For a few years now, massive streaming services like Netflix (NASDAQ:NFLX) have shared space with tiny niche offerings in the streaming video market. While the big dogs have been battling, little services like AMC Entertainment Holdings' (NYSE:AMC) horror-only streaming service Shudder have been able to carve out niches in the streaming market.
But the long-term viability of such niche services remains in question, particularly after AT&T's recent decision to shutter three niche streaming services. Its WarnerMedia shut down classic film service FilmStruck in late October after shuttering DramaFever, which served up mostly Korean drama, and comedy-focused Super Deluxe in mid-October.
Shudder and other niche services are still soldiering on, but can they survive?
Niche streaming services' challenges
Niche streaming services aren't necessarily the easiest businesses to keep afloat. Their small user bases make their margins thin, and they have to compete with the big boys for streaming licenses. Unlike Netflix and other giants, niche streaming services don't have audience inertia on their side if they choose to dabble in original programming, which can be more lucrative. And few do such dabbling.
For the most part, the purpose of niche services is to be a destination for a type of licensed content that may not be in great enough supply on major platforms.
Getting the right licensed content and keeping users loyal is tough to do, especially on a budget. And since niche services are generally something people buy to supplement their main streaming service, they can easily be cut by cost-conscious consumers and many folks are worrying we're headed into tough economic times that will put budget cuts on people's to-do lists.
That's why AT&T's decision to kill off newly acquired niche streaming services made so much sense. And challenges like the ones above are why Comcast Corporation's Seeso, a comedy-only service, failed in 2017: reports indicated that Seeso's user base simply wasn't big enough for it to turn a profit.
Fellow fool.com contributor Adam Levy reported that DramaFever had more than 20 million viewers and that FilmStruck had estimated there were 10 million to 15 million people who'd want to pay for the content. Super Deluxe reportedly had 52 million monthly users.
In the long term, these problems seem likely to come for Shudder, as well as for AT&T's anime-specific Crunchyroll, independent- and documentary-focused CuriosityStream, and other single-genre and niche streaming services. But is there a way for such services to dodge that fate?
Hubs and the future of niche services
Surviving as a niche service means finding a niche audience and keeping costs down. One possible way to do that is to rely on other, larger services as platforms on which to distribute content.
CuriosityStream -- which bills itself as "the home of award-winning documentaries," with plans starting at $2.99 per month -- illustrates this approach. Initially launched with a heavier focus on its own app, CuriosityStream now appears to rely heavily on reaching users through other services. Though CuriosityStream has not made breakdowns available, the importance of outside marketplaces as brokers is made clear by the company's actions.
CuriosityStream has significantly expanded its subscription options since its launch, and is now available as an add-on to DISH Network's live TV "skinny bundle" service, Sling TV, as well as through Amazon.com's video subscription marketplace, Amazon Channels.
Crunchyroll, too, is available on Amazon Channels. So is Shudder, at least usually -- a recent absence from the platform triggered questions for AMC Corporation's brass during the recent conference call.
COO Edward Carroll responded:
For Amazon, generally as you know, we do business with them all around the world. They are a great partner. It is a commercial relationship and sometimes we experience bumps in the road over deal points. To your question as it relates to Shutter and Sundance Now, I would say we are all but done on the major deal points. We have resumed our normal relationship with Amazon on the platform.
In that call, CEO Joshua Sapan told investors that Shudder had "doubled its member numbers over the past year and it's on track to double again this year. We're also seeing subscribers spending more and more time on this service... "
There is, however, a potential long-term problem in relying on streaming "hubs" for distribution. That problem, of course, is that the hubs that services like CuriosityStream rely on to reach subscribers are in some cases run by the very same companies that niche services compete with for content deals. At some point, Amazon may decide that it would rather offer its own documentary subscription service or roll more documentaries into its existing Amazon Prime Video offerings. Maybe Amazon would move to put the competitive squeeze on CuriosityStream at that point, or maybe Amazon would try to buy CuriosityStream out. Either way, it would be a moment of consolidation and a blow to the long-term prospects of a niche streaming market.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Stephen Lovely owns shares of Amazon, AT&T, and Netflix. The Motley Fool owns shares of and recommends Amazon and Netflix. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.