OTT leaders outline different paths through the pandemic and to profitability

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There’s no one template for taking over-the-top video services to sustainable success. Three executives at smaller OTT services shared that lesson in a round of interviews that closed out FierceVideo’s OTT Blitz Week virtual conference.

First up, FuboTV CEO David Gandler explained to Alan Wolk, co-founder and lead analyst at TV[R]EV, how that service had built a business starting—but not ending—on viewers’ fondness for sports.

Gandler said sports were a key to the game for Fubo at its 2015 launch, but the service soon realized it had to diversify its content.   

Sports alone is not enough to sustain a 12-month subscription,” he said. Fubo now offers a spread of channels that approximates that of a legacy cable or satellite service, making it what Gandler called a “sports-first cable-replacement product.”

That expansion of Fubo’s menu—including it finally landing ESPN—has also left it vulnerable to some of the same inflationary pressures. Its rate is about to rise from $55 a month to $65 a month.

Gandler blamed consolidation in the entertainment industry: “You have fewer media companies who are all merging, so they’re going to sell you all of their content or none of their content.”

But, he added, there’s also a history of those firms charging higher rates to each new group of TV providers: “New entrants have always paid more.”

The second speaker, Xumo CEO Colin Petrie-Norris, explained how he’s been able to keep that service’s mix of entertainment and news channels subscription-free through automated curation and cultivating its advertising business.

Both efforts, he told FierceVideo editor Ben Munson, are now generating yields per hour that Xumo’s channels find “rivals what they can earn from subscription services.”

Petrie-Norris credited Elixir, the software Xumo built to manage its growing menu of content and optimize its ad targeting and tracking.

The advertisers are enjoying the accountability we provide,” Petrie said.

That’s despite Xumo’s unusual absence of any requirement to create an account.

We don’t even ask for an e-mail address!,” he told FierceVideo editor Ben Munson. There’s no friction to using the service.”

Comcast found Xumo’s work impressive enough to buy the company in February, just in time for Xumo to help with NBCUniversal’s launch of its Peacock streaming service.

The last speaker, Philo CEO Andrew McCollum, pitched a middle ground between those two: That OTT service keeps its subscription cost down to $20 a month by avoiding sports channels and their escalating costs.

We took the strategy of moving away from sports and really focusing in this entertainment/lifestyle/news package long before coronavirus happened,” he told Joan Solsman, senior writer on tech and media at CNET.

That freed Philo from having to sell service at a loss and hope funding rounds can cover the difference: “We used to have a slightly cheaper package, but we haven’t raised our price since we launched over two and a half years ago.”

McCollum said this has paid off with a boom in subscribers—over 80% so far this year, 300% the year before. He expects the economic pressures of the coronavirus pandemic to make his service more appealing, along with new support for synchronized viewing across multiple viewers.

They may, however, face a rate hike at some point.

We’re not completely immune to rising costs,” he said, citing annual increases specified in typical programming agreements of from 5 to 8%. “That’s larger than the increases in costs of housing, health care and higher education, which are typically labeled the worst offenders for rising prices.”