Bundle Models between STREAMING SERVICES and Telcos

Product bundling means offering several products for sale as one combined product or service package. For streaming companies, bundles are most frequently created with telcos (mobile operators, TV and internet service providers).

As of 2021, it’s estimated that there are more than 540 digital content bundles launched across the world by video streaming services. Bundling by music streaming services is almost as popular as video streaming services. However, with the emergence of cloud gaming, gaming content is starting to get bundled as well.

Such bundles are beneficial for both sides:

·      Streaming companies have the content and need new users to sign up.

·      Telcos have the marketing channels to reach local consumers and need to differentiate their offerings from competitors to sell their core products: cell phone plans, TV or internet services.

Bundles comprise advantage for both parties:

·      Telcos invest into marketing of the combined offering, which means streaming companies need to give users discounts or extended trials to their service.

·      Streaming services companies seize the opportunity to reach their services to the massive audiences through the telco bundle.

In the standard hard bundle model, telco subscribers get a free trial to the streaming service for an extended duration (most frequently 3, 6 or 12 months) but only as long as they are also subscribed to a specific telco service plan. When the extended trial ends, they are converted to a paid account of the streaming service, which is paid for together with the telco service plan.

Since giving away content for free for an extended duration incurs a significant cost to the streaming service, these kind of partnerships usually involve a minimum guarantee of marketing spend or minimum guarantee of the number of new users brought in by the telco.

The other option for bundling is a soft bundle model, also called an add-on. In this case, a telco subscriber can simply purchase access to the streaming service through their telco account. However, they are either given an extended free trial or discount to the service if they are also paying for a premium package sold by the telco.

The third model of partnership for bundling is reselling. In this case, subscribers of the telco can simply purchase access to the streaming service, but instead of making the payment for their subscription directly to the streaming service provider, they pay through the telco’s billing channel (usually a monthly invoice or carrier billing).

Since the discount given to subscribers in soft bundles is smaller than hard bundle, soft bundles usually assume the telcos to do less marketing for the combined offering, instead relying more on organic growth. Costs for both sides in case of soft bundles are smaller, so it can often be easier for both parties to come to a commercial agreement, compared to the hard bundle model.

However, a hard bundle can be used during the initial intense market entry period to maximize new user growth, while soft bundles and reselling can be added on later. 

Eventually, each model has different pros&cons and streaming services can combine all three models with their telco partners, using different models at different stages of their partnership.

The results of user acquisition from bundle partnerships are entirely dependent on telcos, as they are the ones managing the marketing activities. Telcos have an versatile toolbox of marketing options available to them and amplifying the bundle offer with promotions has significant impact on the results of the partnership:

Hard bundles are the best way for streaming services to bring in new users because both the incentive for the consumer and the telco marketing commitment is the biggest.

At the same time, every hard bundle eventually comes to an end. That is the point where users who were previously on a free trial of the streaming service decide to either continue on a premium plan or cancel their account.

Usually, the hard bundle lifecycle looks something like this:

During the free trial of the bundle offering, telcos already get what they want out of the partnership, which is people upgrading to a premium service pack. Once the free trial runs out, there is little motivation for telcos to make sure that users stick around with the streaming service and convert to its premium offering.

This means the user journey from activation to trial to paid access needs to be as seamless as possible. One way to do that is to continue using the same mechanism the user was identified through for the free trial in order to continue charging them. If a billing mechanism is not included during the initial trial sign-up, that provides a smooth transition to paid access, churn from hard bundles can be drastic. As an example, if the free trial is simply cancelled at its end and the user is required to enter their credit card details to keep their access to the service, churn will be far higher. Therefore,  billing mechanism should be fixed in the initial stage of the subscription for users.

Streaming services usually start out launching bundle partnerships not by the dozens, but rather focusing on one or two bundles in a few core markets. In such a case, handling the commercial and technical complexities of each partner and custom setups is relatively simple.

Kaynak : 

https://fortumo.com/blog/hard-bundles-soft-bundles-whats-the-difference-from-a-digital-service-provider-perspective/