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3 Keys to Winning in the New Digital-Media Age (Guest Blog)

Innovation, scale and monetization must stay top-of-mind for niche streaming-video players

TV is in a golden era! TV is dead!

We continue to hear polarizing views about the future of television. What we do know is that technology is fundamentally altering what we call TV. We are in a renaissance driven by a new connected, mobile-first, on-demand world. Services like Netflix, Hulu and YouTube have permanently changed the way we consume media, and we are seeing many new online models fulfill needs not satisfied by traditional outlets.

Younger consumers, in particular, are flocking to new entertainment apps that are more social, community-driven and engaging than traditional forms. Recently, we have witnessed video platforms move away from the broader Netflix-Hulu model that aims to provide a wide mix of content that appeals to every consumer, and embrace niche content that appeals to a more select audience. Look at SeeSo, Shudder, MLB.TV, and the WWE Network, just to name a few. While these platforms have a ceiling on the number of customers they will able to reach, there’s a growing appetite for content that goes deep into a targeted subject. These niche digital media offerings unite passionate fans around shared content experience, and those fans are willing to pay.

It’s clear that TV, however you define and use the term, is in a period of transition. The century’s next iconic entertainment brands will be formed over the next few years as the $300 billion-plus video industry transforms itself around new consumer needs and available technology. What should the new subscription video on demand services, primed to both alter and help solidify the market, consider in order to succeed?

The Three Imperatives
There are three imperatives to win in the new digital ecosystem: continuous innovation, achieving scale, and effective monetization. The three typically go together to form a virtuous cycle. For a niche business especially, maintaining this cycle can be difficult if not impossible alone.

Continuous innovation. While this may seem intuitive for every industry, it is especially relevant for niche SVODs, and this doesn’t just mean new content. Consumers increasingly expect services to “just work” and get better and better every year. Big tech companies (e.g. Google, Amazon, Netflix) clearly have this in their DNA. Building modern infrastructure and leveraging data are at the foundation of this. For smaller companies, continuous innovation is difficult due to both the skills and investment required. Those who can’t continually innovate will have difficulty keeping up and eventually lose relevance to those who do — or they will need to find a suitable distribution partner who can continually innovate.

Achieving scale. In a digital economy, the marginal cost of production — serving video to an incremental user — is negligible. Therefore, increased scale drives tremendous economics for digital services. Additionally, companies must continue to grow to a minimum viable scale that allows for continued investment in technology and innovation. Niche brands by definition serve a limited audience. Niche market winners must start by fully penetrating their target market and consider expansion to adjacent and casual fans to continue to grow.

Effective monetization. Innovation and scale require a strong monetization engine to complete the cycle. Subscription economics are essential to monetize smaller passionate communities and ad-supported monetization helps monetize casual fans and provide a free funnel of users. However, a subscription model for stand alone brands typically only monetize a small fraction of superfans and is susceptible to higher churn (particularly during any periods of seasonality). Attracting a broader audience with multiple brands allows for bundling opportunities that better monetize casual fans and can reduce churn, thereby increasing overall economics.

The next few years will see a great amount of experimentation, as digital media companies seek to find the right model for their audience. But, by keeping these three points top of mind, they will be in a better position for long term success.

Tom Pickett is CEO of Ellation, a leading OTT video business that includes brands such as Crunchyroll and Creativebug. Ellation builds premium video experiences for passionate fans and provides sustainable business models for content creators. Ellation’s major funding comes from Otter Media, a joint venture between The Chenin Group and AT&T. Tom joined Otter from Google, where he was the Vice President of Content for YouTube, responsible for global content partnerships & operations including the YouTube Spaces initiative. Previously, he was a Director in AdSense Operations and worked on Google’s Business Operations team. Prior to Google, Tom was a Senior Associate at Booz Allen Hamilton. He also served as an Officer in the U.S. Navy as an F/A-18 pilot and “Top Gun” graduate reaching the rank of Lieutenant Commander. Tom received a Bachelors of Science in Electrical Engineering with honors from Rensselaer Polytechnic Institute and an MBA from the Harvard Business School.