappoint superfans.
If the service has little or no new original content, attracting new subscribers rests entirely on the creative packaging of newly available ‘old’ content. This is more difficult on face, since the temporary availability of some old movies has considerably less psychological pull than a new episode of a new show. It also lacks the natural marketing rhythm of new original content with its cast photos, interviews, and the anticipation of the release date.
Library-focused services have come up with clever ways to create timeliness for new ‘old’ content from Mubi’s marketing trick of the new film of the day to Broadway HD’s Twitter watch parties to Criterion publishing critical essays on new available films.
The necessity of library rotation forced by temporary licensing in this way has become a strength that helps both with giving existing subscribers the perception of continual value and potentially snagging new subscribers drawn by the latest additions to the library.
What is the value proposition of a streaming service anyway? The simple answer I gave above is entertainment, as defined by the target audience’s interests. But looking closer the variations in strategy suggest the different services are targeting somewhat different customer needs.
We can start to see this by exploring the implicit reason why should someone keep subscribing next month:
Netflix: Reliable access to comfort foods (Grey’s Anatomy), want to see the new show everyone else is watching
Disney: Reliable entertainment for your children, next episode of The Mandalorian
Amazon: Annual free prime shipping, maybe the next episode of Marvelous Ms. Maisel
For some niche services:
Mubi: To see next month’s new films
Shudder: New episodes of Creep Show/Joe Bob Brigg’s Drive In, access to horror classics
Britbox: Reliable access to Poirot and Classic Doctor Who back catalog, next episode of Wild Bill
Criterion: Reliable access to film classics, access next month’s new library additions
The value proposition for Criterion is rather weak on first glance. Why not just rent 1-2 indie movies a month for $3.99 from Amazon/Apple?
But under the surface I think Criterion has a promising strategy, which I will explore in Part 2.