VHX is starting with two new Apple TV apps, and both highlight the interesting dynamics at work for niche content creators as the world of online video and traditional television merge. One is Black&Sexy , an online video series which focuses on romantic comedies starring African-American characters.

“There is a lot of opportunity these days for small content creators to steal a piece of money we used to spend on cable,” says Rich Greenfield, an analyst with BTIG. “People will consume on lots of different devices, but if you can get onto the biggest screen in the house, there is a much better chance people will pay for your content.”

One of the startups behind that revolution is New York-based VHX. The company’s tagline is “launch your own streaming video service,” and over the last two years it has helped a lot of relatively small creators build thriving businesses. Today the company announced that it will move beyond just handling payments for its creators, and will start working with them to build apps for smartphones, tablets, and over-the-top platforms like Roku and the Apple TV.

The traditional world of network and cable television is in decline, with ratings slumping and subscribers shrinking . It’s a big iceberg, and it’s melting slowly, but the trajectory is clear. At the same time, however, a new breed of programming that in many ways looks and feels like television is blossoming online. For a long time the only way to make money in that world was through advertising, primarily on YouTube, but in the last few years the industry has seen a shift, with content creators switching to direct sales and subscriptions.

Building an indie media company was a struggle, and the low point for co-founder and CEO Dennis Dortch was probably the day he found himself in a Los Angeles county courthouse after failing to keep up with his rent. The writer and director had been funneling all his money into Black&Sexy, a business that at the time consisted mainly of a very popular YouTube channel. The company made money advertising against its videos, but not enough to grow its offerings and pay his landlord. Dortch managed to avoid eviction and bankruptcy that day, and beginning in February of 2014 Black&Sexy began putting some of its content behind a paywall, selling select episodes through VHX to its die hard fans for $3 a pop. "We would make the first nine episodes free and then sell the season finale," Dortch explained. That sales model brought in enough money to keep the business running and the rent paid, but it wasn’t very predictable. "You couldn’t start planning the next season until you saw the sales from that last show." Subscriptions brought in three times the revenue of advertising In February of 2015 Black&Sexy tried another option: a subscription service that provided access to every show for $7 a month or $60 a year. Only a small percentage of its overall audience signed up, but each of those customers was now far more valuable than they would have been as just one more click in an ad-supported model. "We earned in one month what we used to earn every three months in sales, for the same amount of work, and that payment repeats each month as long as the series lasts," said Dortch. Following the success of its sales and subscriptions, the company was offered a development deal with HBO and a licensing deal with BET. "Hollywood executives subscribed because they wanted to see, hey what do you have hidden behind that paywall," says Dortch. The small-time creators essentially took the risk out of optioning a show by proving on their own that a paying audience existed. "People started to look at us differently, and during the subscription phase, BET stepped in and offered a licensing deal."





The second Apple TV app being rolled out today by VHX is for Yoga with Adriene, an instructional workout series, and another small media company that began as a YouTube channel. Founder Christopher Sharpe recalls trying to make the switch from an advertising-only business to one where they sold videos directly to their viewers. "We used a WordPress website with a plugin that allowed us to create a membership. That linked to our Vimeo account," says Sharpe. "It was hacked together, didn’t scale, and broke half the time." Now, even while capturing a small part of the show's overall audience, paid options have become far and away its biggest revenue driver. Sharpe says the company has about 1 million subscribers to its YouTube channel, 100,000 who subscribe to the email newsletter, and 10,000 subscribers through VHX. Yet it makes just 30 percent of its total revenue from advertising on YouTube, and 70 percent from direct sales and subscriptions. Viewing is moving from the desktop to mobile and television When it began three years ago, the majority of Yoga with Adriene's audience was watching it on a desktop web browser. That segment is now in decline, and the growth is in people using devices like the Roku, Apple TV, and Chromecast. "Customers were paying to download the show and then trying to get it on their TV through Airplay or Plex," says Sharpe. "It's a real relief to be able to provide them with that option." Both Sharpe and Dortch say that it would have been prohibitively expensive to bring on a full-time developer to handle mobile app development, much less something for a brand new platform like Apple TV. "It's nice because we know that they make money when we make money," says Dortch. "So we can rely on them to handle the technology side of it, and we can focus on what we know best, which is creating content."

VHX co-founder and CEO Jamie Wilkinson