Smaller cable TV channels appear to have a shaky future in the wake of this week’s Disney/Charter deal, in which Charter Spectrum was allowed to drop Disney Junior, Disney XD, Freeform, FXM, FXX, Nat Geo Wild, and Nat Geo Mundo from its lineup.
But on the subscription-based video-on-demand (SVOD) side, the major “premium” services’ shift to ever-more “mass” strategies so as to achieve profitability — including consolidating their brands, broadening distribution for the core streamers, and focusing on programming with wide, even international appeal — has, at least up to now, created opportunity for specialty SVODs focusing on more targeted audiences and promotion strategies, according to Antenna.
Subscriptions for 25 specialty streamers tracked by Antenna have quietly grown at a 37%-plus compound annual growth rate/CAGR for the past four years, significantly outpacing the premium SVODs’ itself impressive 21% CAGR (chart above). At the end of 2019, Antenna counted 10 million subscriptions to specialty SVODs, or 7% of the premium-plus-specialty SVOD total. By June 2023, that number had grown to 28 million, or 11% of the total.
Specialty SVOD is significantly more fragmented than the premium category. The largest among those tracked, AMC+, accounts for just 11% of total specialty subscriptions. BET+, MGM+ and BritBox are the next-largest players. MGM+ was the only service that grew by more than 1 million net adds over the past year. BET+, Crunchyroll, and AMC+ were the next-largest growers.
As with premium services, the proliferation of streaming choices has significantly exacerbated subscription volatility for specialty services. Antenna counted 6.6 million specialty cancels in this year’s second quarter — up 65% versus Q2 2022 and a whopping 130% compared to Q2 2021. On the flip side, gross additions of 6.8 million in Q2 2023 represented a 26% increase versus Q2 2022 and a 45% increase versus Q2 2021.
Increased volatility means higher churn. Specialty SVODs’ average weighted monthly churn doubled from 4.5% at the start of 2019 to 9% in June 2023. Similarly, premium SVODs’ churn rose from 2.6% to 6.1% during the same period.
Still, specialty service subscriptions continue rapid growth, with no indication that they are approaching their ceiling, says Antenna. Since the start of 2022, an average 2.4 million unique individuals per quarter have subscribed for the first time to any of the 25 specialty SVODs — higher growth than during the COVID lockdowns.
The 169 million unique U.S. individuals who had cumulatively subscribed as of June 2023 to one of the 35 total SVODs tracked by Antenna was up from under 90 million at the start of 2019 — up by 80 million, or 90%. Within specialty SVODs, the growth rate was an explosive 400%, from 8 million combined subscribers at the start of 2019 to more than 40 million by mid-2023. This means that 32 million U.S. consumers have entered the specialty SVOD subcategory in the past 4.5 years.
Of the 169 million consumers who had transacted with an SVOD service as of mid 2023, 24% had done so with a specialty service. That’s up from 9% as of the start of 2019, and the growth in penetration has shown no signs of hitting a ceiling, reports Antenna.
Looking at distribution strategies, SVOD services are far more reliant than premium SVODs on third-party distributors, and Amazon Channels, in particular. Two of of every three specialty SVOD subs measured are generated through Amazon Channels, compared to just 9% of premium SVODs.
Nearly two thirds (62%) of individuals with two or more specialty subscriptions have all of their subscriptions through Amazon Channels, and about one in four use a mix of distributors.
Among those with two or more premium subscriptions, two in three have a mix of distributors, and another 22% subscribe directly through with the services. Only 2% use Amazon Channels exclusively.
While this is heavily influenced by services’ availability on different platforms—only five of the 10 premium SVODs tracked are distributed via Amazon Channels, and Netflix and Hulu are almost completely direct —this still suggests that consumers are willing to find premium SVODs wherever they are distributed, but are more likely to stick with their preferred distribution platform when selecting subscriptions to specialty services, the analysts point out.
The full report can be downloaded online.