Streaming Video Services Attempt to Solve the Monetization Puzzle

"Direct-to-consumer" and "scale" might be the monetization buzzwords of 2018, but what actual strategies increase content services' ability to generate revenue? Companies often won’t talk about their secret sauces, but we got Ellation, Xumo, FandangoNow, and other experts to chime in with insight and advice about how their monetization strategies are paying off.

According to Deloitte, streaming crossed the chasm last year, with 55 percent of U.S. households holding paid subscriptions, compared to 10 percent when the company first surveyed consumers about the topic in 2009. In another Deloitte report called “Digital Media: The Subscription Prescription” (2017), the company predicted that, by the end of 2018, 50 percent of adults in developed countries would have at least two online-only media subscriptions (this includes all media: TV, movies, music, news, and magazines), and this will double to four by the end of 2020. The report predicted that 20 percent of this same consumer group would have at least five paid subscriptions by the end of this year, and by the end of 2020, they’ll have 10 accounts, and their aggregate spend will be more than $100 per month.

There’s been lots of news about how Amazon and Netflix are spending their way to success with their investments in original content. However, not everyone has those kinds of budgets, so the companies we spoke to for this article have gone about things differently. What makes viewers stay tuned and keeps the lights on at media companies? Original niche offerings, easy access, 4K, exclusive live events, well-curated content, and of course, advertising. First, the T-shirt test.

Ellation: The T-Shirt Test

“[About 4 years ago] we had a strategy to build not just Crunchyroll but a ton of other different SVOD [subscription video-on-demand] properties focused on niche passion audiences; everything from arts and crafts to auto enthusiasts to Korean drama. While we were going through that strategy we realized that everybody was going and trying to do the same thing,” says Eric Berman, head of content partnerships and business development at Ellation, which owns anime SVOD service Crunchyroll.

Ellation decided consumers didn’t need more single-purpose apps. Instead, the company built VRV, a fan-focused aggregation platform where other complementary niche SVOD properties could reach their audiences without needing to hire large engineering or product teams to work on audience development. VRV works with traditional linear partners to deliver anime, gaming, tech, and cartoon content, and it continues to grow the breadth of its offerings. “At VRV we have something called the T-shirt test. For every brand that we bring on the service you should see someone walking around a mall proudly wearing that logo on their shirt, because it defines who they are as a person,” says Berman.

“Our users come for what we call appointment viewing,” says Berman. Each quarter, Ellation acquires 30 to 40 new series directly from Japan. Each season is 20-plus episodes, and each episode can range from 22 to 44 minutes in length. This binge-worthy content keeps viewers tuning in.

Behind the scenes, Ellation is using data-driven insight to shape everything on its platforms. “Establishing a data-driven decision platform is probably the single most important technology innovation that a streaming video business should work to take advantage of,” says Michael Dale, VP engineering, Ellation. “There have been several innovations that have facilitated better surfacing of actionable data, and leveraging these data points has helped our video streaming business succeed.” Those innovations include data normalization and server-side data integration via companies like Segment and Datazoom. Dale says Ellation was able to integrate with those platforms in a matter of weeks instead of “[what] would otherwise be a massive cross-platform integration project to build and maintain.”

These data platforms enable Ellation to measure the video experience against metrics such as the impact of video quality on churn or how the number of ads impacts minutes watched by viewers over time.

“We send most data into a central hub that lets us pipe video view events into several services for everything from targeted messages to user journey funnels that help us model our users into behavioral cohorts for further analysis,” says Dale. “[We can] connect the events into our marketing CRM similar to how we connect in our data analytics platform. This can enable triggering an email to users that experienced a streaming issue through the same system as other customer messages.”

VRV has a million monthly viewers, a good portion of whom are watching ad-supported content. Viewers can subscribe a la carte to individual channels or buy an unlimited, ad-free subscription called VRV Premium for $9.99. “It’s the only bundle that exists of all of these channels in one place,” says Berman. The pricing is fixed, so viewers get the benefit of new content without seeing the price go up each time Ellation adds new partners. That’s good news for viewers, especially Nickelodeon fans. This past summer, VRV launched an exclusive NickSplat channel from Nickelodeon featuring almost 300 episodes of nostalgic, animated content, and Dale says the company is beginning to partner with other linear cable channels.

Xumo: The Non-Skippable Business Model

Xumo is a 100 percent-ad-supported video-on-demand (AVOD) platform that was launched 4 years ago. It now has 141 channels and more than 2,000 advertisers, and 20 percent of its audience members have cut cable altogether since they started using Xumo, says Anthony Layser, VP of content partnerships and programming.

“We currently have five partner-branded movie channels and one white-label free movies aggregated channel. More TV and film content channels will be on-boarded in the coming months,” says Layser. “Monthly active viewers (more than one session) watch for over 3 hours per month on average.” Xumo is scheduled to have two or three new 4K channels coming soon.

