A new streaming service launches every week it seems. Most recently, Fullscreen, Spotify, go90 and YouTube Red join more established players like Netflix, Hulu, Crackle and Dish Sling. But the economy for subscription and direct-to-fan is split into two buckets — the professional streaming businesses that look like television and the creator-driven channels meant to increase personal revenue growth and greater ownership of the creator-fan relationship. Powering both are companies like Zype and VHX, the business recently acquired by Vimeo.
Today, only three weeks after the acquisition was announced, VHX is rolling out in-app subscription channels on iOS. It’s a small move, and a feature that has been available to creators and publishers using Zype for over a year but, according to VHX co-founder and Head of Product Casey Pugh, VHX has “already seen success with one of our top sellers — viewers who find their app in the app store are 33% more likely to start a free trial than viewers on the web.” Basically, VHX clients will be able to better convert Apple or Roku users to paying subscribers and enable greater revenue for video sellers.
And conversion of audience at a time when the market is becoming increasingly cluttered will be crucial for independent creators as well as professional publishers.
“There are a lot of services launching and the market is getting much more crowded from a mind share perspective and so each new service has it harder, from that lens, to break out,” said Tom Pickett, CEO at Ellation, the digital holding company under The Chernin Group’s Otter Media that operates subscription streaming service, CrunchyRoll.
So far, both Zype and VHX have seen success in coverting YouTube subscribers to paid users. Many of Zype’s YouTube clients, for instance, have seen an average conversion of 2% (for channels with over 100K subscribers) within the first two weeks and a consistent 2–4% audience growth week over week. The numbers aren’t necessarily massive, yet, but for an indie creator, revenues and the 1:1 relationship might merit such efforts. VHX client Black&Sexy TV, a channel with 100K+ subscribers, has been able to increase their direct-to-fan revenue to upwards of $35K/month, and are on track to make over $1M in revenue this year from its VHX-powered streaming destination alone.
It’s still early days but with numbers like that, one can see how the business can work for indie creators. The larger question at play is how many apps and services is a user willing to navigate between and moreover, how many are they willing to pay for, as audiences become increasingly siloed and disparate. (See below for pricing models of most major streaming sites)
Last summer, Nielsen reported that there were 151 million unique users accessing apps on a regular basis (Q4/2014), using upwards of 26 apps on average in a given month. Later in the year, Comscore reported that users are only engaging with three apps, with 50% going towards a primary app, 18% on a second and 10% on a third, accounting for 80% of time spent in apps. Obviously, this doesn’t solely account for streaming or entertainment-based apps nor viewing on smart TV’s, connected devices and desktop, but it can shed some insight onto general user behavior and loyalty.
But for Ed Laczynski, CEO and founder of Zype, app behavior becomes less important when comparing the potential for what he calls “wallet share.” He says Zype’s clients are experiencing growth because the cord-cutting and cord-nevering trend has “opened up $1500 per year per household available for these services,” and “until that wallet has been spent, [there will be] growth in these areas.” Once that last dollar is spent, Laczynski believes “that’s when we’ll see fatigue. But we’re just going into the first inning of that movement.”
So just how much are these services charging? On average, higher end premium services have been priced at around $9.99. More recent entrants into the space have lowered prices to around $3.99, in the case of Seeso, and $5.99 for Fullscreen. At the top end are companies like Tidal, which charges up to $19.99/month.
“There will be a long tail for these types of services,” added Pickett. “But for any individual there is a finite limit to how many they will subscribe to.”
With Netflix, Amazon Prime, Hulu, Spotify, and HBO Go/Now alone the user would be approaching upwards of $500/year already, not accounting for a $50-$100 internet bill. That leaves about half of the “wallet share” open for business as new generations phase out of a cable bundled system into an ala carte, get-it-when-and-where-you-want model.
According to a new report from StrategyAnalytics, “U.S. consumers will spend $6.62 billion on video streaming services such as Netflix, Amazon Prime and Hulu in 2016. Although this represents a $1.19 billion (or 22%) increase on 2015, it’s the first time ever that the $ increase in the amount people spend on these services will be lower than the previous year’s increase — in this case, the $1.21 billion increase in 2015.”
Vimeo, with VHX, will aim to help creators, like Jack Vale, get a piece of that pie. Publishers and talent including Anthony Cumia and Digital Media Rights are already using Zype to try and grab market share as well.
“Millennials and the generation behind them arent going into the world with that levy on their bank account,” says Laczynski. “They are starting with these services — the internet and the things they subscribe to. That turnover is going to take some time but it’s happening already. Cord-cutting is driving [the shift] and cord-nevering is cementing it.”
As the wall comes down between television and digital, it can be anticipated that the gold rush for subscription video and hybrid business models will continue to surge, as legacy networks and studios work to recapture the remaining “wallet share.”
A list of subscription and ad-supported streaming services and their offerings:
NameSubscription PriceRevenue ShareAdsAcorn TV$4.99/month or $49.99/year.N/ANoAmazon Prime (subscription and transaction)$79/year- Transaction; $99/year Subscription50/50NoCBS All Access$5.99 a monthN/AYesComcast Stream$15 a monthN/AYesCrackleFreeN/AYesCrunchyroll$6.95–59.95 a monthN/AYesDailymotionFreeUp to 70% on AdsYesDish Sling$5- $20 a monthN/AYesDramaFever$.99-$9.99 a monthN/AYesFullscreen1 month Free, $4.99 a month afterNogo90FreeYesGoogle Play$9.99 a month30/70YesHBO Now/Go$14.99 a monthN/AYesHBO ODHulu$7.99 per month or $95.88 per yearN/AYesiQiyiiTunes$9.99–14.99 a month30/70YesNetflix$7.99 per monthN/ANoPatreonPledge Data $1 pledges account for 33% of all pledges $5 pledges account for 22% of all pledges $10 pledges account for 10% of all pledges $10 pledges and below account for 90% of all pledges Creator Earnings Data 5.2% of creator earnings come from $1 pledges 33% of creator earnings come from $5 and $10 pledges combined 50% of creator income comes from $10 pledges and below 26% of creator earnings come from $50+ pledges (2% of all pledges) 15% of creator earnings come from $100+ pledges (0.65% of all pledges)YesSeesoFreemium / $3.99N/AYes, without subscriptionSpotify3 months for .99- $9.99 a month afterNoVessel$2.99 a month30/70YesVimeoFree- $59.95 a year10/90YesVudu99 cents to $5.99 to rentYouku tudouYouTube$0.99 per month45/55YesYouTube Red3 months for .99- $9.99 a month afterNo
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