BLUEPRINT FOR A SUBSCRIBER-CENTRIC OTT VIDEO BUSINESS. Key Considerations & Requirements for OTT Video Monetization

Transcription

1 BLUEPRINT FOR A SUBSCRIBER-CENTRIC OTT VIDEO BUSINESS Key Considerations & Requirements for OTT Video Monetization

2 CONTENTS OVERVIEW 3 Overview 12 Pricing, Packaging and Marketing 14 Subscriber Management & Support 30 Commerce, Billing, Finance 50 Multi-screen Video Fulfillment 54 Reporting & Analytics 62 Next Steps In recent years, media companies such as Time Warner (HBO), CBS (Showtime), Viacom, Bertlesmann (RTL), NHL and MLB have established successful first generation direct-to consumer, IPbased, OTT video services. The success of first generation OTT video services has simply proven that customers are willing to pay directly via the internet and mobile devices for quality digital content, and the discussion about OTT video today has shifted from whether to implement a direct-toconsumer OTT video service, to how best to implement an OTT video service.

3 4 5 Overview In recent years, subscribers have evolved from anonymous numbers on a chart to become your primary customer base. And newer and higher customer expectations require a foundational and operational change in the way you do your business. This essentially means that your entire business from acquisition to service delivery to renewals and upsells must be centered around your subscribers. NOW MORE THAN EVER, YOU HAVE AN OPPORTUNITY TO TAKE STEPS TO MANAGE AND MEASURE YOUR SUBSCRIBER RELATIONSHIPS AND USE DATA AND INSIGHTS TO OFFER CREATIVE VALUE ADDED SERVICES AND GROW THOSE RELATIONSHIPS. This renewed focus on subscriber relationships, and the strategies to develop, monetize and maintain these relationships is what we call OTT Video Monetization. While perhaps seeming simple at first glance, implementing the OTT Video Monetization strategy has considerable implications on your current media infrastructure and business processes.

4 6 7 Overview YOU LL QUICKLY FIND THAT YOU NEED TO GO MUCH FURTHER THAN SIMPLE CREDIT CARD TRANSACTIONS TO ADDRESS THE LARGER ISSUES FACING HOW YOU MANAGE AN ONGOING CUSTOMER RELATIONSHIP. IF YOU ARE A TRADITIONAL MEDIA COMPANY TRANSITIONING TO OTT VIDEO, CHANCES ARE YOU HAVE ONE MONOLITHIC SYSTEM HANDLING ALL ASPECTS OF YOUR OPERATIONS. And you have probably found that getting a complete view of your relationship with the subscriber is a complicated and difficult task. Only a handful of media companies can claim to have the ability to view their digital subscribers as a unified audience in a single system. With the shift to OTT Video Monetization, you will need to develop a long-term architecture strategy that meets the dynamic demands of your subscriber base, and one that is nimble enough to adapt to changing market demands. Your digital media ecosystem will need to accommodate multiple content delivery platforms, yet maintain a unified view of your subscribers regardless of how many platforms they use to engage with you.. The rise of multiple content delivery platforms, as well as the growing number of digital billing and payment flexibility that customers demand today necessitates an agile approach.

5 8 9 Overview WHEN DEVELOPING YOUR SYSTEM STRATEGY: Instead of one monolithic system, consider a best of breed approach to solutions that provide deep capabilities in key areas, and that can easily integrate into a broader ecosystem. Consider a unified subscription management system across multiple properties so that you have a holistic view of your subscriber base regardless of the channel they use to engage with you. This blueprint, based on best practices that Zuora has arrived at working with leading This blueprint, based on best practices that Zuora has arrived at working with leading media companies, attempts to highlight the five key areas for you to consider when developing or transitioning to a subscriber-centric OTT Video Monetization platform: 1.) PRICING, PACKAGING AND MARKETING 2.) SUBSCRIBER MANAGEMENT & SUPPORT 3.) COMMERCE, BILLING, FINANCE 4.) MULTI-SCREEN VIDEO FULFILLMENT 5.) REPORTING AND ANALYTICS Each of these is crucial in delivering a complete OTT Video Monetization solution.

6 10 1) PRICING, PACKAGING AND MARKETING FOR THE DIGITAL AGE The first step to moving to OTT Video Monetization is to adopt creative pricing strategies. It s clear that having a system to support multiple pricing models, and the ability to test new pricing models rapidly will be a competitive advantage for your business and give your subscribers more ways to engage with you. Whether you are considering a freemium model, which gives viewers access to free content up to a point so they are not completely locked out, or special plans for all access, or specific content/format bundles or even special rates for corporations or educational institutions - flexible pricing and packaging is a key component to success.

