The future of bundling: why subscription pricing needs to evolve

“I’m sure we subscribe to the same service three times in the same house. So I would love to figure out a way to be more efficient and manage one billing.” — David Purdy, Chief Revenue Officer, Stingray

When it comes to subscriptions, people have never been more cost-conscious or had more options to choose from. And that’s made pricing and payment key differentiators in what has become a highly competitive market. Tiered pricing models, combined billing and ad-supported plans were all designed to make the process as frictionless as possible.

But consumers are demanding more.

As the subscription economy enters its next phase, payment and pricing models need to keep pace with the increasingly dynamic ways that consumers are actually engaging with their content.

Bye-bye blunt billing

Our research found that two-fifths of Americans (43%) think they’re wasting money on subscriptions by paying for a full month when they only use each service a few times. For many consumers, the traditional one-size-fits-all subscription model is beginning to feel too rigid.

This points to a growing demand from consumers for more flexible pricing models that reflect how they actually engage with the service, whether that’s measured over days, hours, or even minutes. In fact, one in every six Americans (16%) wants their subscriptions billed on actual usage rather than a fixed stretch of time.

In a world where many digital experiences are increasingly driven by moments rather than routines, consumers are beginning to expect more flexibility in how they access and pay for services. And that creates opportunities for providers to experiment with more flexible pricing and commercial models.

Peering over the paywall

Monthly billing feels particularly clunky in the era of aggregators. Prime Video, for example, now includes add-on subscriptions from the likes of Paramount+ or Hayu, allowing consumers to access additional subscriptions more conveniently from the same platform. Where this kind of arrangement falls down from a consumer perspective, however, is when the platform surfaces content that is locked behind a purchase:

“There is no bigger disappointment for a customer than to search for content and, when they get the search results, they find out that they’re not subscribed to it. That’s a ‘disappointment journey’.” — Chris van der Linden, Director Product Roadmap for Entertainment & AI, Liberty Global

What Chris is describing here is discovery happening before entitlement. And when a platform surfaces content before the consumer knows whether they have the right subscription, it creates friction at the exact point when it should be engaging the user.  

Bundle balance

Alongside the demand for more cost-friendly options, consumers also want an easier time managing the various services they pay for. And one of the main draws of subscription bundling is combined billing, where all subscriptions are charged as a single bill rather than several separate ones. It allows consumers to avoid some of the awkward nuances that are associated with digital subscriptions, such as duplicate purchases or admin fatigue.

But convenience shouldn’t come at the cost of flexibility:

“Even for the big streamers, you are adding cost at a time now where people really do look at their bills. We try to keep it as a balance. There are different packages with different value propositions for those that do want a larger integration — but we don’t want to make it our default position.” — David Bouchier, Chief TV & Entertainment Officer, Virgin Media

As David says, consumers want to have the ability to choose which subscriptions are included in their bundles — or, at the very least, they don’t want to pay extra for services they know they won’t use.

Easy exits earn trust

More dynamic payment options aren’t solely about keeping consumers subscribed. It’s also about making it easier to leave. Because, as counterintuitive as it may sound, a smoother cancellation experience can be better for business in the long run.

And that goes for both those who bundle:

“It’s a little bit contentious because obviously we don’t necessarily want the customers to stop their service. But in the case that they do want to, we make the process not too complicated in the interest of transparency and customer experience.” — Vincent Stevens, VP Entertainment, Telenet

… as well as those that are bundled:

“One click in, one click out — which is not easy sometimes. The one click in is very easy. But people have to be able to get out of it with the same ease because, at the end of the day, they will come back. There are a lot of returning customers. So the easier you make it to leave, the easier they come back.” — Joan Cruells, Vice President Partnerships and Growth International SVOD, Viaplay Group

What both Vincent’s and Joan’s comments here boil down to is recognising that today’s subscription relationships are increasingly fluid and providing the best customer experience possible. After all, with so much competition, if consumers feel they’re being taken advantage of, they will go elsewhere.

The future is flexible

Customers don’t want rigid contracts anymore. They need to be able to pause, swap, top-up, pay by time or usage and, fundamentally, build the experience that meets their unique set of wants and demands. Without that convenience, consumers will simply go elsewhere.

For telcos looking to build bundles for the future, the takeaway is clear. While offering this kind of flexibility may sound like ceding control, by meeting consumers where they want to be, bundlers can build long-term loyalty that sets their organisation up for success.

However, the clock is ticking, and supporting this level of flexibility isn’t a quick product decision. Commercial relationships, billing systems, and partner ecosystems that can accommodate changing customer behaviour all take time and expertise to create. And the telcos that build that capability now will be better positioned as subscription models continue to evolve.

The Digital Vending Machine® (DVM^TM) from Bango is designed to help telcos prepare for the indirect-first era. By helping organisations move beyond one-to-one integrations into a one-to-many ecosystem, Bango enables organisations to launch faster, experiment with pricing and bundles, and standardise across partners.

Pricing needs to — and will — evolve in step with modern consumers. Ignoring the signs now means falling behind those who capitalise early.

In our next blog in the series, we discuss the third major force disrupting the subscription industry: AI and how it’s set to become the new gatekeeper for discovery.