It’s no secret that the content monetization models of yore have had a tough run over the past decade. Newspaper print revenues are down 70% in that time period. The decline in home video sales is outpacing growth in digital options. CD sales dropped 30% between mid-2015 and 2013, and digital downloads fell 13% over that same span. Then there’s pay TV, which has lost nearly 900,000 net subscribers in 2015 alone.

Clearly, the Internet has fundamentally changed the way people think about paying for content. Particularly with video content,  there are some big success stories. Over The Top (OTT) video services like Netflix, Hulu, and Amazon have been able to monetize shifting consumer attitudes through lucrative subscription models. As a result, the OTT video market has been on a big growth path.

The growth of digital video is becoming harder to maintain as all the existing blue-chip, mass-market content increasingly gets snapped up. What video needs is a display advertising-like long tail (where many publishers with small footprints have more combined market share than the biggest players) to bring new consumers into the fold. Up until now, technology has been the barrier. But owners and aggregators of niche video content are just now leveraging new capabilities driven by innovative third-party partners to open up the long tail. And that’s what will really push video to become the new vanguard of paid content.

Subscription Models Hit The Big Time

Despite crackdowns on piracy and copyright infringement, the Internet today still retains much of Web 2.0’s Wild West character. Take YouTube – it remains by far the most popular source of music online, with 65% of consumers using it to listen, and nearly 41% of consumers say they are using it to view full-length TV and movie content. But it’s not just “free” that defines the ethos of the content landscape. It’s also unlimited access to content. The companies that monetize that mindset are the ones reshaping the content marketplace, and subscription services are excelling.

The vast majority of American households, some 68% of them, now subscribe to a subscription video on demand (SVOD) service. More than half of the connected households in the U.S. subscribe to Netflix alone. Major tech players are pouring billions into the subscription music streaming market, and the subscription model has made its way to comic books and podcasts. Even YouTube is now offering an ad-free, premium experience, YouTube Red.
    
Niche Content Holds The Key

But focusing on unfettered access to content over content ownership leads to a top-heavy ecosystem, as scale requires providing the mass-market content that will draw large numbers of consumers in. This is why Netflix has grown increasingly selective as its user base spreads – it will shell out significant paydays to studios to secure summer blockbusters, but its more niche selection is surprisingly thin. That makes sense for Netflix, which has to choose where to invest its resources, but it hamstrings the growth of OTT video as the mass market becomes saturated.

Yet niche content holds tons of potential. Consumers are willing to spend big on content they love and can’t easily get. One case in point: vinyl’s shocking (re)-ascendancy. In the age of Spotify, vinyl record sales increased 52% between 2013 and 2014, and grew another 52% in the first half of 2015 to $226 million. Audiophiles and the skinny jean set certainly aren’t the mass market, but their dollars add up and have contributed significantly to aggregate growth in the paid content-starved music industry.

That same dynamic is now carrying over to the OTT video market. While Netflix and the like continue to focus on more centrist fare, content producers and aggregators are bringing the free access ethos of OTT to niche markets – with some very impressive results so far.

The Paid Video Long Tail Is Just Taking Off
 
Crunchyroll is a good proxy for the growth of the OTT video long tail. Started in 2009, it’s a video streaming site focusing on anime and manga (a quintessential niche). At the time of its $100 million acquisition by The Chernin Group in late 2013, Crunchyroll had roughly 200,000 subscribers paying $7 a month for premium, ad-free access. By October 2015, that number had ballooned to 700,000. That’s some $60 million in subscription revenues alone, not to mention the ad revenues from the site’s 10 million registered free users.

Yet that’s still small beans compared to the WWE. Its streaming wrestling channel now has 1.23 million subscribers that also pay $10 a month, adding up to about $150 million in revenues – or more than a quarter of the company’s total topline. WWE created this burgeoning cash cow by outsourcing the entire OTT process to MLB Advanced Media, Major League Baseball’s digital arm.

That ability to outsource is what’s driving niche OTT video’s transformation, because building OTT platforms is no small feat. Getting together a team that can manage content delivery, transcoding, search, storage, management, billing, DRM and CRM integration, and plenty more is an expensive and time-consuming proposition. In October of last year, HBO announced it would develop a proprietary OTT streaming service entirely in-house. Two months later, it abruptly killed the project.
 
Luckily, a handful of behind-the-scenes players are quietly dismantling these prohibitive cost and tech barriers. Along with MLB Advanced Media, there are other established companies like Brightcove, Comcast-owned thePlatform, and Ooyala that have broad-based solutions for TV networks, studios, and other big media customers. And now there are also entrants that have emerged to focus on selling and distributing long-tail content for more narrow topics than wrestling.

Media network OWNZONES just inked a deal with Mark Cuban’s Magnolia Pictures to launch Dox, a $3-a-month subscription platform streaming the distributor’s catalogue of documentaries. OWNZONES’ other partners range from niche news sources like Variety to up-and-coming celebrities like home designer Jennifer Adams. And publicly traded SeaChange is launching the BBC’s forthcoming OTT network aimed at monetizing the British broadcaster’s own diehard fan base.

Anime, documentaries, and British news certainly aren’t about to take down House Of Cards. But they will fuel the growth of OTT video from here on out – and that should make video the first big success story in paid content since the Internet crashed the party. This same long tail is the reason for the US display advertising industry’s growth from a $7 billion market in 2007 to a $45 billion behemoth now. That’s not to say that OTT video is about to surpass Google. But niche content may finally be leading to the long anticipated paid content explosion.