7 Blueprint for a Subscriber-Centric OTT Video Business : Key Considerations & Requirements for OTT Video Monetization FREEMIUM PRICING - This model increases the probability of customer acquisition, since your content is still accessible to subscribers who are not yet ready to make a commitment. If free content such as pilot episodes help to convert prospective subscribers to paying subscribers, your commerce system will certainly need to accommodate this model. PROMOTIONAL PRICING - To help convert prospects to customers, you may choose to offer marketing promotions, which can be time-based (e.g., 50% discount for the first 3 months), volume-based (e.g., tiered pricing, whereby additional units become progressively cheaper), or both. Eligibility for promotions can be dictated by a multitude of factors such as geographic location, customer type, usage, etc. The lure of promotions to increase customer acquisition rates is powerful. The downside is that an over-reliance on promotions can erode value and train prospects to demand a promotion before signing up.

8 Overview CROSS PLATFORM PACKAGING AND BUNDLING - Since viewers are demanding access to content on multiple devices, you will need to offer bundled pricing for different content formats. Subscribers have also shown a willingness to pay a premium for the ability to access digital content on multiple devices and platforms like phones and tablets. ONE-TIME CHARGES - While you may not adopt it as a component in all your offerings, your system should support the ability to charge customers a one-time fee to get started with your service, or to monetize viewing single non-recurring content such as sporting events and award ceremonies. This is an important touchpoint to convert such viewers to ongoing, paid subscriptions. Today s customers expect a variety of services and pricing plans, so they can choose one that best suits their needs. With a multitude of pricing approaches at your fingertips, an important consideration will be the number and types of service packages to offer. Your commerce system must allow you to support numerous service configurations, rapidly experiment with new plans, and change dynamically as market or competitive situations dictate.

9 Blueprint for a Subscriber-Centric OTT Video Business : Key Considerations & Requirements for OTT Video Monetization RECURRING CHARGES - Your system should allow your subscription pricing model to have a recurring component. It should provide the flexibility to define different time intervals for the recurring charges such as weekly, monthly, quarterly, or yearly. And support additional complexities, such as when recurring charges are calculated (e.g., 1st of the month vs. anniversary date) and what proration rules apply (e.g., for partial months). In addition, your system needs to support different types of recurring charges. Recurring charges might be fixed a flat fee that gets charged each month to customers. Or they might be variable a charge calculated by multiplying units purchased (e.g., number of articles downloaded) by a set price. Or, they might be calculated based on detailed usage statistics, a model slowly being adopted by the media industry. PAY-AS-YOU-GO CHARGES - You will sometimes have customers that don t want to commit to a subscription, and only wish to pay for what they use. One of people s pet peeves with cable has been the fact that they are forced to pay for channels they neither watch nor want. OTT video with its increased flexibility has the opportunity to capture such audiences. Your system must flexible enough to offer and manage this level of detail and customization.

10 Overview B2ANY PRICING - Leading media companies have adopted sales models that include both businesses and consumers as their end customers. For example, The Wall Street Journal and Spotify sell subscriptions to consumers, and also sell bulk subscriptions to businesses. Leading educational and medical publishers often have both direct consumer and enterprise customers. Many of your OTT video customers will have both B2B and B2C characteristics. You should not have to deploy separate platforms to manage the different pricing strategies. Your system should be able to meet the pricing, promotion and discounting requirements of high volume low touch consumer sales, and low volume high touch enterprise sales within a single unified platform. MULTI-CURRENCY PRICING - The internet makes it possible for your content to reach subscribers across geographic boundaries often opening new and significant sources of revenue. You will need to decide whether you d like international customers to sign-up for your service. If yes, you must make it easy for them to pay for it in their local currency. For this, you will need a system that supports multiple currency types and date formats. In addition, you may also need a system (and particularly a web self-service portal) that can be localized in the languages of the countries where you primarily do business.

11 20 2) SUSCRIBER MANAGEMENT AND SELF SERVICE In the digital age, customers expect to sign up for and maintain their subscriptions via self-service from your website using their computers, tablets or mobile phones. While call-centers are still required, they cannot be your only customer support solution. Your commerce system will need to provide self-service functionalities that make it an easy and seamless experience for your subscribers to manage their accounts.

