When streaming platforms emerged in the late-2000s, they announced they had come to unbundle the bundled linear TV programming. Viewers got ordinary TV channels to watch sports programs, news shows as well as movies. They were unable to choose a show on-demand and had to wait for it to come up on the screen. Streaming services changed that—on-demand is now the norm. However, they did not unbundle anything. Still, today, we pay for a bunch of content that we do not watch because we buy a package. With the birth of a dozen platforms, the bundle’s existence has become even more apparent. Maybe in 2020, it’s time to take a further step in the packet deconstruction and have streaming platforms rethink their pricing strategies.
Netflix came to light in the late 90s, delivering personalized rental DVDs, and it soon changed a TV-based industry into a streaming on-demand market. But now HBO, Disney-controlled Hulu, the recent launched Disney+, Amazon Prime Video are competing for Netflix’s pie (read Netflix, no longer the streaming leader in the US.) It’s not only them, other established commercial TV channels like CBS with CBS All Access and more targeted streaming platforms like ESPN+—owned by Disney—have entered the market as well. For a fixed monthly rate, the viewer gets to watch unlimited content on one platform. That’s how all streaming pricing strategies are working so far. The problem is that although the viewer gets to watch unlimited movies and shows, the show he/she wants may not be in the platform. The solution? Get another subscription with another service. That’s two subscriptions for a minimum amount of $20, and so the user could keep adding subscriptions. For example, a viewer may want to keep Netflix for $8.99 a month but may want to watch “Big little lies” and thus need a $14.99 HBO subscription. Just to subscribe to Netflix, HBO, and Amazon Prime Video, someone would have to pay $37 per month on streaming entertainment.
The reality is streaming products are bundled in multiple different “channels”—not as different as linear TV programming. What’s more, with these pricing schemes, streaming platforms can only compete on content, as their pricing structure is very similar—flat fees from $5 to $15 for “unlimited” shows. As the content battle heats up, streaming services, notably Netflix, should look for other competitive angles, such as pricing innovations. We highlight Netflix because the company will find it hard to win the content war eventually—Amazon has an unlimited war chest, and Disney owns hundreds of popular movies and shows (read Netflix struggles to compete against content moguls.)
Instead of providing flat fees, streaming services should give prospective subscribers other options such as metered subscriptions or rewards for loyal customers. Subscribers could pay meager monthly fees to access 15 movies/episodes, for example. The price could increase if the user wants access to five movies more, and so forth. This way, users could have access to an unbundled system, where they could pay to watch five HBO episodes and ten Netflix movies monthly. Users would pay similar fees than what they are paying now for just one service, or they would at least pay for what they use.
Moreover, streaming services should look at subscription models in other markets to learn from their customer relationships. When users are loyal, and when they buy regularly, they get rewards. With streaming platforms, the strategy should be similar. Loyal customers could get special discounts, event passes, or exclusive access to newly released shows.
Finally, as the Harvard Business Review notes, there’s a third option: offering packages with content divided by types of shows included, release dates, etc. These ways to unbundle content could create a new angle of competition in a cutthroat market. And, most importantly, an improved situation for users, who would actually be able to access on-demand content.
However, this metered/package alternatives would have secondary effects on content, as users would watch fewer shows and pay undoubtedly less. If you are going to get the same material for $14.99 regardless of how much you watch, there will be weeks in which you watch a lot and others in which you barely open the platform. However, if you pay for five movies per month, you’ll choose them carefully, watch them more attentively and pick the best ones. This would open an opportunity for quality-content creators, but shrink opportunities for those who produce low or medium-quality shows. If a user is paying for a few shows per month, he/she will generally be less willing to risk watching a new movie. Streaming platforms, and distinctly Netflix, would have to focus on producing the best content, instead of the most. Right now, Netflix is aiming for both—a lot of filling shows and a few star movies like Martin Scorsese’s “The Irishman.”
The last alternative is to offer new kinds of bundles that compete not with pricing but with the content offering—for example, Disney could offer subscriptions to its Hulu, ESPN+, and Disney+ platforms for a bundled discounted price. Spotify is doing it with Hulu already, but other services could follow suit (read Disney+ and the value of knowing your customer.)
With the launch of a myriad of streaming options, it’s time for platforms to think of new ways to compete, not just content. Bundled discounted packages are an option, but there’s a ceiling—there are so many deals companies can reach. That’s why 2020 will probably be the year for new pricing schemes in the streaming market—or the second part of the cruel streaming content war we have been watching all 2019.