Reading Time: 4 minutes

Why is pricing your OTT service the right way crucial for growth?

The world is increasingly moving towards the digitization of all businesses. Consider gym membership, for example. Earlier, a gym membership involved going to the gym physically and enrolling with a monthly, quarterly or annual plan. Today, with apps like fitternity and, the same thing can be done from the comfort of your home through the click of a button. Moreover, these apps incentivize you to rate them and refer other people to the app. They also help you track your calorie intake and calorie burn. But one thing is common between the old and the new ways, you still need to take up a membership, based on the plan you choose. This model where customers pay a recurring fee regularly, for the services of the business is called a subscription model, and it is this model where all businesses are heading, to lock in customers.

Look at the entertainment industry. Gone are the days when you would call up your cable guy, ask him to set up your television and channels by tuning frequencies. No longer do you sit in front of the TV at the designated time of your favorite shows. You don’t wait for your favorite films to air on any network. You do not need to watch what everyone else in your family is watching because there is just one TV in the house. This is the age of Over-the-top media, where you Netflix and chill. You stream your favorite shows and movies on streaming services such as Netflix, Hotstar, Amazon Prime, Voot, etc, on your own computer or phone. You watch numerous documentaries, biopics, plays, stand-up comedy, and so many other genres online. Earlier, the TV channel with the most number of high paying ads was king, but today, it is the content. People take up subscriptions for platforms that have the best content. With increasing purchasing power, people don’t mind paying a premium for quality shows.

“Well, we’re about 24 million subscribers today, and that’s up from about 15 million a year ago, so it’s a very high rate of growth, and that’s what’s exciting about the business – more and more people are getting smart TVs, they’re watching Netflix on their iPads.” – Reed Hastings.

Today, the internet is reaching the remotest of the areas. As of October 2019, about 4.48 billion people use the internet actively. India alone is the second-largest in the world in terms of internet usage. According to a report published by CNBC, approximately three-fourths of the world will use the internet on their smartphones by the end of 2025. A per Razopay’s report, OTT has already seen about 62% of Indians’ subscriptions to at least three platforms. If you are an OTT service, your business on the internet is easily scalable, as you can reach a much wider audience within as well as outside your own region. But your success depends on one vital factor-Pricing! While users don’t mind paying that premium for quality content, they are well-informed and will not overpay.

Pricing strategies used by businesses

There are various ways in which businesses price their OTT services. While there is no one correct method for pricing, you must understand the requirements of your audiences before you come up with plans.

Device-wise pricing

Some businesses charge their users on the basis of the number of devices with access to the same login on that platform. For example, if you want to be able to log in through your computer, phone, and iPad, you pay for three devices. This is a good strategy for the business and helps prevent password sharing and losing out on revenue. At the same time, if the same user wants to access his/her content through different devices, he/she will not prefer this model.

Duration-wise pricing

Another pricing strategy that businesses follow is paying on the basis of the duration you watch the content for. This is a good pricing strategy in a way that why should users pay for when they are not using the platform? At the same time, every time they log in to finish an incomplete show or movie they were watching earlier, it is pretty tedious to first complete the payment procedure each time and might lead your users to switch due to the hassle involved.

Content-based pricing

Content-wise pricing is another way that businesses have started to price their OTT services. In this kind of pricing, you charge the user only for the content they choose to watch, while the other shows are inaccessible. Youtube uses this pricing model for its paid content. This might result in lost sales as the user might want to preview or watch little parts of particular content before deciding whether they want to watch it. If the content is blocked and the user has to pay each time before accessing it, it might just irritate the user into switching platforms. It is also beneficial in some cases as the users are happy to pay only for the content that they want to watch.

Screen-wise pricing

Screen-wise pricing is similar to device-based, except that here you pay for each screen the platform is accessed simultaneously through. This means that if you plan to open multiple browsers of the same instance, you will not be allowed to do so. This helps businesses avoid losses due to password sharing and access to the same content by multiple people for the price of only one user. Hotstar is based on this pricing model and does not allow opening multiple instances of the platform from the same log in simultaneously. This is better than device-based pricing as the same user might want to access the content from different devices at different times and is not restricted to the use of a particular device.

User-based pricing

Another popular method of pricing that is implemented by players such as Netflix is user-based pricing. The different plans of Netflix depend on the number of users that would use the same subscription. This is extremely convenient for the user as a different home page and recommendation settings are created for each user, and the progress of content watched for each user does not interfere with each other. With such convenience and flexibility, users do not mind paying extra and often opt for family plans.

In Conclusion

No matter what pricing strategy you use, the important part is to gauge the behavior of your users and determine what promotes retention and what causes churn. If one strategy is not working for you, it is time to switch as the other strategies are working for other players. You must analyze what your audience prefers and launch subscription plans accordingly, as this is the way users are going to consume all content in the future.

[contact-form-7 404 "Not Found"]