12 Blueprint for a Subscriber-Centric OTT Video Business : Key Considerations & Requirements for OTT Video Monetization ACCOUNT CREATION AND INITIAL SIGN UP - Your web storefront should allow a new customer to create an account and sign up for your service online. When creating a new subscriber account, your system should only collect information you absolutely need, to keep the process short and minimize customer abandonment. Information typically required will be: Customer Name: Identifying the customer who made the purchase. Start Date: Date that the subscription begins. Auto Renew: Whether the subscription should automatically renew at the end of the term. Renewal Term: If auto-renew is selected, how long should the subscription be renewed for? Pricing: The amount to be charged for each service purchased, which can include one-time fees, recurring fees, and usage-based fees. Billing Interval: How often the customer is going to be billed for recurring charges. VIEWING INFORMATION - Returning customers should be provided with a login and password to access your web self-service portal. Logged in, a customer should be able to view the following information: Account Profile: Typically a customer s contact and billing information. Payment Method: The payment method used for any recurring billing. For credit card details, only the last four digits and the expiration date should be displayed for security reasons. Subscription Details: Information related to the services that a customer has subscribed to, along with their corresponding rate plans. Invoices: A record of the customer s invoices. Payments and Adjustments: Payment history and any billing adjustments you have made for the account. Current Usage and Charges: If you offer a pay-as-you-go subscription, the customer should have a snapshot of how much of your services he/she has used this billing period as well as a calculation of how his upcoming bill currently stands.

13 Blueprint for a Subscriber-Centric OTT Video Business : Key Considerations & Requirements for OTT Video Monetization UPDATING INFORMATION - Your system should also allow customers to make changes to their accounts from your web self-service portal, thereby saving you significant customer support costs. Common self-service updates that your system should support are: User information: Changing account username and password. Contact information: Changing contact information such as multiple addresses, telephone number or . Service changes: Adding, removing, or updating services in a subscription as well as creating, suspending, or cancelling a subscription. Additional Contacts: You may want to store different bill to and sold to contacts for gift accounts. Pause or resume subscription: Since media subscriptions are usually monthly or even weekly, customers often want to pause their subscription when they are on a vacation or out of town. They should be able to pause and resume a subscription easily without making any phone calls. UPDATING CREDIT CARDS - Once a credit card is on file for recurring charges, there is the possibility that the credit card may expire. Your system should be proactive about notifying customers via , text messages and alerts on your web portal when their credit cards are about to expire. This proactive, automated approach will reduce the number of failed payments and ultimately improve your cash flow. IDEALLY, YOUR SYSTEM SHOULD ALSO LEVERAGE VALUE-ADDED SERVICES FROM VISA AND MASTERCARD, ALLOWING YOU TO AUTOMATICALLY UPDATE CREDIT CARD NUMBERS AND EXPIRATION DATES, SO YOU WILL ALWAYS HAVE A SUBSCRIBER S LATEST CREDIT CARD INFORMATION. And in addition to the selection of one default payment method, your system should ideally support entry of multiple payment methods. Customers in different countries and geographic regions may prefer to pay in different ways. For example, a majority of consumers in North America prefer credit cards but a large portion of consumers in the UK prefer direct debit.

14 Blueprint for a Subscriber-Centric OTT Video Business : Key Considerations & Requirements for OTT Video Monetization CREATING MULTIPLE SUBSCRIPTIONS - As your business grows, you may want to upsell or offer an additional service to your existing subscribers. It is important that your commerce system allows you to create multiple subscriptions for an account so you can, for example, allow your customers to try out the new offering without impacting their existing service. For example, if a customer wants to add a monthly DVD service on top of the original, annual streaming subscription, there should be no service disruption or invoice confusion from this addition. CANCELLING ACCOUNTS - Subscribers should be able to cancel accounts in a self-service manner, and your support representatives should also be able to cancel accounts, either at a customer s request or for other business reasons such as non-payment or fraudulent use. DELVING DEEPER, HERE ARE ADDITIONAL THINGS YOUR SYSTEM MUST SUPPORT DURING ACCOUNT CANCELLATION, LARGELY TO MINIMIZE THE RISK OF REVENUE LEAKAGE: Before canceling an account, your system should cancel all of the customer s subscriptions and verify that all due invoices have been paid or adjusted. The system should prohibit further subscriptions from being added to a canceled account. The system must ensure that any remaining usage prior to account cancellation gets billed to the customer in the next billing cycle. Optionally, you may consider having your system cancel all of a customer s subscriptions but keep the customer account active, so the customer can re-engage without friction at a later date, with her existing account information still intact.

