Yesterday pay-TV network EPIX announced a multi-year distribution deal with Hulu that will kick in on October 1st, as EPIX’s current deal with Netflix phases out.
Perhaps most noteworthy here is that in the current Wild West environment where everyone and their brother are launching standalone SVOD services, EPIX has remained disciplined in choosing to instead team up with a large SVOD player (EPIX has a separate SVOD deal with Amazon dating to 2012 as well).
Back in August, 2010 when EPIX did its initial SVOD deal, with Netflix, the only decision was whether to strike an SVOD distribution deal or not to. The option of launching a standalone SVOD service was virtually unheard of, not to mention seriously frowned upon in the pay-TV community.
Flash forward 5 years to today and it’s a whole different ballgame. High-profile standalone SVOD launches by HBO and Showtime are just the tip of the iceberg as the numerous cable TV networks, sports leagues, and online aggregators have introduced a huge variety of SVOD choices.
But in this gold rush, there are ample reasons to be cautious about launching yet another SVOD service. First is recent research showing high levels of churn even for the most established SVOD services. As I explained, the ability to binge-view combined with the frictionless “easy-in/easy-out” nature of online access means that many “subscription” VOD services may in fact end up being more like “transactional” VOD services. Obviously losing the stability of ongoing subscriptions would be very disruptive to an expense structure predicated on them.
Further, as Sesame Workshop’s decision to partner with HBO - and de-emphasize its own nascent SVOD service - demonstrated, even the most well-loved and well-known content brands face a steep challenge in scaling awareness and revenue. The fact is SVOD has quickly become a land of the giants - carving a niche against the broad-based, yet inexpensive Netflix, Hulu and Amazon services is more difficult than ever.
No doubt given the flurry of SVOD launches EPIX management took a long hard look at starting their own. Wisely they decided not to. Even though EPIX has a stable of popular movies (“Hunger Games,” “Transformers,” etc.), it still lacked many of the core technology, customer service and marketing components to make a serious run at a standalone SVOD service without huge investments.
EPIX’s decision to partner with Hulu is further evidence of how well-established the ground rules of the SVOD industry have already become.