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Bundling vs. À la carte – Best way to monetize content for OTT providers

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Oct, 2016

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The key for any business survival is to create maximum value for the customer, to get maximum returns. Thus value creation in OTT space is accomplished by delivering the best content at right price that is adaptable to all devices.

As content is the king but getting the right content that bring more customers is still a major problem faced by OTT providers, also selection and implementation of the correct monetization strategy too plays a crucial role in order to reap maximum returns. Where the real power still lies in the hand of consumers, the key to attain Higher LTV- Life time value and ARPU- Average revenue per user, still largely depends on

“How much flexibility is provided to the consumer to choose what to watch?”

And

“What all monetization strategies should be followed?”

Getting answers to those two questions right becomes more important due to low ARPU and higher churn in the industry.

Mostly providers follow two pricing strategies

  1. Bundling
  2. À la carte

Whereas, now days most of the providers are offering hybrid model as well

Though each model has its own pros and cons, but offering a variety of models to choose from broadens the scope for a provider to cloak higher returns.

Various OTT providers are choosing either of the two strategies. But the key question remain the same “what to choose- Bundling or À la carte?”.

Let take a look at these models in details and discuss on their pros and cons. Also, will try to take example of how different providers are practising it.

Bundling – Deliver right value to right customer

As the name suggests, here OTT providers bundles their offering into 2-5 packages of varying prices. User can choose the package of his/her choice based on required usage and the type of content they may wish to see.

The important point to consider here is package designing because it should represent all customer persona oDeliver right value to right customertherwise it will end up catering to only a few customers, thus losing out on revenue. Also, it shouldn’t be a confusing one, with more bundles. Each package should deliver the right value to the customer.

While carrying out bundling process, providers can put the cap on the content available for viewing, quality of content (HD, Ultra HD or 4K), commercials, same time multi-screen viewing etc.

For example Netflix provide 3 packages – Basic, Standard and Premium. Where unlimited content is provided in all the packages, but the differentiation lies in Quality (Normal, HD and Ultra HD) and simultaneous multi-screen viewing.

Hulu further simplifies its packaging. They offer only 2 packages with the clear differentiation between commercials and no commercials. And some others will still customize it.

One of the major issues faced by providers is to manage the churn. And the key to manage it is to serve their customer with relevant content on continuous basis.

Really, only a very less number of OTT providers can really encourages the positioning of OTT content bundles like Mobile TV extremely difficult in such a case.

À la carte – Provide 100% flexibility

The idea over here is to give 100% flexibility to consumers to let them choose what they want to see and pay only for that.

Though this gives the freedom to customers but it has its own pros and cons too. From viewers perspective they pay only for what they want to see.

And for providers, keeping a hook on to their customers is one of the biggest challenges. For that they have to keep notifying the customer about availability of new content and recommendations for other content based on their viewing pattern. Also effective marketing campaign should be rolled out on continuous basis.

Bundling vs À la carte

So the question is what to choose between Bundling and À la carte?

Every company with an aim to succeed in the industry, must follow a valuable and effective pricing strategy, to get their ROI. Some Internet-based subscription services are also offering  programmed based kind of “channels” that are available a la carte

This has to be viewed from both customer and business perspective. Generally bundling appears to be most attractive for the consumers as they perceive a huge profit in getting a number of programs against a small price but in actual for providers it brings quite a good amount of profit too. And on the other side consumers are getting almost some of the good programs to watch out but in the bundle there could be some unwanted programs too that will not make you that much happy and satisfied as well.

As compare to that in À la carte service you will get the best content of choosing your favorite programs against a fixed amount, no matter how much it costs you but you will get the quality content that will satisfy all your likings for entertainment. On the other hand it gives a free hand profit to the OTT provider.

Blended packaging is the basic practice in many items aside from in satellite television. Aside from a couple motion picture stations which could be requested individually, the satellite TV bundle comprises of 50 or 60 stations (WSJ).

As anyone might expect, there is a warmed open deliberation on whether permitting viewers who watch a normal of just 17 channels (Newsday 2/10/2006) to pick channels individually could lessen their membership expenses.

Link organizes that offer just bundles of stations to link suppliers assert that channel packaging really brings down membership expenses on the grounds that a bigger potential viewership summons higher counterbalancing promoting rates.

Hybrid = Bundling + À la carte

To overcome the cons of bundling and À la carte and get the maximum ROI for all content, most of the providers are coming up with hybrid model. Here, they allow the customers to consume services either as a subscriber (bundle) or À la carte and both.

For provider it offers them a scope to capture the larger market thus getting the maximum buck and consumers can pay little for a bundle for daily viewing and extra for a specific content.

Sometimes, providers can also give the liberty to consumers to create their own bundle. Allowing the user to define the bundle will surely increase the ARPU for providers too.

Networks are finding much better ways to monetize their content online and on OTT platforms than they have been in the recent past, advertisers are reaching more targeted audiences, and now a days cable service providers are also becoming internet service providers.

At the point when telecom operators and CSPs looks for better monetization opportunities, conveyance of extraordinary experiences around video and television content can open up unexplored opportunities for the operators.

Apart from these, various players are coming up with innovative pricing models. We will cover those in our next blog.

By : Ramakrishna Mashetty

Ramakrishna Mashetty is The Chief Marketing officer of SURE! (a Magnaquest product).SURE! is an internationally acclaimed player in comprehensive end-to-end Subscription Business Solutions for PayTV, Broadband and Cloud Computing businesses – through deployment of Metered Billing, CRM, Service Fulfillment, Value-Added Services, and Managed Services.

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