• Sesame - HBO Deal Also Underscores Difficulty of Niche SVOD Model

    When Sesame Workshop announced its deal with HBO last week, everyone seemed to have an opinion about whether another “poor door” had been created, this time for Elmo and his iconic friends.

    It’s an interesting societal debate, but what was more intriguing to me was that Sesame’s deal with HBO signaled that its own SVOD efforts had not delivered material results (and with the new HBO deal, I’d guess will likely be phased out at some point). That in turn reinforced my belief that the niche SVOD model is extremely difficult given the rise of “super” SVOD services like Netflix, Amazon and Hulu.

    Sesame launched its own SVOD service, “Sesame GO,” in April, 2014, as an ad-free option to access current season and library episodes of some of its most popular series. Sesame GO was priced at $3.99/month or $29.99/year. It was initially a desktop-only service, though last November it was renamed “Sesame Street Go,” when iOS and Android apps were introduced.

    When Sesame GO launched I wrote that it was a key test case for the viability of standalone, niche SVOD services. Making things even tougher on Sesame GO, it was treading into an intensely competitive online space where Netflix, Amazon and Hulu had invested heavily in both licensed and original kids content, clearly seeing this as a key enticement for young families to subscribe (HBO clearly nows sees the benefits of kids programming too as it seeks to build up HBO NOW).

    The effects of these investments were clear all the way back in Feb, ’14 when I described how the super SVOD services had decimated viewership of kids’ cable networks. The situation has only worsened for kids cable networks since then, with the super SVOD services completely upending kids’ viewing behaviors and expectations.

    More broadly, Netflix, Amazon and Hulu provide access to vast content choices, and for their low monthly rates, offer an increasingly compelling value. Beyond content choice, these services have strong mobile apps and integrations with connected TV devices, making access virtually ubiquitous. They also allow multiple simultaneous streams per account and are promoted with massive marketing budgets, driving international brand awareness.

    All of this makes the viability of standalone SVOD options a long shot. The super SVOD services have raised the bar extremely high in terms how much investment is required to launch a successful SVOD service and what constitutes a compelling consumer value proposition. In this light, did an independent, budget-constrained organization like Sesame Workshop ever really have a chance of achieving huge success with its own niche SVOD service? Probably not.

    Yet the super SVOD players’ success has spurred a gold rush of niche SVOD players seeking to cash in. Given the above realities, growing to a sufficient scale seems like a long shot for most of them. One example is Acorn TV, a well-defined SVOD service focused on British TV shows, which, as my colleague Colin Dixon pointed out, took 5 years to reach a mere 150K subscribers.

    Still, with unrelenting pressure on the advertising model these days and concern about cord-cutting mounting, I’d guess that we’ll see even more niche SVOD services launched in the near future. My advice to any of these niche SVOD aspirants is to do plenty of cold-eyed analysis about potential market-size and required investment to reach target milestones.

    SVOD has quickly become the province of giants. As Sesame quickly learned, it’s likely far better to find a partner than trying to go it alone.