Video streaming concept
Demonstrating strong subscriber additions this last quarter, Disney+ is narrowing the gap between market leader Netflix Inc. at the start of 2022. Industry analysts predict that the battle for eyeballs will only intensify, with both companies leveraging various tactics to grow their subscriber base.
Expansion into international markets is one source of subscriber growth that has worked well for Netflix, Global growth has been a key factor in Netflix’s success to date, with approximately 66% of their paid subscribers now located outside of US and Canada. Last month Disney+ signaled its intention to follow Netflix’s trajectory by forming a new group focused on developing local and regional content.
Another related source of subscriber growth is through tie-ups with telecommunications (telco) service providers. The telco-streamer partnership has been in full-swing since 2015 with Netflix being one of the most prolific OTT video service partners. Such partnerships are only expected to grow as Disney+ expands into global territories. Take for example, Disney’s partnership announcement in October 2021 with KT, South Korea’s second-largest mobile operator, ahead of its Disney+ launch in the country.
Eyeballs, Entertainment and… Billing
The marriage between video streaming and telco providers brings immediate benefits to both parties. For telco providers, it is the chance to differentiate their service offering in the face of increased commoditization of broadband and TV services. For streaming providers, it is the chance to gain new subscribers by bundling their content with distribution carriers, especially mobile. On the backend, optimizing customer interaction interfaces such as direct carrier billing is a draw for both parties.
Carrier billing arrangements, in particular, have proliferated in recent years. Direct carrier billing enables the consumer to pay for streaming video services, and other OTT media, through their telco provider. If a customer has a subscription to Netflix, for example, their monthly subscription fee will show up on their phone bill. This arrangement is convenient, especially in geographies where credit card and bank account penetration are low. In Africa, for example, Netflix has tied-up with Vodacom and Telkom South Africa given low credit card and banking penetration. The music streaming service Spotify, reportedly integrates M-Pesa-owned by Kenya’s largest telco operator, which is used as an alternative to credit cards and bank accounts in the region. For streaming companies, carrier billing has become an all-but-essential strategy for subscriber acquisition so they don’t lose out on consumers who are willing to sign-up but unable to pay. As a result, direct carrier billing services that integrate telco and OTT platforms, such as DOCOMO Digital and Boku, have flourished.
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And for telco operators?
An Inflection Point for Telco
“I think we are at an inflection point, “ says Amir Peled, Head of OTT at Swisscom, a major telecommunications provider in Switzerland. “Telco providers have the infrastructure-networks, data centers, CRM systems billing relationships, customer care, and more that could be leveraged towards building a great customer experience around the content. Take for instance, streaming media subscriptions. Consumers are looking for easier ways to consolidate and manage their media subscription services, and telco providers could offer such services.”
Optus, an Australian telco provider, is already heading down this route. Last year, it launched Optus SubHub, a subscription management platform that allows customers to subscribe, track, and manage their digital content subscriptions through their mobile phone account. Optus believes that this provides consumers with more control of their OTT and third-party subscription service spend. State-side, commenting on Verizon and Disney+ arrangement to Marketing Brew, Frank Boulben of Verizon explains “we manage consumer subscriptions at scale….We can manage their lifecycle, billing, [and] customer services, and we can do that more efficiently than they can do on their own.”
For such a transition to fully occur, strategic, technical and regulatory hurdles will still need to be addressed. And then there’s the ongoing debate between telco providers and tech companies on subsidizing costs of building last-mile networks. Netflix recently lost a court case in Korea, forcing it to pay for its network access with SK Telekom.
One thing is certain. Consumers may be seeing more telco and OTT partnerships in the future, as the two parties recognize mutual benefits in such arrangements. And perhaps it could result in better experiences for the consumer.
