Bundles of streaming services always have seemed likely because they provide benefits for sellers and buyers. The proposed ESPN, Fox, Warner Brothers Discovery sports bundle; the Peacock-Netflix-Apple TV bundle and the early ESPN+, Hulu, Disney+ bundle provide examples.
Product bundles generally have appeal for buyers because they provide more value, typically with some savings over buying each of the products individually. But bundles also appeal to sellers because they tend to create value and distinctiveness, while reducing churn and creating more product “stickiness.”
The same bundle of streaming services value (more content for less money) also means barriers to consumer churn. It is a lot easier for a consumer to cancel a single service than a bundle of three, for example, as the cost of buying the remaining two services might be quite significant.
So streaming bundles provide upside for sellers on both the customer acquisition and customer retention fronts, while trading some amount of gross revenue for higher lifetime account value and possibly some lower marketing expenses.
Market share considerations also are important, as contestants scramble to build leading positions in an overcrowded marketplace. Bundles can help suppliers grab market share faster.
Generically, one might attribute the value of bundling in several areas, including customer acquisition, gross revenue impact, churn reduction and market share gains.
Customer acquisition benefit (25-30%)
Gross revenue upside (25%)
Churn reduction, higher lifetime customer value (20-25%)
Market share gain (20-30%)
As almost always is the case, Comcast will restrict the new streaming bundle offer to customers who already buy either linear video or internet access from Comcast, attempting to create a value moat anchored in one of the core legacy services, as one can only buy the Xfinity mobile service unless one also is a subscriber to either linear video or home broadband.
All those key problems--customer acquisition; market share, gross revenue, churn and profitability--are in principle aided by the new streaming bundle.
If one assumes the stable eventual market structure will include leadership by about three firms, including Netflix, Prime Video and the Disney properties, it is clear that the other providers must try and break into that top group, or create some other valuable role that contributes materially to firm profits.
Amazon always has seen Prime Video as a feature driving its e-commerce subscriptions, for example. So many analysts seem to discount Prime’s market share, which by one measure (subscribers) would place it first, ahead of Netflix. The complication is that Prime Video is bundled “as a feature” of Amazon Prime, the e-commerce platform.
-
Sources:https://www.statista.com/statistics/1035628/most-in-demand-streaming-services-global-share/, https://www.parksassociates.com/, https://www.ampereanalysis.com/, and industry reports.
Aside from customer acquisition and market share issues, account churn remains a huge issue for video streaming service providers.
Account churn can range from as much as 60 percent on an annual basis to as low as 30 percent. At the high ranges, the equivalent of the entire subscriber base turns over about every two years. At the lower ranges, the equivalent of the entire subscriber base turns over about once every three to 3.5 years.
That poses business model issues as high effort must be expended to acquire new accounts, while profit margins for short customer life cycle accounts is lower than for long-tenured accounts. Bundling is seen as helpful in that regard.
So watch for more bundling efforts.
No comments:
Post a Comment