With the right solution for video streaming, a business in this sphere can generate a lot of revenue. They usually have four monetization models: subscriptions, advertising, pay-per-view, and a hybrid. They all are effective for generating money, but here, we are going to talk about a subscription business model.
What is a Subscription Business Model?
A subscription-based streaming service uses a business model in which customers must pay a recurring fee to keep watching content. They can pay for a monthly, yearly, or quarterly subscription. Also, they can easily cancel it.
The subscription-based streaming service is usually ad-free, which allures viewers into using them. People can binge-watch as many videos as they want without interruptions.
If a subscription-based streaming service offers on-demand content, viewers receive benefits. For example, they don’t need to follow a fixed schedule. As a result, they watch whatever whenever they want and in any amount of episodes they want.
Advertising-based streaming services often provide free content, but the playback is interrupted by advertisements. A pay-per-view model, in turn, charges a fee for every video on the streaming service. These models are also effective for generating revenue with their own drawbacks and benefits.
The hybrid business model combines several models described above. If talking about subscriptions, there are several examples of combinations. One of them is an ad-based subscription that Netflix has recently launched. They offer two plans: an ad-free subscription at a higher price and a subscription with ads at a lower price. A viewer can choose the one that suits their needs.
Another example is the combination of subscriptions and pay-per-view. A content provider creates two groups of content: one is available on a subscription basis, and another requires an additional fee.
Three Key Benefits of the Subscription Business Model
Let’s talk about the benefits a subscription business model can provide companies.
#1 Predictable revenue stream
It will take some time to understand how many people purchase a subscription and how many people you gain and lose each month. After you figure that out, you can calculate the amount of revenue you can generate from one month to the next.
If you are introducing updates and uploading new content from time to time and this content is long-awaited, people will likely continue paying for your service. As a result, you have a predictable revenue stream.
#2 Stronger relationships with customers
Using your service from one month to the next makes viewers feel like they know you. They feel connected to your service and brand. They tend to wait for your updates and new videos. As a result, they continue paying for a subscription to your service, and you have a stable revenue stream.
Moreover, when you have a strong connection with viewers, they are more inclined to purchase your other products or services.
#3 Lower customer retention rate
Compared to services that rely on one-time purchases, a subscription business model provides users with continuous contact with your brand. This leads to customers staying longer on the service.
You can also reduce customer churn by introducing flexible subscription offerings. For example, you can provide customers with lower-priced and higher-priced subscription plans.
Drawing the Line
Video streaming services can generate money through various models – advertising, pay-per-view, subscriptions, and a hybrid. A subscription-based monetization model has its advantages. It can be beneficial for long-term relationships with viewers and more predictable revenue streams.