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The recent Subscription Economy Index (SEI) report from Zuora showed subscription businesses growing at a rate five times faster than S&P 500 companies and retail sales. Consumers are comfortable with subscriptions, particularly as brands have become more responsive to privacy and delivery concerns.
The trick for subscription brands is to reduce churn, keep subscribers renewing and reduce any user fatigue or financial strife that may come from too many services. This is particularly concerning to streaming networks, which are competing in a very crowded marketplace. Enter bundling, a possible solution for brands and consumers. Apple, Disney and CBS are all looking at bundling options, especially with more streaming services headed onto market in 2020.
Streaming Services Are Starting To Feel Like Cable TV
Bundling isn’t a new concept. Cable companies have bundled their services for years, offering tiered options that include premium channels for a modest price increase. Consumers complained about having too many channels for too much money in the past, and wanting more choice in choosing exactly the networks they wanted. This is essentially what audiences have with multiple streaming services, but, as an article from The New York Times recently pointed out, juggling a bunch of streaming services is getting expensive as well.
"Even a conservative estimate of all these subscriptions [Netflix, Hulu, HBO Now, Showtime, CBS All Access, Amazon Prime and Disney Plus], puts a monthly bill at about $75,” noted the article. Offering bundles in various ways could be the answer to this modern-day problem.
CBS, Apple And Disney Offer Bundles Of Their Own Products
Many streaming services are launched either from existing entertainment conglomerates or have “sister channels” already on cable. Disney and CBS both fall into these categories and are offering consumers the chance to bundle their products and save. From The Motley Fool, “Disney will offer consumers interested in its streaming services the option to bundle Disney+ with Hulu and ESPN+ for just $12.99 per month (a $5 per month discount). CBS offers a bundle of Showtime and CBS All Access starting at $14.99 per month (a $2 per month discount).” Bundling is a natural solution for brands in this position.
Although not yet confirmed, it’s likely Apple will offer a bundle of their existing products including Apple News+, Apple TV+ and Apple Music sometime this year. Apple continues to seek additional revenue from subscribers as phone sales plateau.
HBO, which is launching HBO Max in the spring, has revealed HBO Now subscribers will be able to upgrade to HBO Max, with a catch. According to CNET, “Only new and existing HBO Now subscribers who subscribe through hbonow.com and are billed by HBO are eligible for the free upgrade,” which means people who subscribe through third-party providers like Roku or Apple will not be eligible to upgrade. “Stay tuned for more details” seems to be the company line around the release of HBO Max and how it will ultimately work for HBO Now and HBO Go subscribers. It is unlikely existing HBO customers will want to pay for another service, but will instead want bundles or a seamless transition to the best option.
Different Companies Contemplate Bundling Together
Bundling within their own universes may be a no brainer for brands, but partnering with other streaming companies could be the service consumers are seeking. The Motley Fool explains these partnerships are likely to happen through wholesale agreements. “Wholesale agreements allow the distributor to set the price on services instead of the service provider themselves. That opens the door for them to improve the overall value to their customers through a bundle of popular services.” Adding, “A bundle of streaming services could be great for companies whose offerings are included. Bundles decrease subscriber churn and increase customer lifetime value.” A good example of this kind of bundling is Apple TV, which, by offering Showtime and Starz subscriptions gained a core base of customers who were ready and waiting when Apple dropped their own original content. However, niche streaming services that aren’t amenable or invited to make these kinds of wholesale agreements could be left out in the cold and lose customers.
For brands like Apple, Roku and Amazon, the upside to bundling is very good, with increased value for consumers, distributors and media companies. Brands that want to stand out in the very crowded over-the-top (OTT) marketplace should find benefits from leveraging bundling partnerships and touting content that may appeal to shared target audiences.
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