Could a non-subscription service hope to compete with giants such as Netflix, Amazon Prime, and Hulu? The founders at Chili, the new Italian streaming platform, think so. “But how are they going to make money?”, I hear you ask. Chili’s business model is based entirely on pay-per-view. And, while the sceptics point out that pay-per-view never really took off, despite several services trying it from back in the days of cable TV, Chili’s team still has a positive model to look up to. They aim at emulating the success of Rakuten, a Spanish streaming platform that racked up millions in Japanese investments.
A long journey
Most international readers won’t have heard of Chili (and, to be fair, not many Italians have either), but the company is not exactly a young one and it is certainly no longer a startup. It was founded in 2012 and it has been growing quietly and steadily ever since. Its current strategy seems to be counterintuitive, in a market that is progressively fragmenting. Platforms like Amazon Prime and Netflix built their success by aggregating a lot of content from different producers and appeared to dominate the market completely for a short while. However, Sony and Disney have now decided to launch their own platforms and will, therefore, be snatching their original content back. This might be confusing for many users, who will be left unable to keep track of their favourite shows unless they can afford to subscribe to multiple platforms. It is not hard to guess that this state of affairs will open a new breach for piracy to creep back in. Chili, however, is not interested in this particular race and decided to focus on classics and distribute them through a pay-per-view platform, in which every title’s ROI becomes instantly apparent.
Films over shows, for users that are not ready to commit
There is a thoroughly thought-through business strategy behind Chili’s model. It starts with data analysis, specifically with the consideration that around half of the film-and-show-watching population does not have a subscription. This demographic aggregates those who dislike the concept of paying a fee for a service they may or may not use, those who can’t commit to serialised shows and would much rather conclude their watching experience in one sitting (thus preferring films to shows) and those whose schedule is unpredictable and who watch films and shows sporadically and rarely binge. Chili is focusing in particular on recently-released titles and has a prevalence of original Italian content (although it does feature some of the most popular international shows, such as HBO’s Game of Thrones, and many recently-released international movies).
How Chili attracted international investors
Let’s talk numbers: Chili can currently count on an active user base of 2.5 million and €50M’s worth of profit. They claim to want to grow “organically”, avoiding the temptation of sudden and substantial forward leaps. This is not due to a lack of funds, however, given how all the major film companies (with the notable exception of Universal) have invested capitals in Chili, clearly showing an interest in its potential and trust in its management team. With its confidence properly boosted and a sparkly new platform for the public to try out, Chili is currently looking for a strategic partner and hoping to gain traction in the home market.