Subscription-video services are benefiting from the growing number of cord cutters looking for cheaper ways than cable TV to access TV shows and movies.
Netflix and Hulu, for instance, are much cheaper than pay-TV subscriptions that on-average cost $US55 monthly in the US, according to SNL Kagan estimates. And streaming video adoption will grow even faster with the availability of popular channels like HBO and AMC outside of cable TV packages.
As a result, BI Intelligence estimates US subscription video revenue will top nearly $US4.8 billion this year and grow to $US11.5 billion by the end of 2019, rising by a compound annual growth rate of 24% from 2014, based on data from PwC.
In this new and exclusive report from BI Intelligence we look at how prominent players in five separate categories have tried to build a subscription-based revenue streams alongside ad-based businesses: the categories are video, music, news publishing, social networks/messaging, and dating apps.
Here are some of the key takeaways:
- Most companies operate on a “freemium model.” Subscriptions typically operate alongside an advertising business.
- Success in freemium boils down to offering a core audience exclusive value that can only be accessed beyond a paywall. The key is to target the most loyal audiences, and sell them on an expanded offering — bundles of features or content — that they find irresistible.
- Some publishers and apps have had mixed results with subscriptions, and vary in terms of how hard they have pushed them. Part of the problem is that ad-dependent companies are worried about limiting audience if they pack away too much value into a subscription tier.
- The proportion of paying subscribers within the total user base varies considerably across digital media industries. Each category is obviously different, and won’t face the same challenges and opportunities in dialling up the percentage of subscribers and subscription revenue. Here are some of the proportions of subscribers in apps’ user bases: Spotify (25%), WhatsApp (21%), Pandora (5%), Match Group (5%), The New York Times (3%), and LinkedIn (2%).
In full, the report:
- Analyses the most common subscription-based digital media revenue models
- Explores the drivers that allows some subscription or freemium business models succeed
- Explains the revenue mix and business opportunity in several key digital media industries
- Outlines companies that have succeeded with subscription-based business models
To access the full report from BI Intelligence, sign up for a 14-day trial here. Members also gain access to new in-depth reports, hundreds of charts and datasets, as well as daily newsletters on the digital industry.