Both Charter and Redbox are charting a course for video aggregation platform waters but that market is already infested by some hungry sharks that could make entry difficult.
Charter and ViacomCBS this week reached a new distribution agreement that includes licensing for Paramount+, Pluto TV, BET+ and Noggin. Tom Montemagno, executive vice president of programming acquisition for Charter, said the inclusion of ViacomCBS’s streaming services advances his company’s interest in an aggregated video store concept, which is something that CEO Tom Rutledge has mentioned before as an option for his cable company.
At the same time Redbox—which is preparing to go public—shared with industry analysts its roadmap for expanding its digital business, which includes launching an integrated channel store for subscription streaming and premium video services by the second quarter of 2022. Redbox plans to partner with third-party services to provide a unified billing and playback platform along with access to its large customer base—which includes 39 million total members and 13 million active members—in exchange for a share of recurring subscription revenues. The company has already market tested bundling Redbox and Showtime OTT together and said the more than 62,000 people bought in.
Both Charter and Redbox seem to have similar aspirations but the SVOD aggregation hub business model is already a popular one that’s currently being dominated by Amazon, Apple and Roku.
According to MoffettNathanson, there are approximately 195.6 million paid domestic subscribers, with 70% of those coming in through direct relationships and 10% coming in through telco and cable partnerships. The other approximately 20%, or roughly 38.4 million subscribers, come in through Amazon, Apple or Roku. That’s a big chunk of the equation that may struggle to get bigger as SVODs increasingly value direct relationships with their customers.
On top of that, Google, Comcast, TiVo and others are also vying for a piece of the video aggregation action. So, there are lots of players in a crowded space, which means less room for Charter and Redbox to wedge themselves in.
While video aggregation competition is increasing, U.S. SVOD household penetration remains at highly saturated levels. According to Kantar, the proportion of U.S. households who have a video subscription has remained consistent at 74.6%, meaning there are now 95.8 million households with subscriptions as of June 2021.
“With three quarters of U.S. households now accessing VOD services, room to grow is slowing and we’re seeing less gateway subscribers entering the market,” the analyst firm wrote in a research note.
However, Redbox is focusing its SVOD aggregation efforts on smaller services—which it hopes will attract faster growth rates—instead of the big players like Netflix, Amazon Prime Video, Hulu and Disney+
“Really what I’m suggesting is that it’s not really a winner take all, that Amazon or Netflix is a winner take all. But on top of that, it's going to be showing a lot of growth from these non-established players. And many of them are going to be looking to partners like Redbox who already have a trusted brand that can help them grow their business and help them compete against some of these large established players,” said Jason Kwong, chief strategy and digital officer at Redbox, according to an analyst presentation transcript.
As for Charter, the aggregated video store concept will likely only represent one piece of its multi-pronged plans for continuing to sell video.
Both Charter and Redbox could potentially carve out corners of the video aggregation market for themselves. But they’ll likely need to square off against a lot of established players to do so.