Digital streaming choices drive content subscriptions
Feb 9, 2021 | By PYMNTS.com
Ask Vindicia CEO Sharath Dorbala if he thinks the fast-growing and highly competitive market for digital content has become saturated, and he’ll tell you that it hasn’t. In fact, at a time when the disruptive over-the-top (OTT) media startups of yore (think Netflix or Spotify) have become the dominant players in streamed subscription content, he says there’s every reason to believe that we’ll see more content providers looking to connect directly with users.
“So, to answer your simple question, it’s not yet saturated,” Dorbala said in a recent chat with PYMNTS. “Subscribers have more choice, and when they see more and more content that they have an affinity for, you’re going to see subscription numbers go up.”
With newcomers like Disney+, Discovery+, and NBC’s Peacock all entering a robust marketplace, Dorbala said the average U.S. household saw its media subscriptions rise from four to five last year, while European consumers now average four paid content relationships. What is going away, he said, is the somewhat confusing and outdated acronym OTT. Dorbala believes the term is irrelevant and will be replaced by “digital services” or just “streaming.” Look at Peloton, for example — it makes exercise equipment, but its revenue comes from apps and subscriptions.
Choice, freedom, flexibility
With the concept of individual digital services comes the idea of unbundling cable TV packages, or the even more draconian practice of cord-cutting. Both trends are on the rise as consumers adjust their tastes and habits.
“If you look at sports in America today, everything has a season,” Dorbala said, pointing to the NFL as a perfect example of content that comes, pauses, and then comes back again. “People get bored. It’s fun because it lasts for those 20 weeks. There’s only so much content you can keep throwing at people. Subscribers want a choice. They want freedom. They want flexibility.”
He said the ability for viewers to take a break is one of the best antidotes to subscription fatigue, and that once the new season is available, most will gladly come back.
Dorbala said that partnering with one of the big three telecom providers, each with over 100 million subscribers, is still the best, most cost-effective way for new content providers to acquire an audience. It also doesn’t hurt that the telecoms, which have invested billions of dollars in souping up their networks, also “want to showcase their 5G technology,” he noted. “Instead of giving everything away for free with subscriptions and going through all the trials, they can always partner with telcos and have better customer acquisitions, and then decide what they want to do.”
Once a content connection has been made, the process shifts to retaining subscribers — or, more specifically, limiting churn, both active and passive. In the case of active churn, where a customer intentionally opts out, Dorbala said that Vindicia has partnered with data companies that can make recommendations for other viewing suggestions to remind people of the value they get from the service. On the flip side, passive churn continues to be a matter of credit card processing errors, which he said still fail about 15 percent of the time in the media subscription business.
As people get more comfortable with streaming and subscriptions, the new bundle will look more like five streaming services plus a super-fast one-gigabyte-per-second connection, Dorbala said.
“It’s not like the providers are coming out with a new product,” he noted. “The products are still the same, but the way the providers are monetizing them has changed. All we’re seeing is the next-generation economy coming in.”
Two questions providers need to ask themselves, Dorbala said, is whether their service is attractive enough to keep people subscribing, and if they do get fatigued, how can they give them something new.
“That’s why you’re going to see more ‘no contract’ [offers],” he explained. “We’re going to see pay-as-you-go models in a lot of these businesses.”
What’s next for the subscription business? “The one thing that nobody’s talking about once COVID restrictions are off is travel,” Dorbala said, predicting that the beleaguered sector could catch a bounce through creative packaging of consistent subscription-style trips. “Travel is one area that’s going to very seriously explore subscription models. You have all this money that has not been spent, and now you’re going to see people coming out and wanting to spend money.”