ALL YOU CAN EAT. A conceptual and empirical approach to the business models of streaming media services

Transcription

1 ALL YOU CAN EAT A conceptual and empirical approach to the business models of streaming media services Terje Colbjørnsen, Postdoctoral research fellow Department of media and communication, University of Oslo

2 The streaming model Anything, anywhere, anytime, anyhow Online access to vast content catalogues On-demand Financed by flat subscription fee or advertising Users access content by continuous delivery, not downloading. Few or no restrictions on usage From ownership to access

3 Streaming as a buffet? The buffet business model works in one of two instances: 1. If a sufficient number of customers eat less than the cost of their meal to cover for people who eat more than they pay for. 2. If the costs of the buffet (including overconsumption) is already covered by the fee paid for adjoining products and services. bit.ly/streamproject

4 Is all you can eat a sustainable model? for the streaming companies? for the media and culture industries? for content creators? and for the users?

5 there are other options Unit sales Two-part tariff entry fee + unit sales or fee based on consumption level Price discrimination By creating slightly different versions, sold at different prices By separating between different kinds of users based on ability and willingness to pay

6 RQ: To what extent do the business models of streaming media services comply with economic theories requirements for profitability for subscription and buffet pricing models? Market size? Production and transaction costs? Difficult to enforce exclusivity? Difficult to implement price discrimination? Homogeneous of heterogeneous audience? Uncertainty about the value of the product?

7 The cases bit.ly/streamproject

8 Service Tiers Price level(s) Revenue streams Spotify 1. Premium 1. $9.99/m 1. Subscription fee 2. Free 2. Free 2. Advertising % student discount 4. $14.99/m Family option Tidal 1. Premium 1. $9.99/m Subscription fee 2. HiFi /m % discount for students, family, military Kindle Unlimited One tier only $9.99/m Subscription fee Storytel One tier only 9.99 EUR/m Subscription fee YouTube 1. YouTube standard 2. YouTube Red 1. Free 2. $9.99/m 1. Advertising 2. Subscription fee Netflix 1. Basic 1. $8/m Subscription fee 2. Standard 2. $11/m 3. Premium 3. $14/m HBO Now One tier only $14.99/m Subscription fee

9 HETEROGENEOUS AUDIENCE HOMOGENEOUS AUDIENCE REGIONAL MARKET (Storytel) - Spotify (Free and Premium) GLOBAL MARKET DISTRIBUTED GLOBAL MARKET Tidal Premium Netflix YouTube HBO Kindle Unlimited Tidal HiFi YouTube Red

10 Streaming as a buffet The buffet business model works in one of two instances: 1. If a sufficient number of customers eat less than the cost of their meal to cover for people who eat more than they pay for. 2. If the costs of the buffet (including overconsumption) is already covered by the fee paid for adjoining products and services. Freemium model Exclusive model Content network model bit.ly/streamproject

11 Is the streaming model sustainable? Rapid growth, global expansion Streaming costs (content licensing and production costs) increased from $2.6 billion in 2013 to $5.8 billion in 2016 Increasingly reliant on developing and producing its own original content. Original content is attracting subscribers, but requires significant upfront investments. Plans to spend $8 billion on shows and movies in 2018, up from $6 billion in 2017.

12 Is the streaming model sustainable? IFPI: The value gap remains the biggest challenge to sustainable growth in the global music industry: Value gap: the growing mismatch between the value that user upload services, such as YouTube, extract from music and the revenue returned to those who create and invest in music (IFPI, Global music report 2017) Ebooks and audiobooks? Still largely uncharted waters Ebooks unit sales stagnation Audiobook boom Several companies came and went (e.g. Oyster and Blloon)

13 New directions for sustainanble streaming? Networks and bundles across and within companies and industries Amazon Prime, Google Cable tv encompassing Netflix and HBO Spotify and Hulu bundle Hardware and software lock-in solutions Exclusive offers Original programming Exclusive releases New genres (e.g. podcasts) Price discrimination strategies More tiers! Low-threshold paid offers (the $5 streaming service) For the dedicated and well off: HD/HiFi with added functionalities at a premium price

14 Thanks for your attention! Terje Colbjørnsen, Postdoctoral research fellow Department of media and communication, University of bit.ly/streamproject