Viewster Says it's Striking Gold by Offering 'Free TV 2.0'

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Ad-funded on-demand service Viewster is bullish about its chances of surviving the increasingly competitive VOD (video-on-demand) landscape, and has taken aim at Sainsbury's, the latest retailer to launch into this space.

“We are sceptical of physical retailers selling movies on a transactional basis and making that a successful standalone business,” Kai Henniges, CEO of the Swiss-based Viewster told “Such a business can only work by understanding the ulterior motives it can serve.”

Henniges says this means using the promotional “glitter and buzz” of movies to attract customers back to their stores or encourage them to shop online.

U.K. supermarket retailer Sainsbury's has gone live with its streaming service Sainsbury's Entertainment, partnering with Rovi's Entertainment Store technology. It offers rental or download-to-own titles including Life of Pi and Les Miserables.

Tesco, the world's third-largest (and U.K.'s largest) retailer, purchased Blinkbox to provide its entree into VOD in 2011. Consumer electronics retailer Dixons is also offering pay-per-view movies via its KnowHow Movies service.

“They could almost give the movies away provided it serves the purpose of doing business with customers in other ways, or acting as retention and loyalty tool,” says Henniges. “Intellectually it's a good decision for retailers who are selling fewer and fewer physical discs, but ultimately they all centre on white label products from Rovi which won't make the service distinct from the VOD services of other big retailers.”

By contrast, he says, Viewster's model is mining a rich seam not just in the U.K. but worldwide, and has grown by over 800 percent in the last 12 months.

“We have gained traction in this market with a free-to-view ad model and we are playing in a global market for TV ads worth $200 billion. The online ad portion of that is more like $4 billion, but that is growing at 50-80 percent a year so we are after something big.”

Viewster has just announced further TV and film content deals worth 240 hours with giant U.K. TV indies All3Media and Shine Group, as well as with Starz Media in the U.S., bringing its library to over 8,000 hours.

Among its other 150 distribution agreements, licensed for different territories, are DRG, Screen Media Ventures, ABC Commercial Australia, Millennium Media Services and Sonar Entertainment.

“There is more than enough room for a free offering next to subscription services like Netflix because Viewster is commitment free,” Henniges claims. “We are one of the top 20 video websites in the U.K. and we're only just getting going.

“We are the young rebels if you like. We are not competing with the likes of Sky Now or Netflix. We are not after those people changing their living room habits or cutting out cable. We are not after 50-plus-year-olds.”

Henniges describes the offer as “free TV 2.0” for the younger generation unschooled in scheduled TV and brought up on expecting to watch what they want, when they want it.

Ads of 15 to 60 seconds are inserted pre-roll and then mid-roll every 8 minutes into content. Henniges says users like it, citing a Google Analytics report of the site's 29 million uniques a month

“Since the ads are our only revenue source we need to make sure the ad pipe is full. We try to make sure the same user doesn't see the same ad twice. Frequency capping is set by the advertiser but sometimes we try to control that too.”

Launched in 2007, Viewster followed both the ad-funded and transactional model and retains a sizeable 14 market deal for digital sell through with Warner Bros. It changed tack to offer the bulk of its catalogue for free “after seeing avery clear preference for free entertainment in our audience.”

“We are skeptical about transactional which we think really only works for iTunes and only then because they own the devices and made it a slick experience,” Henniges argues.

“We initially thought that by virtue of having this cool content and having it pre-installed on all connected TV sets we would have a business, but it turns out that users have to find you. That requires a huge marketing effort.”

Additionally, Henniges says, studios only make their premium blockbusters available under a transactional model and that content takes a while to transition into subscription and advertising VOD. “What's more, studios ask a very high revenue share on those kind of movies. while only a certain subset of people are willing to pay those prices early on.”

This is compounded, Henniges says, by piracy. “Sadly, if you analyse the 100 most visited websites in the U.K., you will find a high number of pirates and torrents still among them. This problem has to wash out first because the most in demand movies hit the pirate sites first and it hurts the rest of the industry.”

UltraViolet (introduced to combat piracy), Henniges insists, is an intelligent concept but one that “has not fully taken into account user habits or experiences so things have gone quiet around that.”

While Viewster competes against the more established studio-backed Hulu, outside of the U.S. it finds itself “almost the only ones pioneering advertising driven premium VOD”.

“The content deal ladder starts with indie filmmakers and proceeds to mini-majors, which is where we have arrived now. Then you reach the major studios. We are talking to all of them.

“We try to pick up TV shows from the U.S. even before they reach U.K. broadcasters. That's not always possible, of course. It's like mining for gold, but those opportunities do exist and we are scouting for them.”

Available via Android and IOS apps and part of Samsung's walled garden mobile device portal, Viewster has struck deals with more than 25 TV manufacturers to install its app on connected TVs and Blu-ray Players.

“Every application on a TV set is like an island,” Henniges says. “If you are on one you can't talk to another -- whereas on the web we get people to jump across from Facebook or YouTube, on TV the apps don't talk to each other and it's much harder to promote your presence. That said, the biggest days of VOD on connected TV are still to come.”

“We're in a growth phase. We employ 40 people and we are making content deals like crazy. We have grown by building out localised content to service German speaking, and South East Asian markets and serve niche content such as Japanese anime and Korean drama into the U.S. We have revenues in 30 markets and we are financially independent [an angel investor and venture capitalist own a minority stake]. The next steps are to become a brand in both a B2B context, and for end users,” Henniges says.

“We are riding this wave and hopefully making the right moves. We are not in a hurry to throw ourselves at companies [Amazon, Google, Tesco  et al] as others have done who didn't find the traction. We are finding fertile ground.”

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