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OTT Channels and the Riches in the Niches

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Damian Pelliccione: How powerful is your brand and what audience does it speak to? I go back to what you'll hear me say in an investor pitch: the riches are in the niches. If you can command a niche audience control that pipeline of content, which we do at Revry, we have what we call an exclude, an LGBTQ exclusivity. We have it on our content. We have it with our FAST channel deals and we have it with our technology partners. So no one can replicate our service or what we do because we spent so much time building the television network brand that is Revry. So we're owning and commanding this funnel for this special interest. And I think the more special interest content and the more special interest channels that you can spin up, then there's another flip side to this. We bring an entirely new audience to Samsung TV Plus that was not their typical user, that they did not have data on before.

So, by virtue of bringing that new audience--a very affluent audience worth $965 billion in disposable income in the U.S. and $5 trillion globally. If you bottle the LGBTQ economy, it's the 12th largest economy in the world. It's undeniable.

Erick Opeka: I would agree with Damian. I've been through multiple cycles of this kind of environment before where there's vertical integration. Everyone just saw the paramount consent decree has essentially been voided because vertical integration with theaters is no longer the case. But I think there's an environment now, where I think we're probably a facing a regulatory environment down the road where controlling both distribution and then all of the content on the platform is incredibly monopolistic in practice and is likely going to hit regulatory issues down the road. It happened in broadcast television, and it happened in theaters. And if, knock on wood, you have a Democratic Congress and so on. I would suspect that a lot of this very deep, vertical integration of content and distribution is going to be at some considerable risk because it's a serious conflict of interest. It's self-dealing, and it's not tolerated. And in the cable environment is heavily regulated. I think we'll see more regulation around that in the OTT environment, but put that aside for a second, because it may be unfair for awhile. But as Damian said, as the big platforms look to do vertical integration--take a look at Netflix. Every time they enter a market, enter a niche or vertical, it scares the hell out of everyone who makes their money in that vertical.

But what you end up finding out really is they cream off the top 5% of the content, the users, the big money, and they leave 95% unfilled. That happened in the anime space. Netflix came in and carpet-bombed with money and bought Yu-Gi-Oh! and other big shows, but they left huge gaps in the market that allow for a very flourishing environment for Funimation and CrunchyRoll and HighDive and others to really survive. I would call it the mile-wide, inch-deep strategy. The big guys come in, carpet-bomb with half a billion dollars, and take off some of the really pristine content, but they can never super-serve the niches because there's too many niches to super-serve. And when we talk about a niche--you think about cable. Cable and linear were really built on niches. It's evolved over time into the TNTs, and the TBSes in the evolution that history has made, really because these are part of public companies tha have to show massive profit growth year over year over year. I think there's room for a very robust niche. But I do agree that you can't be wholly dependent on any one platform. I think that's a recipe for really getting yourself in a jam if that platform wants to compete head-on with you.

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