15 28 3) COMMERCE, BILLING AND FINANCE The subscription business model changes everything from the ground-up. Billing, payments and finance are three of the most impacted areas of subscription based OTT Video Monetization.

16 Blueprint for a Subscriber-Centric OTT Video Business : Key Considerations & Requirements for OTT Video Monetization MULTIPLE PAYMENT TYPES- COMMERCE Your subscribers will want to pay in different ways, so it is important that your commerce system supports the key payment types: Electronic: These payments are typically electronic bank transfers (e.g., ACH) or creditcard transactions that are made with a direct connection between your billing system and the electronic payment processor. External: While most OTT video customers will probably choose electronic payment methods, you must be prepared to accept other forms such as paper checks or wire transfers. These are processed outside of your commerce engine and must be recorded against an invoice back in the billing system.

17 Blueprint for a Subscriber-Centric OTT Video Business : Key Considerations & Requirements for OTT Video Monetization PAYMENT GATEWAY INTEGRATION - In order to accept credit cards and electronic checks, you will need a relationship with a payment gateway (e.g., PayPal, Authorize.net, CyberSource) to authorize transactions. Your commerce system must be able to integrate with the payment gateway you have selected in order to automatically charge your customers credit cards on a recurring basis. AS YOUR BUSINESS GROWS, YOUR PAYMENT GATEWAY NEEDS MAY EVOLVE. FOR INSTANCE, IF YOU DECIDE TO EXPAND INTO CANADA OR THE UK, YOUR PAYMENT GATEWAY MAY NOT BE ABLE TO SUPPORT CREDIT CARD PROCESS- ING FOR THOSE COUNTRIES. Having a commerce system that supports connections to multiple gateways is essential to ensure that your growth is not hindered by an inability to accept payments. Your commerce system should also allow you to change gateways seamlessly, so your subscribers do not need to re-enter their credit card information if you add or change a gateway. PCI COMPLIANCE - If you intend to process credit cards as a method of payment, best practices will dictate that your commerce system be PCI compliant, thereby achieving a level of security that meets the standards of the Payment Card Industry (PCI) and giving your customers comfort that their credit card information is protected. Maintaining PCI compliance for a homegrown commerce system can take months of effort from multiple teams every year. SCHEDULED PAYMENT RUNS & AD-HOC PAYMENTS - For subscribers who pay electronically, your system should accommodate the scheduling of automated payment runs that charge their accounts or credit cards at a regular, recurring time interval. In all likelihood, most of your subscribers will pay you against an invoiced amount on a regular basis. However, your system should still support the processing of ad-hoc payments. For example, if a customer did not pay you the full invoice amount in a previous statement period, you may need to process an ad-hoc payment to cover the outstanding balance.

18 Blueprint for a Subscriber-Centric OTT Video Business : Key Considerations & Requirements for OTT Video Monetization FAILED PAYMENTS - When you schedule automated payment runs, your system should allow you to define how many times you want to retry failed transactions on a specific credit card. For example, you may define up to three additional attempts, and designate that a specific amount of time (e.g.,12 or 24 hours) must pass between retry attempts. In addition, your system should automatically notify you and your subscriber if all retry attempts fail. REFUNDS AND CHARGEBACKS - Your system must support customer refunds when requested for overpayments or perhaps for unmet service level agreements. It should also support chargebacks, which are funds needing to be returned to customers for contested charges. Subscribers typically request chargebacks for fraudulent purchases made on their credit cards, clerical errors (e.g., duplicate billing), or services purchased but never received. OVERPAYMENTS AND CREDIT BALANCE - Subscribers will sometimes overpay the amount due, for example, by rounding up a check or erroneously paying more than the current invoice amount. In these situations, your commerce system should ideally allow you to accept these overpayments and hold them as credits for the customer that can be automatically applied against future usage of your service. WITH SUPPORT FOR CREDIT BALANCES, YOUR BUSINESS CAN AVOID MANY TIME CONSUMING REFUND PROCESSES.

