The more successful Kanopy becomes, the more expensive it gets. A new "capped" program might be the answer.

Eight years ago, on-demand streaming video platform Kanopy radically changed the educational market for video. Whereas institutions used to pay a premium — sometimes 10 times the consumer cost — to purchase DVDs, many universities began putting their dollars toward offering students access to the Kanopy website and app, where they can stream nearly 20,000 titles.

In 2017, Kanopy did something even more radical: It made an aggressive push to get into public libraries. This used a pay-per-view pricing model, not unlike an iTunes rental: Local libraries paid $2 each time a patron watched a video for at least 30 seconds. As libraries across the country signed up, Kanopy and its offerings grew. Last year, Kanopy’s monthly active membership increased by 250 percent, while the library added another 6,000 titles to include the libraries of A24 and Frederick Wiseman, along with a 100 classics from Paramount’s vault and a film-school-friendly portion of the Criterion Collection.

This artfully curated “free” alternative to Netflix seemed too good to be true; now, according to the New York Public Library, it is exactly that. This week Queens, Brooklyn, Staten Island, the Bronx and Manhattan libraries announced that as of July 1, its members would no longer enjoy Kanopy access. Faced with a growing Kanopy bill that was significantly higher than had been projected for the 2019 fiscal year, NYPL had had enough.

“Considering that only about 25,000 of our 2 million cardholders use Kanopy, we decided that our limited funding is better utilized purchasing other materials, including books and e-books,” wrote a NYPL spokesperson who represented the Manhattan, Staten Island and Bronx branches. “Simply put, over the long run this is not a sustainable model for public libraries.”

The core issue will be familiar to anyone who followed the MoviePass trajectory: As awareness and positive experiences with the Kanopy service multiply, the resulting demand drives up libraries’ costs.

“I’m not concerned, we have conversations with libraries all the time,” said Kanopy CEO and founder Olivia Humphrey said in an interview. “If anything, it’s often the opposite conversation, where libraries are very pleased with the number of users signing up and the activity and the quality of the content. So I’m not concerned. It’s really down to libraries working out what their members want and that’s something only libraries and their members can know.”

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Humphrey said Kanopy is valued for its ability to attract new members with a popular resource. According to Kanopy, with the exception of Manhattan, Brooklyn and Queens, all other public library clients currently still have “active accounts.”

Humphrey added that she does recognize the need to supply public institutions with a level of cost certainty to manage annual budgets. Toward that end, Kanopy has begun rolling out a “capped” program that uses forecasting models and algorithmic equations to estimate a library’s projected annual costs, which the company than guarantees.

“It’s important for us to get our forecasts right, which is why we’ve been doing extensive piloting,” said Humphrey. “If we get it wrong, we’ll take the risk.” Meaning if a library goes over its yearly projection, Kanopy will pay the contents’ rights holders its 50 percent cut and not charge the institution for the overage. “One thing we have never done and will never do is discount the artist or filmmaker, which I’m proud of, so our capped model is a very realistic forecast, because we are incentivized to get it right.”

Kanopy said it did offer NYPL a capped model plan, but the two sides remained extremely far apart. IndieWire has learned that Kanopy insisted on a cap that was many multiples higher than New York was willing to spend.

“The Library worked with Kanopy to find a solution that would allow us to responsibly continue offering this streaming service to New Yorkers,” wrote the NYPL spokesperson. “All options were taken into consideration, but at this time, we simply cannot find a sustainable model.”

Many libraries have also expressed a lack of faith in Kanopy’s projection modeling, which significantly missed the mark in predicting NYPL’s Kanopy bill. Kanopy has countered that with two years of data, its projections have vastly improved.

It remains to be seen if the growing popularity, and commensurate costs, of Kanopy will force other public libraries to follow NYPL’s lead. On the academic side, 60 percent of the Kanopy content streams for free, but after a certain number of streams a substantial annual licensing fee kicks in for each title. At $150 each, the costs have forced some universities to drop or curtail its use of Kanopy.

While Humphrey understands the need for cost certainty, she also believes this growth in usage is exactly why Kanopy has become so valuable to institutions. The demand model allows libraries to spend money on the videos its community actually watches. It’s growth she is determined to see fuel new acquisitions and the continued improvement to Kanopy’s wide variety of offerings. It’s growth that will also cost more, leaving the very open question of if libraries will continue to support it.

Correction: Kanopy did not insist on a “guaranteed minimum” when negotiating with the NYPL, as stated in an earlier version of this article. Kanopy did insist on a cap, or ceiling, that was many multiples higher than New York was willing to spend.

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