Streaming’s Great Rebundling and the Fight Against Churn
Preventing subscriber churn is the oldest problem in the streaming subscription business, and bundling is hardly a new solution, as analyst Paul Erickson points out in this clip from Streaming Media Connect 2024. So with a purported "Great Rebundling" upon us—and with tiered offerings, hybrid ad models, and other revenue-generating approaches increasingly holding sway—how do contemporary bundling/rebundling strategies differ from old ones and offer greater avenues to success? Ampere Analysis' Guy Bisson, Hub's Jon Giegengack, and Antenna's Rameez Tase offer their takes on current bundling and aggregation strategies and which ones are working in 2024.
Erickson says to the group, “How does bundling fundamentally help tackle the challenges of churn and retention right now? And what are the ways that it really differs from the bundling strategies of old from only a few years ago?” To Bisson, he says, “You have some really great perspectives starting as far back as your days at Screen Digest. I would love to hear your opinion on this.”
How the absence of a “middleman” marks a significant shift in bundling
Bisson highlights that while the rationale for bundling remains focused on reducing churn and controlling consumer costs, the absence of a middleman, unlike in the pay-TV era, marks a significant shift.
“It's an interesting question because fundamentally, it's not different, but it's different in every way,” he says. “The rationale for bundling is the same: churn reduction. [Also], cost control for the consumer, because obviously, we are hitting a ceiling in terms of the number of paid streaming services that consumers are willing and able to pay for. So giving them a 30% discount when they take three or four is another great strategy, both to attract new customers and keep the ones you have.
“But it's fundamentally different because if we go back to those pay TV days, the pay-TV operator effectively was a middleman on which the various services were hosted, be they channels or other things. And today, we don't. The importance of the middleman was the single unified interface for content discovery that was a very familiar system, a grid system for the old EPG. [It was] not entirely unified, but it was a much simpler environment for ad buying as the industry now is moving into that space. So in that respect, the bundle is very different from those old school bundles, but the rationale for doing it, I believe, is fundamentally the same.”
The new need for collaboration to achieve scale and resist churn
Erickson asks Giegengack, “What are your thoughts in terms of why bundle? Why now? How does it differ from the past?”
“It's different from the past in that no one wanted to bundle last time,” Giegengack says. “If you go back to several years ago, everybody realized that Netflix was a bona fide business. All of the streaming platforms didn't want to cooperate. Each of them wanted to be the next Netflix or take over from Netflix. And the cable companies all wanted to strangle streaming in the crib so they could keep their business model going. Today, that hasn't worked at all.
“I think the turning point for me was when David Zaslav said in the press conference, I think it was in 2021, that the independent streaming platforms need to think about bundling on our own before someone does it to us. And I thought that that was a very telling 180-degree reversal. There's this kind of capitulation now, I think, where all the independent platforms have realized that they don't have the scale and it will be really hard to get the scale with so much competition…and it's that scale you need in order to be more resistant to churn in to make a bigger profit.”
He emphasizes that this capitulation is very fortunate now, because consumers crave simplicity. “Simplicity is something that's valuable enough that people will be willing to pay for it. So I think it could be also a really good way for these companies to bolster their bottom lines. God knows they can't really afford to cut their prices right now.”
Erickson says, “I think you touch on something valid there where it's tangible for a lot of consumers who have overload in a number of dimensions. So if you've gone from the content overload…to now billing overload, relationship overload, and everything else. And so I think simplification is very tangible to a lot of consumers, whether you are a heavy streaming video consumer or not.”
Why the method of bundling is as crucial as the rationale behind it
Erickson asks Tase, “What are your thoughts on ‘why bundle?’ What are the justifications, and how does it differ from the days of old?”
Tase says he thinks that a question which is just as interesting as why bundles are needed is also how they are constructed. He discusses how Fubo, or a prototypical Multichannel Video Programming Distributor (MVPD) might consider itself a bundler in comparison to the big bundlers.
“You, of course, have big bundles like the Disney, and now it's getting even bigger with Max, and the proof is in the pudding there. Basically, it works. If you look at the Disney bundle versus the Disney standalone subscriber, there's about a 2+ churn percentage improvement versus a more seasonal or ad hoc service. There's about a 7% versus ESPN+ standalone churn improvement. But frankly, there's the kind of ‘Fubo method,’ there's the synthetic bundle of a number of services coming together. Frankly, the biggest bundle is one that I don't think people even talk about as bundle, which is the channels environment. And 70% of all specialty services come from Amazon. It's not as high for the premium ones of course, but Amazon itself may be considered a bundler.”
Erickson speculates, “How [then] do we define the difference between aggregator and bundler when really to the consumer, it's just a single source for consumption?”
Join us in November 2024 for more thought leadership, actionable insights, and lively debate at Streaming Media Connect.
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