Thanks to an increased selection and availability of production tools, creating videos has never been easier. Both individuals and brands with even the most beginner-level skills can produce attractive, quality content with little more than a smartphone camera and some free editing software. But until recently, setting up a video subscription service to distribute that content to audiences was a different matter entirely.
For years, video creators have defaulted to uploading content to YouTube, opting to run advertisements and making a profit from ad revenue. But the rise of ad blockers and lowered cost-per-mille (CPM) click rates mean subscription services have become a more viable avenue for making a living from video content. Distribution and subscription services such as Pivotshare, Vimeo on Demand, and VHX have appeared in the market within the last few years, helping creators provide their own subscription offering to their followers and move beyond an ad-supported business model.
Ads vs. Subscriptions
"Ad-supported content is an excellent way of reaching the biggest possible audience, but it's a poor, inefficient way to actually make a living," explains VHX co-founder and CEO Jamie Wilkinson, whose company made its API public in February 2016, so anyone can build his or her own Netflix-subscription model. "A million views on YouTube will earn you a few thousand dollars, at best. A million views is no small feat to do once, let alone more than once. If you get 1,000 people to pay $5 for your movie or comedy special, you can get the same return. If you're producing serial content or have a decently sized library, you could charge $5 per month and make 12 times more."
Essentially, a video subscription model gives both larger and smaller brands recurring, predictable revenue at a consistently higher dollar-per-view rate than that of ad revenue. Subscriptions are especially powerful for creators who produce niche or special interest content, which has the ability to attract a very large and dedicated subscriber base. For example, the subscription service Crunchyroll offers up anime series and TV shows to more than 750,000 paying subscribers every month (as of December 2015). The entertainment site DramaFever started as a place to distribute Korean-based soap operas; the company now boasts 15,000 TV episodes and claims 21 million unique viewers per month across its own subscription site and syndication partners such as Hulu and iTunes.
In addition to providing a consistent revenue stream, video subscriptions also provide creators with the benefit of marketing insight to grow their brands. For example, if an individual or company knows an average subscriber's lifetime value is worth around $50 per month, $20-$30 can be spent on marketing efforts to pull in at least one new subscriber each month and still profit. This added wiggle room in finances also means creators who run a subscription platform can better choose where to invest marketing expenditures, such as running advertisements only on social sites where their audiences are present.
Of course, bigger brands will always have more spending power to drive subscribers to their subscription service than a smaller creator does. But as Pivotshare's CEO, Adam Mosam, explains, the inherent beauty of the video subscription model is that it levels out the playing field. "What it really does for the smaller creators is it gives them the ability to compete," Mosam says. "The larger creators always have someone-always have distribution outlets available to them, people knocking down their door. But there's a lot to be said about the proliferation of production tools, that anyone with even a limited budget can create content. But now with companies like [Pivotshare], the next step in the process is really top-tier distribution technology being widely available. So they could deliver an entire best-in-class solution, and that's truly powerful for them."
Subscriptions for Small Business
The ability for smaller creators to compete with larger brands and individuals using a video subscription model isn't just a myth. Mosam provides the example of creators Ryan Gutierrez and Mike Ross, who produced a web series called The Excellent Adventures. It made more money in the first 24 hours on Pivotshare than the preceding year on YouTube through ad revenue. Likewise, Numa Perrier, co-founder and chief content officer of Black&Sexy TV, notes how her company of just five full-time employees makes as much money in 1 month as it does in an entire year on YouTube, thanks to its subscription offering through the VHX platform. VHX has also helped the web series An African City pull in more revenue in 24 hours than the show made on YouTube, even with more than 2 years and 2 million video views on Google's online video site.
However, just because video subscription options are now widely available doesn't mean all creators and brands should offer one to their audiences. Saif Rahman, founder and CEO of the mobile video subscription platform Mobile First Entertainment, believes there's a "necessary critical mass" that content creators need to reach before their audiences will be willing to pay to follow them. "Imagine having 500 followers instead of 5 million," Rahman says. "If you start charging a subscription service so early, they may drop off, unwilling to pay at all. It may be a move backwards." Rahman notes how a free or ad-based model is a good place to start for novice creators who need to build trust, because in the end, fans who like the content "will be there for the long haul, even if it ends up costing them money down the road."
Perrier says her company took this audience-first approach before introducing a paid subscription option to followers. Perrier prefers a subscription service over other monetization methods because it serves Black&Sexy TV's audience directly-and not corporations, as is the case with advertising. "Having a subscription service has always been part of our long-term vision. We focused on building our community and gaining their trust before we made that move, though," Perrier says. "We also had to make sure we could keep up with the demand-once you start the subscription train, you can't get off. So once we launched our SVOD [subscription video on demand], we had no choice but to keep up pace and find ways to constantly improve our output. The SVOD forces you to do more and be better. No days off."
It's the "no days off" aspect of video subscription models that individuals and brands should also consider before launching a subscription offering. Creators may not be able to justify a video subscription service to their followers for $6 per month if, for example, they're only capable of producing a few hours of content per month. Compare this to specialized subscription services such as Crunchyroll, DramaFever, or even the ad-free YouTube Red-which all offer hundreds of hours of content for only a slightly higher price-and creators without the ability to create similar amounts of content on a regular basis might be hard-pressed to find fans willing to pay for access to only a few videos.