Spanish-language streaming service Vix explains the challenges of expanding the AVOD market internationally and how it plans to grow revenue by 40% in 2020

  • The Spanish-language streaming company Vix launched its ad-supported OTT service in Brazil on Friday, adding to the growing number of services that are expanding the market for advertising video-on-demand (AVOD) internationally.
  • Two top Vix execs talked with Business Insider about how they're tackling the unique hurdles in AVOD's international expansion and the lessons they learned from streamers like Netflix.
  • Vix held off on its Brazil launch until it acquired enough Portuguese-language content to satisfy local audiences, and it is using its existing social footprint to draw viewers to the newer AVOD offering. 
  • The Vix execs also said selling ads directly is a key component to their business model.
  • Visit Insider's homepage for more stories.

The Spanish-language streaming company Vix launched its ad-supported OTT service in Brazil on Friday, adding to the growing number of services that are expanding the market for advertising video-on-demand (AVOD) internationally.

Other free streamers including Pluto TV and Tubi have also pushed abroad in recent months with the help of corporate backers like ViacomCBS and Fox, respectively. Their international expansions come after subscription players like Netflix and Amazon made streaming a global habit, but also experienced growing pains in markets like India where their price points were steep compared with local competitors.

Ad-supported streaming video, which is usually available for free or cheap, faces its own challenges in expanding globally, such as building out local libraries without the support of subscription revenue, and attracting local advertisers.

The landscape is also getting more competitive as legacy players venture into the AVOD space, like NBCUniversal's Peacock.

Two top Vix execs talked with Business Insider about how they're tackling the unique hurdles in AVOD's international expansion and the lessons they learned from streamers like Netflix.

Vix, founded as a digital-media outlet for viral videos and stories aimed at US Latino and Latin American audiences, acquired in 2019 Pongalo, a company that runs Spanish-language streaming services. The deal helped Vix, which counts Discovery and private-equity firm HarbourVest Partners among its investors, launch an AVOD offering that has become a major player among Latino audiences.

Vix said it was on track to hit 10 million app installs in August, up from the 5 million it told the Los Angeles Times it had in July. The app has risen in Roku's app rankings in recent months, as well, Variety reported.

Vix launched its AVOD service in both the US and Mexico last year, but held off on pushing into the lucrative streaming market of Brazil because of the language barrier.

Most of Vix's now-20,000 hours of programming was in Spanish, while Portuguese is the dominant language in Brazil. The company had to build up a library of local-language content before expanding into the region. Subscription services like Netflix found international success in part by building local libraries. 

"Netflix did a lot of things right, particularly in terms of reaching out to local directors and producers to make sure the the programming they're making is appropriate for the market," Alan Wolk, analyst at TVREV, told Business Insider. "That was a great lesson for everybody else on how to roll things out internationally."

Vix went to some of the same content owners it licensed Spanish-language movies, series, and novelas from to acquire Portuguese-language programming.

"We were able to go to them and ask them to add Portuguese content into their deals with us," said Rich Hull, Vix's chief strategy officer and founder of Pongalo. "We were able to shortcut that process … Sourcing and licensing content is a really time-consuming process and it's a very specialized art."

Vix is leaning on its existing social footprint to draw audience to its streaming-TV app

Vix is leaning on its larger social following to draw audiences to its OTT app in Brazil, as it has in other markets. The company garnered more than 700 million video views on Facebook in July, according to data from measurement firm Tubular Labs. 

In Brazil, Vix said it had roughly 30 million followers across its Facebook, Instagram, and YouTube channels.

The company is using social to help program and market its AVOD offering to local audiences. For example, Vix's short-form videos about the British royal family tend to over-index in Brazil. Audiences there are "obsessed with the royals," Hull said. So Vix licensed more movies and TV shows about royals and is using the short-form videos on its social channels to draw audiences to that longer programming. 

"That social web, OTT funnel that we built is kind of our secret sauce," Vix CEO Rafael Urbina said.

Vix says its AVOD model is a 'flywheel' and direct ad sales are key to it

Attracting local advertisers can be another challenge for ad-supported platforms expanding into new markets. The concept of AVOD is still relatively new outside of the US.

Vix said it points to its success in similar markets, like Mexico, in its pitches to advertisers, as well as its standing in globally recognized app store's like Roku and Google Play Store.

In Brazil, Vix is also leveraging its existing ad-sales team, which has direct relationships with local advertisers as part of the company's social-video business. It landed a sponsorship deal with local food brand Perdigão for a Brazilian BBQ-themed on-demand channel on its AVOD service, for instance.

The Vix execs said selling ads directly is key to the company's business model, because it generally secures higher CPMs, a common metric for ad rates, than when selling through programmatic exchanges.

Direct sales don't always carry higher CPMs than ads sold through third parties, said Brian Wieser, global president of business intelligence, at WPP's media arm, GroupM. But TV and streaming advertisers typically care more about the context — the shows and platforms — their ads are airing in than many other digital advertisers, so it makes sense that an AVOD platform would be able to realize higher CPMs by selling directly.

"When it comes to TV, almost all advertisers do care about the context," Wieser said.

Vix said the higher rates also help increase revenue, which gives the company more money with which to vie for content-licensing deals.

Vix, as a whole, expects to bring in $20 million in revenue in 2020, up 40% from 2019.

"The AVOD business model is kind of a flywheel," Vix CEO Rafael Urbina said. "You need audience. To get the audience, you need content. But to sustain the content, you need ad sales."

Vix said it caps ad loads at 10 minutes per hour. That's less than most traditional-TV channels, but more than AVOD services including Tubi that run 4 to 6 minutes of ads per viewing hour. 

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