As the streaming video wars heat up, technology companies like Apple, Facebook, Netflix and Amazon are willing to spend billions of dollars on movies and shows that they hope will attract big audiences. On the other side of the market, smaller niche services are testing out a more cost-sensitive model.
Dust, from independent studio Gunpowder & Sky, is a streaming service launched in 2016 that focuses on science fiction content. It spends less than $10 million a year on exclusive titles like "Glimpse" and "Prospect" and to license TV shows and movies including "Roswell" and "Bill & Ted's Excellent Adventure." It also has short films like George Lucas' "Electronic Labyrinth: THX 1138 4EB" and "Evil Demon Golf Ball From Hell!!!," which "The Last Jedi" director Rian Johnson made as a student.
"We're going to see a two-pronged approach," said Floris Bauer, co-founder and president of Gunpowder & Sky, which has offices in Los Angeles, New York and London. "Huge platforms like Netflix, Apple, etc., they're going to replace the traditional networks and then some. And then, you're going to see hyper-targeted content within a very specific creative filter, brands which cater to a very specific audience."
Streaming services for specific genres try to win with loyalty while they may lack in diversity. Fans are likely to be committed, meaning they're stickier and will more actively discuss and promote the shows.
BroadwayHD focuses on Broadway shows. When it launched four years ago, it had 100 titles and concentrated its marketing in the U.S. But it quickly had to change its payment system to accept foreign currency because of international demand.
"People say they love Broadway, but have never seen Broadway," said BroadwayHD co-founder Bonnie Comley. "We're giving access to people who have heard of this brand but never have seen it before."
The company, which gets much of its content by producing multi-camera recordings of actual performances, pays about $2 million a year to film 10 or so marquee shows. It also partners with Broadway producers, obtains behind-the-scenes content and hosts other exclusive materials. Broadway shows, by contrast, start at $20 million to create and produce, according to Comley.
Subscriptions to the streaming service cost $100 a year, or $8.99 a month. The company is also looking at other ways to create advertising revenue, including sponsored content.
Dust doesn't charge subscription fees right now, though it sees potential revenue opportunities through distribution deals with streaming live TV services and other ad-supported viewing methods. It also uses what's popular with its audience to know what short films to turn into TV shows and movies. "Prospect," which was released theatrically, started as a short film on its service. In the future, it can also license these kinds of adapted content, which come with an audience already, to larger streaming services and media companies, Bauer said.
Even with lower costs, the content business is still risky. Specialized audiences can be tricky, and producers need some luck to find success, said Fred Seibert, founder of Frederator Studios, which launched a streaming service for its animated series called Cartoon Hangover about six years ago.
Frederator built a large audience on YouTube, but wasn't getting enough revenue there to sustain its business. Now its shows, including "Bee and Puppycat," the most successful Kickstarter for an animated series, are available for $3.99 through streaming platform VRV.
Seibert said he knows he's competing with a ton of other shows.
"There are no absolutes in any of these media businesses," Seibert said. "There are great ideas and great executions. Sometimes they succeed, and sometimes they do not. There are a lot of lousy ideas that are not great, but executed beautifully that succeed."
One advantage to niche programming is there can be pockets of hardcore fans across the world, if creators are just able to reach them. That's what Gunpower & Sky is trying to do with Dust.
"Dust is not on at 6 p.m. on a Monday," Bauer said. "We're a 24/7 global channel, as long as we find people who love sci-fi globally. "
Fees and ad revenue aren't the only financial benefits. ChooseATL, Metro Atlanta Chamber of Commerce's nonprofit organization, created THEA, an over-the-top streaming service featuring local filmmakers. The service has more than 875 short videos, movies and documentaries across more than 50 channels, which garnered 1.3 million views over the past year. Creators agree to provide the content for free with the hope that revenue will come down the road.
THEA also helps attract new content creators to Atlanta, which can boost taxes, increase economic development and encourage the city's growth as a creative hub. In the future, the group hopes to get advertising revenue from platforms like Roku and through other licensing agreements to sustain technology costs.
"The future of OTT is this collaboration," said Kate Atwood, executive director of ChooseATL. This type of service is "building out a whole new journey, a whole new pipeline" for content creation, she said.