Streaming services introduce tiered subscriptions to spur growth

August 18, 2021

Streaming services introduce tiered subscriptions to spur growth

Greg Sigel

SVP – Partnerships

Audio and video streaming companies are piloting lower cost premium services in different parts of the world in a bid to entice more subscribers onto their platforms. And the recent flush of advertising video on demand (AVOD) service launches further highlights an appetite to deliver new formats to suit every budget in the race for additional customers.

Spotify is currently testing out a less restrictive ad-supported service – dubbed Spotify Plus in the US – on a limited number of users.[i] The proposition combines elements of its existing free and premium tiers, allowing users to skip unlimited numbers of tracks per hour and choose specific songs to listen to rather than shuffling between albums and playlists. The free service currently doesn’t allow listeners to skip more than six tracks per hour and limits their choice to 15 select playlists chosen by Spotify itself.

The service still includes advertising, while reports suggest the company has not yet settled on a specific monthly fee for Spotify Plus. Instead, it is testing different users with a variety of price points to gauge interest, starting with US$0.99 in the US. Spotify’s Premium Plan currently costs US$9.99 per month for US users. However, pricing differs in different regions of the world (£9.99 in the UK, AUS$11.95 in Australia and just US$3.42 in Malaysia, for example).

Other reports suggest Google is also experimenting with a lower cost premium subscription tier for YouTube in select European countries[ii]. Subscribers in Belgium, Denmark, Finland, Luxembourg, the Netherlands, Norway, and Sweden are being offered a Premium Lite service for €6.99 (US$8.20) a month, significantly less than the cost of a YouTube Premium subscription typically priced at around €11.99 (US$14). Premium Lite includes ad-free viewing of videos on YouTube’s web, iOS, Android, smart TV and games console apps, but not ad-free listening to music tracks or offline downloads.

Netflix too has unveiled Mobile+ for some of its new and existing subscribers in India, priced at around US$4.70 for a service that allows high-definition streaming across smartphones, tablets and PCs (but not smart TVs).[iii] Other subscriptions currently start at US$6.69 for a single screen, standard definition viewing rising to US$10.70 for the 4K multi-screen service.

Netflix has offered a low-cost mobile-only plan in India and Malaysia priced at roughly US$2.70 a month since early 2020 and recently extended the same service to customers in Nigeria, Kenya, South Africa and other sub-Saharan African countries for US$3.99 a month. That implies the company has had success in attracting more subscribers onto lower-cost subscriptions in emergent economies of the world. While these plans will result in healthy growth in new subscriptions, it may not be easy to continue funding the production engine that caters to local sensibilities and keeps these news users engaged (read more analysis in our recent blog Netflix expansion amidst increasing competition here).

AVOD on the march

The video streaming market will experience further competition from newly launched AVOD platforms, particularly in a US market that looks to be approaching, if not already at, saturation point.

WarnerMedia’s HBO Max debuted an AVOD version of its platform for US customers in June, offering nearly all of its content library for US$9.99 a month, a US$5 saving on its ad-free subscription.[iv] Discovery launched an AVOD version of Discovery+ for US$4.99 a month last December, with plans to roll out availability to 25 countries during 2021. While Disney+ currently offers just a single ad-free tier of its platform, its Hulu subsidiary offers two ad-supported tiers alongside a single premium ad-free option.  

Another US SVOD provider, ViacomCBS, extended availability of its AVOD Pluto TV platform to France in February (to include significant volumes of French-language content), with plans for a launch in Italy later in 2021 (the service is already available in the UK, GSA, Latin America, and Spain). However, reports say company executives have indicated the intention is to use the AVOD platform to “funnel” customers into its paid Paramount+ and Showtime OTT platforms.[v]

There is no guarantee that all of the new low cost and ad-supported audio and video streaming services currently being piloted will last long – streamers like Spotify, YouTube and Netflix have a history of testing the water with features that never actually make it into commercial service.

But the fact that so many companies are now experimenting with novel approaches suggests they see the potential of expanding their audience base with more flexible subscription packages. To make it even easier to pay for these new plans conveniently and securely with mechanisms like direct carrier billing seems to be a logical next step.

[i] Spotify is testing a less restrictive ad-supported tier costing $0.99 a month, The Verge, 3rd August 2021

[ii] YouTube ‘Premium Lite’ subscription offers ad-free viewing for less, The Verge, 2nd August 2021

[iii] Netflix tests new low-cost subscription plan in India, TechCrunch, 21st July 2021

[iv] HBO Max AVOD Version Launching in June for $10/Month, TVTech, 19th May 2021

[v] Paramount+ reveals launch dates for US, Canada, Nordics & Australia, Television Business International, 20th January 2021

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