Niche video programmers have new competition in Netflix and other big spenders

Niche video programmers have new competition in big-pocketed spenders — from Netflix to TV companies seeking to compete with Netflix — that are venturing into more specialized genres.

Netflix recently launched its own animation studio focused on developing and producing shows like “Bob’s Burgers” and “BoJack Horseman” (the latter is a Netflix original series), according to The Hollywood Reporter. Similar to what it has been doing with its live-action shows, Netflix wants to bring more production in-house rather than relying on other studios to produce its original series. CBS, which has a subscription streaming service of its own to program, has also formed an animation division within its CBS Television Studio unit, which will look to sell shows to both CBS All-Access and other linear and streaming video buyers.

With these new studio additions, TV’s content boom remains in full swing as both streaming video giants and their legacy competitors look to lure subscription revenue by enticing people with more and more shows. Last year, the U.S. TV industry aired 487 scripted series across streaming platforms and linear TV networks. That was a record that will be broken again in 2018, with Landgraf projecting that 520 shows will have aired by the end of the year.

The growing original content arm’s race puts niche video programmers in a tougher spot. Digital and linear programmers ranging from Rooster Teeth to AMC Networks’ Shudder and El Rey Network now have competition from bigger names that can write bigger checks for original series, projects with high-profile talent and even licensed fare.

To some extent, niche programmers are still protected by the fact that Netflix and others are only buying or licensing a handful of true niche shows.

“[Netflix’s animation studio] announcement is about controlling costs, creative and [intellectual property] versus them entering into niche programming,” said Daniel Tibbets, president and gm of El Rey Network. “Netflix, CBS and others are overall still focused on general market entertainment. Unless they go after a specific segment, I believe [niche programming] companies will continue to provide a unique and valuable product to the market that has a passionate fan base.”

And these longstanding relationships with passionate fan bases can translate to loyalty.

For instance, Crunchyroll, which recently crossed 2 million paying subscribers, says it’s not concerned by competition because it has established itself as a media brand that supports the anime industry. This is also reflected in the company’s business model. Crunchyroll pays a licensing fee to carry anime programming, but also pays the producers royalties — from both advertising and subscriptions — based on the viewership of their shows. To date, Crunchyroll has paid out more than $100 million to rights-holders, the company said.

“By sharing proceeds back to the licensors, fans see our subscription cost as something that’s healthy and contributes back to the [anime] industry, which can then create more great content,” said Brady McCollum, head of business operations for Crunchyroll.

Beyond royalties, Crunchyroll is also actively creating an anime ecosystem in the U.S. that includes the video streaming service, but also live events and merchandise. Netflix, Amazon and other big spenders might seek to fund or license anime programming, but they’re not going to go as deep into the fandom as Crunchyroll aims to.

“We exploit all the rights: we create merchandise and release those titles on home video, which is something that most big streaming providers don’t do,” McCollum said. “We’re looking to not just have anime as a category, but a deeper offering where we have multiple genres of content within anime. We are being everything to the core fans of anime as well as casual new fans.”

“[Crunchyroll] has been in the business since 2006, they have a 12-year track record of building an exciting content library and understanding their consumer,” added Chris Erwin, co-founder of entertainment advisory firm Doing Work As. “Other streaming platforms have been in the business a lot less.”

Of course, Crunchyroll is helped by the fact that it’s now owned by AT&T and WarnerMedia, big-pocketed spenders in their own right. While WarnerMedia has elected to shut down a few of its other niche streaming services, including DramaFever and FilmStruck, Crunchyroll has captured enough subscribers and continued growth that it remains a prized asset for its parent companies.

New niche streaming services and streaming services that do not have the backing of a big company might find it more difficult in today’s content-heavy environment.

“If you’re starting a niche [subscription video service] today, you’re basically starting a new cable network,” said Evan Bregman, gm of programming and SVOD for Rooster Teeth. “The only difference now is that instead of signing a carriage contract that gives you a couple of cents per sub, you have to work hard for every subscriber you get. And yet, you still have to be funded like a cable network, with a robust slate of programming that gets people to pay you every single month. Of course, it’s not easy, but it was never easy. We earn every single subscriber’s payment every single day of the week because we have to.”

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