Qello is quietly building a “Netflix for music films” — and maybe building the future of digital video

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So what will be the big buzzword of 2015? I’m placing my bets on “OTT.”

OTT stands for “Over-the-top” and it refers to video and audio streaming services that don’t directly involve a cable company. For example, when HBOGO announced its standalone service this week, the savvy set of observers called it “going OTT.”

We know the big players like Netflix and Hulu. But there’s one company that’s quietly becoming a major force in the OTT landscape and it’s helping to shape the future of how consumers watch video: Qello.

The New York based company is like Netflix, but its $ 4.99 a month subscription video service is just for concert films and music documentaries. Unlike Netflix and Hulu, which offer a grab bag of movies and television shows across a number of verticals, Qello has chosen to focus on delivering one niche of content and to do it better than anybody else.

In explaining the company’s rationale for its vertical business model, Chief Revenue Officer Rich Johnson looks to the evolution of network television.

“The future’s going to kind of look like the past,” Johnson says. “So what do we start with? ABC and NBC and CBS, and then there’s the advent of cable and the advent of all these niche networks. The fact that there would be a world where niche verticals live in digital is about as natural as it could possibly be.” In other words, Hulu, Netflix, and HBOGO are the early networks like NBC, and sites like Qello are like the VH1 of the OTT landscape — I’m talking about the old VH1 that actually played music, not the new one which is more known for ridiculous television series like “Dating Naked.”

Qello is also unique in that most of its content can’t be found anywhere else.

“Less than 8% of our content is on Netflix,” CEO Brian Lisi says.

In fact, a lot of it you can’t find anywhere. Unlike most video streaming sites, Qello is working with content around which there’s true scarcity. Many of the videos it distributes were only available on DVD or, in some cases, out-of-print VHS tapes. For example, if you want to watch “Fleetwood Mac: Live in Boston,” your only option other than Qello is to order the DVD off Amazon for $ 30.

“We’re not just replicating what you can find on TV, because you can’t find it on TV,” Johnson says.

That’s not just good news for niche consumers, but also for the owners of this content who, after DVD sales dried up, lost their only revenue stream for thousands of titles.

“All those DVDs, Universal has 10,000 of them,” Lisi says. “None of them have the exploitation rights around SVOD (subscription video on demand).” Lisi goes so far to say that by creating a dedicated distribution channel for concert films and music documentaries, many of which never entered theaters and therefore had no revenue potential outside of DVDs, studios will be want to produce more of this content. So fans of music documentaries and concert films should be rooting for Qello to succeed.

Of course, for this “vertical Netflix” model to work, it’s important to have a virtually complete catalog — and while over 2000 films are currently available on Qello, more than 18,000 concert films have been released on DVD or Blu-Ray, according to USA Today. Granted, the number of available titles is growing — earlier this year, the greatest concert film of all time Stop Making Sense wasn’t on the service, but Qello has since rectified that. But other beloved films, like Martin Scorsese’s The Last Waltz are nowhere to be found. How do you run a Netflix for music movies and not have The Last Waltz?

“It’s the music business,” Johnson says. “The label needs to sign off, the publisher needs to sign off, sometimes the filmmaker needs to sign off.”

Like most negotiations, whether or not content owners choose to distribute on Qello often comes down to one thing: Money. And The Last Waltz is, in a word, “expensive,” says President Bob Frank. But with Qello currently available on Roku, Apple TV, and Playstation 3 and 4, and with XBOX and Chromecast coming next month, that puts Qello in a much better position to make these deals.

“We have a bit more leverage, now,” says Frank. “(We can say) ‘We’re on Apple TV, we’re a real company.’” In fact, Johnson says, “I think we were on Apple TV with ESPN and HBO the same launch day. That should say something.”

Negotiations aren’t always a simple question of dollars and cents, however.

“If you go to a big music company, they don’t know what they own,” Frank says. “If they released it on VHS back in 1987, there’s a chance it doesn’t exist anymore.” That said, he believes that “ten years from now, even those assets are going to be creating revenue.”

Assuming Qello’s vertical strategy works, does that mean in the future there will be “Netflix for horror movies”? And a “Netflix for romcoms”? Will the great unbundling of video that’s going on with the OTT revolution become, um, “rebundled” with different video platforms offering different niche content under one subscription, just like cable? It’s possible. Until then, sites like Qello are making it more attractive for consumers than ever to cut the cord and get down with OTT.

[illustration by Brad Jonas]

PandoDaily

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