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Vimeo Plans to Spend ‘Tens of Millions’ of Dollars on Content for New Subscription VOD Services

Barry Diller’s IAC has outlined a new strategy for Vimeo to become a major new Netflix-style subscription video-on-demand player — but without spending the kind of dough that Netflix does on original content.

IAC CEO Joey Levin, who is also interim chief executive of Vimeo following the exit of Kerry Trainor this summer, provided broad strokes for Vimeo’s new SVOD strategy as part of the company’s third-quarter 2016 earnings announcement.

“Vimeo has the once-in-a-generation opportunity to, following in Netflix’s footsteps, deliver compelling subscription viewing experiences for consumers in the market for pay TV,” Levin wrote in a letter to IAC shareholders Wednesday. “I believe we can do so at a fraction of the cost of other major competitors by virtue of the audience and content benefits conferred upon Vimeo through our existing marketplace.”

In the past, Vimeo execs have alluded to plans to launch a subscription-video business, leveraging its large community of creators, and now those appear to be getting put into action.

Vimeo will begin to “experiment” with proprietary consumer subscription services, Levin said, supplementing its offerings for creators that let consumers purchase their content or subscribe to their channels. “We will supplement our creators with original and licensed programming, and can fill out a robust slate of programming for tens of millions, not billions, of dollars,” he wrote.

For now, Vimeo isn’t providing details on timing of the new subscription VOD services, or what the pricing and content lineup might look like.

“Ultimately, our goal is for Vimeo to drive millions of subscriptions and transactions for our creators while also growing a proprietary subscriber base with millions of consumers directly,” Levin wrote.

IAC does not break out Vimeo financial results, but the New York-based company said the video-hosting unit ended the quarter with 741,000 paying subscribers, up 13% year over year. In the company’s video segment, which includes Vimeo, CollegeHumor, Electus, IAC Films and Daily Burn, revenue was flat versus the prior year at $60 million. IAC said growth at Vimeo was offset by lower revenue from IAC Films and declines at Electus “due to the timing of certain projects.” Operating loss in the segment decreased 53%, to $2.7 million, due primarily to reduced losses at Vimeo.

According to Levin, “given the still-nascent stage of Vimeo’s business model,” IAC will not start disclosing financials for the unit in the near future. Vimeo has an annual revenue run rate of more than $75 million, “but overall the business loses money and near-term profit is still not our priority,” he added.

Compared with other over-the-top players, Vimeo has a large existing user base that gives it a major head start in the SVOD arena, according to Levin: “If we can convert just a small portion of our audience, we have a very large business.”

Vimeo serves 1 billion monthly video views and has 240 million monthly viewers, of whom over 100 million are on Vimeo properties. “Not bad for approximately $65 million aggregate investment into Vimeo, the vast majority of which built the (software as a service) business,” Levin wrote.

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