From Verizon/Netflix/Max to Apple/Paramount, Bundling Is the New/Old Method to Keep Subscribers Happy
Seasonal gifts have arrived early for viewers of streaming TV but the discounts on offer are not just for Christmas. Recent deals which have seen Verizon customers get a discounted package of Netflix and Max content and reports of a similar union between Paramount+ and AppleTV+ are the latest attempts by streaming service providers to stem churn and drive profit that will continue and spread throughout the industry well into the New Year.
Wall Street likes it, at least when it come to the prospect of Paramount+ and AppleTV+ tieing the knot. Shares of Paramount Global traded up several percent on the news, even with no official announcement from either side.
Streaming CEOs like the idea too--or least are reluctantly turning to the plan. After years of fending off competition perhaps they find safety in numbers. Bundling would provide greater discounts to consumers who are not prepared to consistently pay for stacks of standalone SVODs.
Warner Bros. Discovery CEO David Zaslav, signalled the intent to bundle earlier this year, noting that consumers were feeling the pinch. “I think one of the things that we’re going to see as we look into the future is bundling," he said. “There should be a consolidation, and I think it’s more likely to happen in the repackaging and marketing of products together.”
Disney has taken full control of Hulu and is in the process of combining content from Hulu and Disney+ into a one-app experience, of which boss Bob Iger said in May, “This is a logical progression of our (direct-to-consumer) offerings that will provide greater opportunities for advertisers while giving bundles of subscribers access to more robust and streamlined content.”
The Wall Street Journal first reported AppleTV+ and Paramount in discussions about a potentially DTC bundle. Industry analysts have noted that both streamers have smaller content libraries than rivals like Disney. Of the major streamers Apple’s is the smallest, by choice. It started its video library essentially from scratch and has pursued a quality over quantity approach ever since.
According to subscriber-measurement firm Antenna, in October, both streamers had more than 7% of viewers cancel their subscriptions – higher than the already high industry average of 5.1%.
Both divisions also increased the price of their services this year: Paramount raised Essential tier by $1 and Premium offering by $2. In October, Apple upped its rate by $3, to $9.99 a month. Though they are by no means alone. Disney+ raised its monthly ad-free tier to $13.99 from $10.99 in October and Netflix is already warning subscribers to expect a further price hike in its basic plan in the aftermath of the strikes.
AppleTV+, though, does not yet have an ad tier – making fighting audience defections more of a priority.
As noted by The Hollywood Reporter, Apple has had success with a bundle of its own services (Apple One includes services like Apple TV+, Apple Music, Apple Arcade, Apple News and cloud storage), but as it seeks to grow its streaming video service to profitability, it seems open to partnering with other players in the space to keep subscriptions consistent and to reduce churn.
It is transparent that the rising cost of living in North America as in Europe is forcing consumers to be more judicious in their TV spend. Streamers have it in their gift to offer economies of scale that consumers crave, potentially with access to move content at more favourable pricing.
But as several commentators note, this is another swing back to the cable delivered pay TV of yesteryear.
Jeremy Haft, CRO of Digital Remedy, told Forbes, that the trend is, “Ironically, similar to how cable packages operate. In addition, these platforms are finding ad supported tiers offer potentially better margins and also an additional way to create cost-effective experiences for customers.”
Dan Goman, streaming and entertainment expert and founder of Ateliere Creative Technologies, told ConsumerAffairs, “The only way forward is the bundle, which might not bode well for consumers as it in its mature form inevitably reduces choice and access to only the content we love most.”
While we are still in the early stages of the reinvention, industry veterans understand where this is headed. He warned, “The bloated bundle with three of the channels you actually want to watch and 300 channels you don’t really care about.”
Striking such deals is also complex at corporate level. Companies see less revenue per user when adding customers through promotions and bundles compared to direct sales, the WSJ reported in October 2022. Netflix and Warner Bros for example will have to share revenue with Verizon.
According to Erin McPherson, SVP at Verizon (per the WSJ) streaming bundles are happening “faster than we thought" and are "here to stay.” Verizon also has a separate bundling deal with Disney.
Verizon's CEO, Hans Vestberg, has said that creating new types of bundles is a company priority. Another telco could act as the third party for the bundle between AppleTV+ and Paramount+
Another mooted tie-up is between Amazon and Roku.
As Hunter Terry, Head of CTV at Lotame, noted to Forbes, “Why spend $10-30 a month for three or more streaming services, to see movies and shows that you will never watch? Now is a time consumers are reevaluating what makes the cut in their lives. Streaming services are constantly focused on churn reduction. Bundling is one way to overcome this challenge by making it more accessible and more affordable for consumers to sign up to multiple platforms.”
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