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Here’s the latest exit in the hot space of niche online video: SoftBank announced Tuesday that it is acquiring New York-based niche video startup DramaFever. The acquisition is being handled by SoftBank’s Internet and Media subsidiary, which is being headed by former Google executive Nikesh Arora.
A press rerealse announcing the deal quoted Arora with the following words:
[blockquote person=”” attribution=””]In five short years since going live, DramaFever has built an impressive internet-based streaming video business operating at scale. (Co-founders) Seung Bak and Suk Park have a proven business model in a dynamic industry, and we look forward to helping them bring their highly popular video content to an even larger global audience.[/blockquote]
Terms of the deal weren’t disclosed. DramaFever raised a total of $12 million from investors like AMC Networks, NALA and SoftBank Ventures. There had been talks that Dramafever was either trying to raise more money or looking to sell for a few months, and IAC was reported as one possible buyer.
The acquisition comes in the midst of growing attention for niche video services like DramaFever. Competitor Viki got acquired by Japan’s Rakuten for $200 million a little over a year ago, and Crunchyroll, which also closely competes with DramaFever, was picked up by the Chernin Group soon after.
Crunchyroll has since become a key part of Otter Media, the joint-venture between the Chernin Group and AT&T, and is now looking o launch additional niche video services. Most recently, the site relaunched its Korean drama service, which directly competes with DramaFever, as part of the fan community site Soompi. But DramaFever isn’t standing still either: The company is working with AMC on launching at least two niche video services.
So why are companies like SoftBank, Rakuten and Otter Media so interested in niche services targeting to fans of Anime, Korean drama or other genres that aren’t likely to attract TV-like audiences? One reason is that at this point, the niche is the likeliest area to succeed with a paid video service.
Attempts to build TV services that directly compete with cable have been hampered by high content licensing costs, and the demise of Redbox Instant has shown that competing directly with Netflix is also a very risky bet. Buying comparatively cheap niche content, and then launching services targeting highly engaged audiences, is on the other hand a lot less risky, and potentially a lot more rewarding as young viewers look for content outside of the world of cable TV.