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Can Niche Streaming Apps Go It Alone or Will They Succumb to Consolidation?

Tim Cross  10 March, 2021

As connected-TV viewing has grown over the past few years, we’ve seen a proliferation of streaming services catering to very specific niches.

Some, like anime streamer Crunchyroll and wrestling on-demand service WWE Network, attract audiences in the millions. Others have much smaller audiences, like beer-themed CTV app The Brewdog Network and Bellinga TV, a streaming service run by Dutch vlogging family De Bellingas.

But recently we’ve seen signs of consolidation in the streaming world, as niche apps have been folded into bigger streaming services.

WWE Network is generally held up as a niche streaming success story, having grown its audience base to over 1.5 million, and helped WWE revenues to climb to record highs. But despite this success as a standalone service, the wrestling brand announced last month that it’s agreed a deal with NBCUniversal which will see WWE Network sit exclusively within NBCU’s own streaming service Peacock.

And Discovery, which has built a portfolio of TV brands geared towards specific niches, has pivoted away from niche streaming. In the US, Discovery had created a number of separate direct-to-consumer channels based on these brands. But now with the release of discovery+, Discovery is instead choosing to bring all its content into one large service with a much wider appeal.

Economies of scale

There are a few factors driving this trend.

Firstly, while niche services by definition are limited in the size of the audience they’ll appeal to, it’s nonetheless easier to pick up new viewers when bundled inside a larger product.

Nick Khan, president of World Wrestling Entertainment, said when announcing the Peacock deal, that expanding WWEs’ reach was one of the motivations. “The challenge was growing it from where we are,” he said. “It’s tough to get people who aren’t fans to sample a product when you have to subscribe to see it.”

Richard Broughton, research director at media research firm Ampere Analysis, added that being part of a bigger service can also help attract audiences who are already fans of a particular niche, but not ‘superfans’.

“There would be people who might be unwilling to pay for a standalone niche service, but where that niche service’s inclusion in a larger streaming service is enough to sway their decision,” he said.

It’s also a question of economics.

In the context of the ‘streaming wars’, niche service providers might be offered very lucrative deals, as larger services look to build their subscriber bases through appealing to new audiences.

Peacock is reportedly paying $200 million per year to WWE Network for a five year contract, which is more than the $180 million per year WWE currently makes from the product according to its financial reports.

The economics of the deal likely don’t deliver an immediate return for NBCUniversal. If every WWE Network subscriber moved over to Peacock, and none were already subscribed to Peacock, the deal would only bring in around $90 million per year (since a Peacock subscription is cheaper than a WWE Network subscription).

But Henry Embleton, head of ad products and revenue at Crunchyroll, said the larger services are very focused on building out their subscriber bases in the short term, and will likely ramp up prices in the future.

“If you look at Disney, their initial pricing was very cheap,” he said. “But once you’re on their platform and they have that relationship with you, and they’ve got your credit card details, then they can start naming their price. So that’s the strategy – get audiences on your platform, make them fall in love with your product, and then you can start raising your prices.”

There are also economies of scale which come from being a part of a larger streaming service. Aside from the ability to cross-promote different media brands from within one platform, ad revenues can also benefit from the large reach found within the biggest ad-supported services.

And as the history of pay-TV shows, it tends to make more sense for distributors to offer wide bundles of channels and content, rather than offering an a la carte model.

“Inevitably whenever someone tried an a la carte model, people really wouldn’t pay for many channels at all.” said Broughton. “It was far more efficient for operators to bundle channels up into one big attractive package, where people get more content than they could possibly ever watch, but it looks like a good deal. It’s the same now with streaming services – the market won’t sustain hundreds of different service providers, and at some point the second and third-tier brands will realise they can make more money as part of a larger streaming product.”

Still opportunities for niche services

This isn’t to say that the streaming boom isn’t still providing opportunities for nicher services.

Firstly, it’s a legitimate strategy for a niche content provider to build out a product and then look to be acquired by a larger company, especially at a time when the big SVOD services are fighting to establish themselves in the streaming wars.

“If a big SVOD service wants to establish itself in a particular niche, it has three options. It can buy an existing company, it can create its own originals, or it can just license content which fits that niche,” said Ampere’s Richard Broughton.

“I’d be very surprised if the big services have sufficient bandwidth to go head to head with all of the niche services out there and produce their own originals in every niche,” he said. “It’s probably going to be far more efficient in those cases to launch partnerships where niche services get subsumed under a branded programming block within the bigger service.”

And Crunchyroll’s Embleton said that companies like his own simply don’t need to be folded into a larger product.

Niches like anime have large audiences of devoted fans who will happily pay for a dedicated streaming service. “I’ve taken my laptop out on a plane before, which has a Crunchyroll sticker on it, and someone else saw it ripped off his shirt and showed me his anime tattoos!,” said Embleton. “Those are the types of fans we attract. We have a global audience of 100 million fans which we can superserve and engage with, so that means we can work as a standalone product.”

There can also be benefits from an advertising perspective of having a well defined audience.

“If you’re selling inventory for Sky, you’re offering kids content, you’re offering sports, entertainment, news, and asking which demographics brands want to reach within that content,” said Embleton. “For us it’s much simpler – we just look for gaming, entertainment and FMCG advertisers, because that’s what works with our audience.”

2021-03-10T16:25:35+01:00
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