Layser says Xumo’s app is preloaded on LG, Hisense, Sharp, and Vizio TVs, and is installed on 20 million devices in 4 million U.S. households. “Over 90 percent of Xumo users are watching on a connected TV. This means that longer-form content, live news, sports, and higher-production-value content create the highest engagement times on the platform,” he says. However, anyone can download the Xumo app with or without a TV.

With LG, Xumo introduced the white-labeled Channel Plus. “This is integrated directly into LG smart TVs and automatically populates our channels once [the TV is] connected to the internet,” says Layser. Xumo’s secret sauce is that consumers access premium channels from their start-up menu without the cost of cable or subscription-based OTT (over-the-top). “We also tailor their experience, with our smart system learning from viewing behavior, then serving more relevant, preference-based, on-demand content.”

The Channel Plus service has really paid off for LG. “Average viewing has more than doubled [from] January 2017 to today,” says Layser. The audience has grown to 900,000 monthly active viewers, which accounts for 25 percent of Xumo’s total monthly viewing. LG has seen a 38 percent increase in sales since the Xumo integration first started appearing on LG devices in January 2017, says Layser.

“Xumo sells in-stream advertising both direct and programmatically, and shares revenues with our content partners,” he says. The direct sales team emphasizes millennial-focused campaigns. “Over 70 percent of our audience can be categorized as a light TV viewer or cord-cutter. So our audience tends to be tech savvy twentysomethings,” says Layser.

The combination of the audience demographic and high ad completion rates on connected TVs (95 percent of ads on connected TVs are completed, according to a SpotX study from 2017) makes Xumo very compelling to brand advertisers. “The non-skippable connected TV ad experience is very valuable inventory,” Layser says. According to a survey conducted by consulting firm Advertiser Perceptions, 78 percent of marketers plan to buy ad inventory on streaming TV in the next year, which is good news for Xumo and anyone delivering on those devices.

What resonates best with the audience? “We have various different promotional units within the different Xumo UIs. Bold graphics promoting on a content/series level as opposed to a channel level tend to have higher click-through rates, especially if it’s timely or new content,” says Layser. Next year there likely will be more in-depth information about how Xumo is doing, as Nielsen recently announced that it would be including Xumo’s viewing figures in its measurements, says Layser.

FandangoNow: 4K Content Curation

FandangoNow has been in business for about 5 years, offering pay-per-view transactional video-on-demand content that its website says is “new releases not on Netflix, Hulu or Amazon Prime subscriptions.” In addition to serving the home entertainment market through FandangoNow, Fandango is an ecommerce site for purchasing movie theater tickets. Like Xumo, when Fandango was looking for a way to differentiate its service, it turned to the consumer electronics device manufacturers to find out about what trends they thought were important.

Those device manufacturers believed that consumers were consciously moving toward purchasing 4K TVs, says Cameron Douglas, VP of home entertainment at Fandango. “There was short-form television content in 4K, but not a lot of movies. We aggressively reached out to all the major studios, indie partners, and everybody in the industry we could talk to secure 4K content,” he says. “We now have a comprehensive catalogue of 4K content from essentially every partner available. We have a team that selects, merchandises, and curates the content on a daily basis. The content that we present to our consumer base is consciously chosen for our audience by our staff.

“This [past] summer we had 50 essential summer movies. We found the great iconic movie set and filmed in every state from Alabama to Wyoming,” says Douglas. The result was a lot of consumer engagement in social media debating the merits of each film selection. “It actually surfaced catalog content in a fresh and interesting way that we wouldn’t have been able to have done by ourselves.”

“One of our more innovative technical crossovers is our loyalty program with redeemable points across all our properties—theatrical, home entertainment, and consumer products—via Fandango, FandangoNow, and Fandango FanShop. You collect points on ticket purchases and you can use them on any of our properties,” says Douglas.

It doesn’t hurt that Fandango has deep roots in merchandizing and ecommerce, with a whole range of consumer-focused incentives to keep customers coming back for more.

“The biggest challenge was in creating a program where consumers can use points against three different business units. We needed to consolidate information from three different back-end systems. This includes figuring out how many points you have, handling returns and exchanges, and reconciling information from three different systems. It’s pretty complicated stuff, but it’s worked out beautifully as a great way to reward our loyal customers and encourage trial [use] for FandangoNow.”

Live Tentpole Events

Broadcast Management Group helps broadcasters and other media companies stream live broadcasts. The company recently helped TD Ameritrade launch a new channel delivering 9 hours of live programming a day, and it broadcasts a lot of tentpole events, like coverage for the Emmys and the Oscars. What monetization tips does CEO Todd Mason have?

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