Making Money From Streaming Video: You Might Be Doing It Wrong
For decades, the delivery and monetization models for broadcast and cable didn't change. Then Netflix came along and offered personalized media directly by mail, then via SVOD. Fast-forward to today, when viewers have more than 200 streaming services to choose from. So how do you grow a streaming business in this crowded field?
The big monetization story of the last 18 months has been advertising, but the average household still has subscriptions to four or more SVOD services. Now, even the subscription services are jumping on the advertising train, using a hybrid approach to lower the cost to consumers while keeping their revenue streams flowing.
Panelists on the "Monetization 2021: FAST, SVOD, Hybrid, And More" panel at Streaming Media Connect in August discussed a variety of strategies to keep viewers happy and build a sustainable revenue model. While streaming consumption has surged, some of that surge was spurred on by the impact of COVID pandemic, so OTT services need to embrace new tools, technologies, and strategies to keep those revenue streams flowing.
Advertising, Subscription, and Hybrid Monetization Models
The conversation in August centered on pricing and viewer engagement. This is a summary of that conversation, plus the occasional piece of information from others in the industry. Struum had an interesting approach of a monthly subscription of $4.99 for 100 credits and viewers use these credits to view content within 25+ streaming services (They also have 60 different SVOD services in the wings which they are onboarding soon). All the content on the platform has a credit value and essentially the credits are used to watch content. Viewers can also soon gift content to their friends.
"The goal really is to basically be able to solve and provide a different access model for consumers to get access to the content today," said Eugene Liew, CTO at Struum. "[We're] really balancing between a la carte and your traditional subscription, all you can eat-type model."
Struum lets customers purchase credits, which they can then use to watch shows and movies from across more than 25 streaming services
When Struum was in the planning stages they focused on if there was a lighter onboarding ramps to viewing. "How do we drive acquisition without basically stating that your only option today to get to that piece of content is sign up for subscription or start your free trial?" he said. "Even if you're chasing the shows, you're coming in, bingeing and after you're done with that particular show, there's a lull in terms of the usage. The offering itself is still rather static."
So while Struum is going wide with their content offering, one of their partners was also on the panel and talked about how they go deep. "We refer to them as enthusiasts," said Yolanda Macias, chief content officer at Cinedigm. With 22 channels, eight which are owned and operated, including Docurama for the documentary lover, Fandor for the independent film enthusiasts, and Bloody Disgusting for 24/7 horror films provide a wealth of special interest content. "We're focused on what some people may call niche audiences," said Macias. "[There are] certain categories where audiences are underserved and want deeper content."
"We don't dictate the business model. We allow the consumer to tell us how they want to engage," said Macias. "We support all business models, AVOD, SVOD, and linear. We're huge fans of FAST."
Why FAST versus another format? "Almost every TV OEM manufacturer has either launched or is in the process of launching these services," said Chris Bassolino, Co-Founder and EVP Sales, Zype. "If you're able to get those content partnerships in place, there's a huge amount of viewership."
FAST is also a familiar format. "Many times it's what that audience has been used to," Macias said. Younger audiences may be accustomed to free, and so are the sports fans who are watching their new RealMadrid soccer streaming. "It's really back to the consumer and how they want to engage."
Building a Direct Relationship with Your Audience
I talked with a couple of people who were not on the panel, including someone who is an expert in what I'll call bootstrap audience building. He runs an event which focuses on independent creators and influencers. These producers have managed to build a lot of community into their programs and other media companies are following the trend.
While most media companies want to have a direct relationship with their audience, they need to create a value exchange, says Jim Louderback, GM and SVP, VidCon. "I can have a direct relationship with those top fans, which you couldn't do in the past."
"The skills you need (to grow this relationship) are building, nurturing, maintaining, and managing communities. A lot of historically what I've seen at traditional media companies is they think it's a one-way street. 'We are a big media company. We have a megaphone and we use that megaphone to talk at our audience over the last 10 or 15 years'," says Louderback. Yeah, that's not going to work any longer.
VidCon's roots are in YouTube, but it's grown into the go-to event to learn how to build relationships between content, brands, and audiences.
"Anybody can start a Discord server, but having moderators that really understand how to build, nurture and grow a community on Discord is very different from having letters to the editor in a magazine or a group that handles fan mail," he says. "The Discord folks are very, very interested in working with companies to help them grow their base."
19 Different Streaming Video Revenue Models
App development as a service company Applicaster surveyed 95 professionals who build streaming applications and found 19 different revenue model combinations in use says Devra Prywes, CPO/CMO. If that's not complicated enough, three quarters of those surveyed expect or are considering changing their monetization model. Most will add AVOD, if they don't already do this, to offer lower cost for viewers.
"Our studies showed everyone expected growth," says Prywes. "[Media executives are interested in] experimentation and trying new things. They might not know what they're changing it to, but they know they're going to be trying."
Doing business model experimentation obviously means your technology needs to keep up. "Today's Zype supports advertising, subscription, multi-tiered subscription, purchase, rental and redemption codes," said Bassolino. "There's an entitlement system where somebody would be able to implement the Struum model with a credit based system, or any kind of hybrid model where you have maybe a multi-tier subscription and advertising. We developed it in a way that was undetermined because we didn't know where the market was going to go."
