Children's programming might have just become the new front line in the subscription battle between Netflix, Amazon.com and other major streaming services to boost subscriber numbers.
The services have gotten the most publicity from critically acclaimed original content aimed at adults such as "Orange Is the New Black" and "Transparent." Their strategy aimed at attracting younger viewers, though, is now getting more awareness.
The newfound attention is largely the result of HBO's recent announcement that it has struck a deal to be the first-run home of "Sesame Street" on its streaming and cable services. The deal helped underscore the importance of cementing a grip in children's programming in a universe being disrupted by changing viewing habits and cable TV cord-cutting.
It's no wonder: U.S. digital video penetration among children ages 11 and under is expected to jump to 74% by 2019 from 68% in 2013, according to research firm EMarketer. At stake will be millions of dollars in subscription fees for streaming services that have the best offerings.
"As a single person or a couple, you might be more willing to drop your streaming subscription for a while until you see more content you're interested in," said Piper Jaffray analyst Mike Olson. "But if you have kids who are watching a lot of content, there's no way you're going to drop it. And in effect, children's content reduces churn, which ultimately positively impacts revenue."
One reason why children are a target audience is because they are natural binge-watchers, prone to viewing the same episode over and over. Parents, who once sat their kids down in front of DVDs, are discovering that streaming services offer more varied programming and are more convenient in a pinch.
About 20% of TV content (both acquired programming and originals) on Netflix and Amazon is aimed at children, according to SNL Kagan data from October 2014. Hulu, which has only dipped a toe in creating originals for kids, has a smaller slice of the pie with just 5% of its library consisting of licensed children's shows.
Netflix jumped headfirst into children's programming in 2011, and it has since proved to be a popular destination for kids — at least anecdotally. About half its U.S. audience, or about 20 million subscribers, is watching children's TV shows and movies on a regular basis every week, said Erik Barmack, Netflix's vice president of global independent content.
He said 30 shows out of its slate of kids' programming were viewed by at least 5 million people in 2014, though Barmack wouldn't name the specific shows.
"We think we have a big lead in developing a big audience for … tent-pole kids' programming," Barmack said. "It's early days still, though. So we're really excited about our future."
The service expanded its lineup of original children's shows in June with the addition of four new animated series, including a co-production from Saban Brands and Cirque du Soleil Media about a character named Luna Petunia.
A portion of Netflix's robust $3.2-billion programming budget for 2014 went to licensing movies and TV series from Walt Disney, Scholastic Media and other companies. Netflix also spent money on original content such as tween spy series "Project Mc2."
Beginning next year, Netflix will have rights to Disney's live-action and animated movies after they leave the theaters. And in 2018, it will launch the animated series based on Dr. Seuss' "Green Eggs and Ham," which counts Ellen DeGeneres as an executive producer.
Netflix also inked a deal with DreamWorks Animation for 300 hours of new shows based on past and recent franchises and characters. The most recent original animated children's series under that deal is this month's launch of "Dinotrux."
Ted Sarandos, Netflix content chief, said during last month's Television Critics Assn. media tour that the company's interest in the younger audience is "important both from a behavior standpoint" because the platform is inherently amenable to the viewing habits of Generation Y and Z, but also from a brand-building position because "Kids will say, 'Oh, I grew up watching Netflix.'"
In effect, the service wants to forge long-lasting relationships with future subscribers. And as the users get older, the platform's algorithm adjusts accordingly — lending to its strategy of being a source of content for every age demographic.
Amazon, the second-biggest streaming service, has also upped the ante in its bid to lure young viewers by securing major deals.
The company struck a deal in 2014 with Viacom to license rights to Nickelodeon's preschool shows. The deal, forged less than two months after Netflix's own agreement with Viacom expired, is estimated to be worth several hundred million dollars and will make Amazon home to shows as "Dora the Explorer" and "Go, Diego, Go!"
Amazon also utilizes the same pilot approach as it does with its original content aimed at adults — crowdsourcing pitches and using viewer input for what gets picked up to series. It entered the children's programming sector last year with four series, including "Tumble Leaf" and "Gortimer Gibbon's Life on Normal Street." All four series were picked up this year for second seasons.
The service recently launched animated preschool series "Wishenpoof!," and last month released six pilots for new children's shows, including animated fare such as "Lily the Unicorn" and "Lost in Oz."
Amazon works with an educational consultant to embed curriculum into its shows that encourages right- and left-brain-thinking, said Tara Sorensen, who heads the kids' content division at Amazon Studios.
"What's great about streaming services is kids aren't tied to the linear broadcast," Sorensen said. "We can encourage them to stop shows or rewind. Streaming and kids just makes perfect sense because we really put them in the driver's seat."
Hulu, as it steadily repositions itself as a major player in adult-skewing content, has taken a more streamlined approach with children's programming.
The bulk of Hulu's offerings on its Kid's Section comes from licensing deals. Hulu, like Amazon, also has a streaming deal with Viacom that gives it access to some of Nickelodeon's content, including older series such as "The Ren & Stimpy Show" and "Hey Arnold!." Hulu, additionally, has a deal with Turner Broadcasting for rights to some of Cartoon Network's library.
And this year the service inked a deal with Disney-ABC Television Group to secure exclusive subscription video-on-demand rights to Disney Junior's popular animated series "Doc McStuffins" and "Bunnytown" and non-exclusive rights to all episodes of "Handy Manny."
Last year it launched only one original series, "Doozers," inspired by the popular characters from the classic Jim Henson series "Fraggle Rock." Discussions about a renewal are underway. "As our offering grows, we're certainly open to doing more originals," said Craig Erwich, senior vice president and head of content for Hulu.
Naomi Hupert, senior research associate at the Center for Children and Technology, said it will be interesting to see how the children's programming market continues to respond to shifting behaviors of young viewers.
"Kids are growing up straddling the computer, tablet and smartphone," Hupert said. "All these technologies are relatively new, and how we see kids use them is still new. It can be sort of overwhelming to think where it can go from here, but we're still in the beginning stages."