Streaming services are really taking the adage “the more, the merrier” to heart—and not just when it comes to subscriber counts.
Take satellite radio company SiriusXM. It recently amped up its premium plan by including a complimentary 12-month subscription to Discovery+. Richard Beatty, chief subscription revenue officer of SiriusXM, told Marketing Brew that the partnership will help SiriusXM sweeten the pot for its new and existing subscribers just as much as it will benefit Discovery+, which wants to boost its own subscriber count as it heads into its second year.
“They are fairly new as a subscription business,” Beatty explained. “What better way for them to get recognition than [to] bundle [it] with something that people are extremely familiar with?”
The arrangement joins an ever-lengthening list of companies pairing up to boost adoption rates on both services. Whether partnerships are with other entertainment companies or with service providers like Verizon, lengthy free trials and giveaways help get the attention of consumers overwhelmed with entertainment options and their separate subscription fees.
If executed smartly, long-term partnerships can boost audiences for streaming services at the outset and help retain customers of both businesses.
“It’s a win-win for everybody,” Beatty said.
Scaling on the cheap
Free trials are nothing new, but Verizon and Disney+ changed the game in 2019 when certain Verizon customers got a year of Disney+ for free. Disney+ has since ballooned in popularity, with about one-fifth of its early subscribers coming in through Verizon’s doors. Disney+ reported a healthy 118 million subscribers as of Q4 2021. So it’s no wonder companies like AMC+ and Discovery+ rushed to strike similar long-term free trials with the telco.
There’s a lot in it for streamers. A 12-month giveaway locks in customers long-term, giving streamers time to convince them their service is essential. For streaming services with ad-supported tiers, scaling up fast is also crucial to the advertising side, as marketers will only spend on streaming services if they believe there’s an audience there to target—and viewers on a free-trial are still targetable.
Partnerships can also help companies save on marketing dollars. Acquiring new customers is expensive; Deloitte estimates that the average customer-acquisition cost in the streaming-video space is $200. If a subscription service charges $12 a month, it’ll take nearly a year and a half to recoup those marketing costs alone.
Team up with an established service provider, and companies can divvy up the marketing costs. The SiriusXM-Discovery+ deal, for example, will be marketed to SiriusXM’s more than 34 million subscribers, representing “tremendous value for our partners,” Beatty said. In exchange, SiriusXM—which in its own early days benefitted from loads of marketing partnerships with auto manufacturers—gets shiny new services to show off in its ads.
There are other ways to save. Verizon, which has offered various free trials and giveaways with entertainment services including Apple Music and Google Play Pass, helps partners manage customer relationships even after free trial periods are over.
“We manage consumer subscriptions at scale,” explained Frank Boulben, the chief revenue officer of Verizon’s consumer group. “That’s the natural partnership between Verizon and those partners. We can acquire subscribers for them. We can manage their lifecycle, billing, [and] customer service, and we can do that more efficiently than they can do on their own.”
Even though the trials are marketed as free, someone is paying the cost of a subscription. While the exact terms of these arrangements depend on which companies are involved, partnerships can often mean one company buys subscriptions at a wholesale discount; other financial terms hinge on things like joint advertising budgets. At a high level, Beatty explained that “you have to look at what both companies can bring to the table as far as all the assets they have.”
Churn, baby, churn
Scaling up fast doesn’t matter if consumers don’t stick around. Losing customers means companies then have to market to those consumers again—and that’s an expensive proposition considering the rate of re-marketing required. Around 50% of millennial consumers engage in what Deloitte called “churn and return” in its most recent Digital Media Trends report, meaning those customers subscribe, watch a show, cancel, and then re-subscribe again later, emphasized Kevin Westcott, vice chair and head of the US technology, media, and telecommunications practice at Deloitte.
Audience turnover can threaten to undermine streaming services’ advertising businesses, which rely on returning eyeballs. “If my audience is churning every two to three months, it becomes a lot harder for me to actually deliver that audience and to provide those guarantees to the advertisers,” Westcott said.
That means the focus shifts to convincing consumers to stick around when their trial runs out. Success rates vary, and most streamers are loath to share their conversion rates publicly, but Verizon has previously claimed that free customers convert to paid customers at a rate of 50%—70%.
To further entice customers to stick around, some streaming services are making permanent complimentary offerings in a single package, like Disney’s streaming bundle, which packages Disney+, Hulu, and ESPN+ all-in-one. Other companies are looking at complimentary entertainment offerings, like in gaming and music.
“If I have five different types of entertainment that I am getting through one bundle, it’s a lot harder for me to cancel,” Westcott explained. “It might feel like I’ve watched the shows I want to watch on the streaming side, but I really like my gaming subscription or I really enjoy the music streaming subscription that I listen to every day. That makes it harder to leave.”
As companies create more permanent bundles, customers get another benefit: bigger discounts.
“We can give you a better price if we bundle it all together, and the partners all work to negotiate that, and that makes customers stickier,” SiriusXM’s Beatty said. Plus, customers may find it easier to pay one time instead of juggling five different subscriptions.
“It’s easier for the customer to manage,” Beatty said. Morning Brew