19 Blueprint for a Subscriber-Centric OTT Video Business : Key Considerations & Requirements for OTT Video Monetization BILLING CONSOLIDATE BILLING- As you begin to offer additional value add services, customers will often have more than one subscription with you for those services. Your system should be able to consolidate multiple subscriptions for a single customer on a single bill, or charge those subscriptions separately, based on customer preferences. Often times, a customer might purchase multiple subscriptions, each with a different start date. To simplify renewals, they may request that all subscriptions coterminate on the same date, which would require your commerce system to calculate and adjust the prorations. This scenario is often common in family subscriptions. Similarly, in B2B media scenarios, the ability for a system to consolidate charges for subscriptions in a complex parent/child hierarchy should be a key consideration for your billing system.

20 Blueprint for a Subscriber-Centric OTT Video Business : Key Considerations & Requirements for OTT Video Monetization CREATING INVOICES - OTT video customers are often not presented invoices but are billed automatically each month via credit card or direct debit. But, it is important to create an invoice for record-keeping, for presentment to customers if requested, and for legal requirements in some countries. SOME CUSTOMERS MAY ALSO DEMAND INVOICES TO BE ITEMIZED TO SHOW ONE-TIME CHARGES, RECURRING CHARGES, AND LINE-BY-LINE USAGE-BASED CHARGES. SCHEDULED AND AD-HOC BILL RUNS - BOTH SCHEDULED AND AD-HOC BILLS RUNS MUST BE SUPPORTED BY YOUR SYSTEM.

21 Blueprint for a Subscriber-Centric OTT Video Business : Key Considerations & Requirements for OTT Video Monetization Scheduled Bill Runs: Your system should support scheduled bill runs to generate invoices daily, weekly, monthly, or at another predetermined time interval. You can then automate identifying the charges and informing subscribers about them. ONE OF THE GREATEST RISKS OF A SUBSCRIPTION-BASED BUSINESS IS REVE- NUE LEAKAGE. FOR INSTANCE, A SUBSCRIBER COULD HAVE AN ANNUAL SERVICE CHARGE THAT GETS APPLIED ON HER ANNIVERSARY DATE. Ensuring that the annual charge is billed is often problematic with manual processes. But scheduled bill runs that incorporate all possible charges will make sure nothing slips through the cracks. Batching of Bill Runs - Your system should support the grouping of customers into batches, where each batch can get run through billing independently from the other batches. For example, you might want to separate credit card customers from larger enterprise customers that pay by check. Other logical groupings to consider are batching by geography (e.g., Americas, EMEA, Asia-Pac) or by taxable vs. non-taxable customers. Taxation Considerations - As an OTT video service provider, you will most likely need to apply taxes. Taxation rules have rapidly evolved, and with state and local tax authorities looking for sources of new revenue, taxation for different content formats will quickly become a requirement. Your commerce system will need the ability to apply taxes differently for each type of service that you offer and operational geographies. Ad-Hoc Bill Runs: Your system will also need the flexibility to support ad-hoc bill runs. For example, you might want to generate an ad-hoc invoice for a certain subscriber earlier than usual, perhaps in a situation where overdue balance is significant and you want to collect payment early to improve cash flow.

22 Blueprint for a Subscriber-Centric OTT Video Business : Key Considerations & Requirements for OTT Video Monetization European Union Value Added Tax and Canadian Provincial and Federal Taxes also present challenges to media providers. A commerce system that has the ability to support global taxation will fuel your ability to offer services to international subscribers. SOME OF YOUR CUSTOMERS, SUCH AS CHARITIES OR CHURCHES, WILL BE EXEMPT FROM TAXES. THESE CUSTOMERS WILL NEED TO PROVIDE PROOF OF THEIR TAX EXEMPTION, AND YOUR COMMERCE SYSTEM WILL NEED THE ABILITY TO NOT APPLY TAXES ON A CUSTOMER-BY-CUSTOMER BASIS. There are three concepts that drive taxation calculations: Nexus: Depending on where your company has a physical presence, you will be responsible for taxes associated to that nexus or location. Services / Products: Tax codes are associated with the services you sell. Each service may have different tax treatments. For instance, bandwidth usage may be classified as Internet access in some states and Internet service in others. Tax Rates: Tax rates are the values that will be used for the calculation of taxes, in conjunction with the sold to address, your nexus, and the classification of the service.

