Research from Parks Associates found that more than one-third of US broadband households subscribe to multiple OTT video services, with 15 percent subscribing to three or more. In a 2017 report, the analytics firm predicted that as competition ramps up, streaming services will begin to focus on niche segments in order to capture any remaining untapped portions of the market. As far as niche OTTs go, there are success stories like WWE Network, Fandor and Crunchyroll, who were able to balance ads and subscribers. But, there are also niche streaming services that failed to get over the hump—like Seeso and Vessel. The difficulty for any niche streaming service is trying to gain a large enough audience while also finding a monetization model that keeps them in business.
PassionFlix has positioned itself to benefit from one of the current voids in the market: a lack of OTT services catering directly to women. For co-founder Tosca Musk, choosing the balance of subscription and ad-supporting was easy; she hates advertising interrupting content.
“I find it annoying and I lose sight of the story,” Musk (yes from the Musk family) told AListDaily about the decision. “If I’m paying for something, I really don’t want ads, I don’t care how much I’m paying.”
PassionFlix raised $4.75 million in seed money, which it is using to produce original content based on popular romance novels like Matchmaker’s Playbook. Musk, a filmmaker by trade, says she is prepping for a fifth movie developed exclusively for PassionFlix.
“We are not broad, we are very specific. I know who my audience is and I know what they like for the most part because it’s a very niche audience,” said Musk. “The niche OTTs that are popping up need to know their audience.”
Crunchyroll, which was founded in 2006, represents one of the success stories for niche OTT services. They primarily offer anime but also Asian dramas, music and mangas. In February 2017, Crunchyroll surpassed one million subscribers, and 20 million registered users. The service offers ad-supported streaming, but also a premium $6.95/month ad-free subscription.
For Crunchyroll, the most important thing in finding a balance between subscriber base and ad-support was inclusion. Henry Embleton, head of ad products and revenue at Ellation (which owns Crunchyroll) told AListDaily, “We never want to turn anyone away, so if a fan is not willing to pay for a subscription we have an ad-supported option.” He continued, “fans can either support the content creators with their money in the form of a subscription or with their time and attention in the form of ads. Our objective is to create an experience that our fans fall in love with. We want fans to see more value than the subscription price and convert to being a subscriber from ad-supported.”
While PassionFlix has avoided ad interruptions so far Musk said they are open to brand partnerships such as product placement within a film.
“Advertising is necessary,” she said. “It offsets the costs dramatically on a film and it allows you to do so much more on a movie. There’s a definite need to have those conversations [with brands] but we all need to work together to create great content and get brands that work for that specific audience out there.”
Musk stressed the importance of seamless integration of a brand within the context of a film. “[T]here’s a brand that works well for these characters,” Musk said, hypothetically, “and it makes sense to have these brands in their home. That, to me, is a great way to integrate a brand into a movie without it affecting the storytelling.”
Chiefly, niche OTTs and streaming services finding a base audience and profiting–regardless of the avenue through subscription or ad-support–will be good for all media consumers. It will diversify the options and allow the consumer the power to choose.
Meanwhile, Netflix has become the figurehead for OTT and continues to surge, allegedly costing TV networks between $3 billion and $6 billion per year by luring viewers away from ad-supported programming, according to estimates by nScreenMedia.
“A company like Netflix doesn’t need to fill that niche because they are everything to everyone,” she said. “We need a Netflix out there that’s going to give us a little bit of everything. We’re always going to need the bigger ones.” Musk confirms.
Musk knows that the world will always need a Netflix to offer a bit of everything, but in the meantime, she and her business partners hope that PassionFlix will become a source of “me time” for women everywhere.