Nineteen different revenue model combinations is a lot. They include various combinations of AVOD, SVOD, TVE and product placement. I think we could argue this is four different revenue models and they seemed to have left out transactional video. Regardless of what the math is, the top combination under consideration was 27% would go to AVOD and SVOD and only 5% going SVOD only. We can safely say that business model experimentation is very actively a thing.
KweliTV: A Case Study in Flexible Monetization
Digital native company KweliTV focuses on delivering stories about black experiences for a worldwide audience. They have a FAST channel, 1-day rentals ($2.99), monthly ($5.99) or annual (49.99) subscriptions.
Every single title on KweliTV is even available for a 24-hour rental. "We know some people may not want to commit. We may not get money from them every single month, but we may get something every quarter," said DeShuna Spencer, founder & CEO, KweliTV. "It's better than getting nothing at all."
KweliTV lets viewers choose whether they want to rent movies for a day, or subscribe monthly or annually.
"Our hope is that once you start seeing more content, [a viewer] will say, 'Wait a minute, I rented three films this month. I might as well subscribe'. That's how we're looking at the pay-per-view model." The company's business model is very diversified. They are developing corporate and education subscriptions and have plans to start doing more AVOD. "We have a huge demo for black men that are very hard to connect with."
Another area they have a lot of involvement with is working with corporate partners to curate content to better understand the black experience "Organizations reach out to us, especially during black history month," said Spencer. Merck previously did a paid subscription, as did GCI health.
While many streaming services typically are more transactional, KweliTV is trying very hard to engage viewers and build a community. Corporate sponsorships are assisting the company in creating offline experiences. AARP sponsored a free screening tour for KweliTV members in six cities. Attendees got to engage with others from their digital community and have a Q & A with local film makers, in real life away from their screens. This is very impressive and is building a much deeper bond to the service.
Build Communities, Build Your Streaming Business
While Facebook, Twitch, and a bunch of other social media platforms have had deep engagement on their platforms for years, Kweli.TV and other streaming services are picking and choosing the things they think will get viewers not only engaged with content, but also interested in engaging with others.
"We see community being an important part of what we're doing," said Spencer. While in-person events have been put on hold, they have done other things to engage members. One event was a hip-hop meditation session with an award-winning poet. "Having these self-care sessions have been really, really great for our customers to connect with each other."
They are planning for a number of interactive features on their site, live chat, and preferred access for members. They also plan on building out the type of content they offer to potentially include wellness, spoken word, performances, animation, anime, and gaming.
"How do you stop the churn? That's where you need to create a deep connection with your audience. What we're seeing with new tools and the new capabilities is a way to deepen that connection," says Louderback. In the panel planning call someone mentioned NFT's. This surprised me, because they so far have seen like a fringe use case and kind of nebulous.
"NFTs are a great example. What do you have that is valuable that people want to acquire and start testing the waters with NFTs," says Louderback. "There's some podcasters who have no more advertising room left in their podcast and they've created a token that they put out there for sale as an NFT. If you buy it, you get five minutes on their podcast to chat with the host. It's already up to about $20,000."
The real value in NFT's are the option to give viewers a monetary investment in your streaming or media company. Previously this was harder to accomplish. "OpenSea and Rarible, are two big platform for creating NFT's. There are companies that will help you as a marketer set stuff up. There's one called Nuarca that is working with NFTs and big companies to help figure that out," says Louderback. "There's a lot of hype out there, so be ready to kiss a lot of frogs."
Kweli.TV has done surveys which show 20% on their customers comes through word of mouth and a big chunk of their customers find them through social media, mostly through Instagram. Kweli.TV has managed to find a formula that really engages their viewers. Building relationships with viewers is a continual process. "Think about it as the net promoter or the brand ambassador who are the 10% of your audience that loves you so much, that they will follow you, wherever you go and will go above and beyond," said Louderback.
In fact, Kweli.TV generated so much interest in their brand ambassador program, they had to stop taking applications. The plan is to have ambassador's help curate and promote content, said Spencer. Whether it's getting help curating content, or giving content to friends, sometimes it's hard to think of viewing content online as a social activity, just because of the nature of what it is.
One thing is clear: We've taken streaming from a one-way environment into a more two-way or interactive experience. Who would think that getting together with a bunch of strangers who liked watching the same kind of content would be popular? Or selling NFT's or using credits to consume content instead of the previous subscription-based models would be appealing?
Streaming has opened up the ability to access very personalised content for viewers. Obviously there's always a balance between whether something is merely interesting and whether it's actually commercially viable. The advertising business has shown us that even pennies on the dollar can add up. The best advice is a very diversified strategy to allow viewers to easily on ramp to your content, staying on top of measuring what works and consider ideas that are only now possible because of our digital economy.
The latest installment of The Streaming Toolbox covers some interesting products that can help build community. They are enabling interactive activities, creating tiered access, and bringing real-life activities online in ways that are working wonders. All of these actions continue to disrupt in ways the old media business could never even have dreamt of. Finally, it's more important than ever to iterate, test and learn, and listen to viewers.
Most OTT services focus on the "lean-back" experience, but streaming can offer so much more. Plus, any media company that leans back while running their streaming business likely won't be in business very long.
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