Market Insight

NBCU’s transition to genre-specific D2C strategy reflects broader trend in SVoD market

February 12, 2016  | Subscribers Only

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US media group NBCUniversal (NBCU) has unveiled a new reality-themed subscription video-on-demand (SVoD) service, branded Hayu, which it will launch in the UK, Ireland and Australia in March. Available on a rolling contract for a monthly fee of £3.99, €4.99 or A$5.99, the cross-platform service will feature more than 3,000 TV episodes from shows such Keeping Up with the Kardashians, Made in Chelsea, The Real Housewives and The Millionaire Matchmaker, including full boxsets. The majority of US shows will be made available on a day-and-date basis.

The unveiling of Hayu comes a month after NBCU launched comedy-themed SVoD service Seeso in the US. Key selling points of this offering include a $3.99 monthly price tag, original series, access to a range of stand-up and scripted comedy from the US and abroad – including episodes of The Tonight Show Starring Jimmy Fallon, Late Night with Seth Meyers and Saturday Night Live the day after first broadcast – and HD streaming.

Our analysis

NBCU’s direct-to-consumer (D2C) video strategy is taking shape, as the group branches out into genre-themed over-the-top (OTT) video services. It already competes with more mainstream offerings in the SVoD space, in particular via Hulu in the US. NBCU has a 32% stake in the platform, but no influence over management as a result of regulatory conditions imposed following cable operator Comcast’s acquisition of NBC in 2011. Hulu is certainly a significant player in the US SVoD market, with 10.8 million subscribers at the end of 2015, according to IHS Broadband Media Intelligence. However, NBCU’s lower-profile PictureBox Films has made less of an impact. Launched via several pay TV platforms in the UK and some Eastern European and Latin American markets in 2006, the VoD offering has evolved into a OTT SVoD offering but lacks an appealing enough catalogue to compete with the likes of Netflix.

Catering to niches not served by the leading OTT players will be key as channels – and, more broadly, newer SVoD players in general – seek to hedge their bets in the evolving TV landscape and move into D2C service provision. The first wave of the SVoD revolution has seen Netflix crowned the undisputed king, and attempting to compete with the OTT giant and rival Amazon with ‘me too’ movie-and-entertainment-themed offerings will be a tall order for channel owners – unless they can offer a truly premium offering. HBO, which this week announced 800,000 subscribers for its HBO Now D2C service, is one of those who can.

Differentiation from Netflix will therefore define the next wave of pure OTT offerings coming from traditional media players. Pay TV operators, for instance, are in many cases playing to their strengths by offering aggregated linear channels – particularly live sport – alongside VoD libraries. Channel groups and content owners, meanwhile, are targeting specific audiences with themed offerings, such as: Disney’s family/kids-oriented DisneyLife (launched in the UK in December); AMC’s horror SVoD service Shudder; WWE’s professional wrestling streaming offering WWE Network; and the more niche anime service Crunchyroll. NBCU’s Hayu and Seeso may not have the broadest appeal, but they have a clear and somewhat unique appeal to fans of these genres.

The appeal of more generalist services that fail to effectively serve a niche that could not be satisfied by Netflix or another OTT aggregator is more questionable. A&E’s Lifetime Movie Club, which, for a monthly cost of $3.99, provides access to films that have aired no less than a year earlier on the Lifetime cable network, is an example of a service that could struggle to achieve scale as it does not appear to offer something different enough to stand out.

Diversification into D2C video will become increasingly necessary for channel groups and content owners, as they seek to safe-guard their businesses against potential cord-cutting and the rise of pay TV lite ‘skinny’ bundles. With a broader range of pay-video options available to consumers than ever before, competition for spend will be intense, with households likely to spread their audiovisual entertainment budgets across a variety of services. This could include any combination of:

  • Traditional pay TV
  • OTT 'pay TV lite'
  • Aggregated OTT SVoD
  • D2C services from established channel/content brands
  • Niche, genre-themed offerings.

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