23 Blueprint for a Subscriber-Centric OTT Video Business : Key Considerations & Requirements for OTT Video Monetization FINANCE ACCOUNTING CLOSE PROCESS - Your commerce system should have the ability to lock down data as part of an accounting close process. It should allow for extensive flexibility to create invoices, payments, and other financial transactions during the month. However, once the accounting books are closed, there should be no ability to change transactions or create new ones in the closed period. REVENUE RECOGNITION - The driving force behind revenue recognition is that you can only earn revenue as the service is delivered. If your pricing model includes cycle-forward billing where you bill ahead for a specified period of time (e.g., a quarter or a year), you will need to recognize this revenue as it is earned. Your commerce system should have the ability to invoice charges for your OTT video services and trigger revenue recognition at different times. For instance, you may want to bill a one-time fee as soon as the subscriber signs up, but not start revenue recognition until the service is provisioned.

24 Blueprint for a Subscriber-Centric OTT Video Business : Key Considerations & Requirements for OTT Video Monetization ANOTHER COMMON COMPLICATION FOR DIGITAL BUSINESSES IS IN RECOGNIZING A ONE-TIME CHARGE OVER THE LENGTH OF A SUBSCRIPTION, OR EVEN THE AVERAGE CUSTOMER LIFETIME. THE SYSTEM WILL NEED TO BE ABLE TO BILL FOR THESE ONE-TIME CHARGES, BUT ENABLE REVENUE TO BE RECOGNIZED OVER LONGER SERVICE PERIODS. ACCOUNTING SYSTEM INTEGRATION - Your commerce system will need to integrate with an accounting system to create your company s financial statements. There are two common approaches to integrating billing data. Depending on how much of your company is run on a recurring revenue model and the volume of transactions every accounting period, you might choose one method over the other: Summary-level Integration: The benefit of this approach is to unburden the accounting system. Subscriber accounts, usage, invoices, and A/R are managed in the commerce system, and a summarization of this data by GL accounting code is loaded into the accounting system as journal entries. Transactional Integration: This approach passes subscriber information, invoice line details, payments, and adjustments to the accounting system. The accounting system then aggregates the information into the General Ledger.

25 48 4) MULTI-SCREEN, VIDEO FULFILLMENT Today s customers expect your content to be available on multiple devices. This isn t a premium option but a basic requirement that OTT video services must provide. But delivering digital video files in multiple formats, for multiple screens, across multiple geographies is a complex task.

26 Blueprint for a Subscriber-Centric OTT Video Business : Key Considerations & Requirements for OTT Video Monetization COMPANIES LAUNCHING OTT VIDEO SERVICES NEED A SYSTEM THAT INGESTS LARGE, HIGH DEFINITION FILES, MANAGES METADATA THAT TRAVELS WITH A FILE, WATERMARKS CONTENT FOR VIEWERSHIP TRACKING, CONVERTS THE FILES TO DIFFERENT AUDIO FORMATS AND LOTS MORE. IN ADDITION, THEY ALSO NEED TOOLS THAT HELP MANAGE ACCESS CONTROL, PARENTAL CONTROL AND OVERALL ENTITLEMENTS. Your subscription platform should work well with leading Content Delivery Networks (CDN), video content management systems (VCMS) and online video platforms (OVP). Key attributes to look for include: Video Workflow Management, Video Content Management, User Access and Entitlement Management, Multi-Device Authorization and Management, Multiscreen Catalogs, and User Viewing and Delivery Reporting. Putting the right systems in place will empower your subscribers to receive the exact combination of video and data assets required to produce a consistent, satisfying viewing experience. Quality and consistency are very important to minimize customer frustration and churn risk. The system should also allow programmers to preview assets, schedule distribution, update metadata and manage playlists without having to resupply the original video content for every format.

27 52 5) REPORTING & ANALYTICS Your system should provide you with ready access to reports and subscription metrics to assess customer relationships and analyze the state of your business. Some important metrics to consider include:

28 Blueprint for a Subscriber-Centric OTT Video Business : Key Considerations & Requirements for OTT Video 2.0 TOTAL CUSTOMER VALUE (TCV): Total contract value calculates the total recurring charges over the lifetime of a subscription. For instance, a subscriber who signs up for a three year contract billed annually at $500 per year has a total contract value of $1500, assuming no activation or setup fees. MONTHLY RECURRING REVENUE (MRR): Traditional finance statements don t really work for subscription based businesses. They tend to look back at a revenue number for a period of time that already passed. Whereas, subscription businesses need to align themselves and drive growth by maximizing recurring revenue - monthly recurring revenue (MRR), annual recurring revenue (ARR), or quarterly recurring revenue (QRR). Your system should be able to generate the relevant metrics and help you optimize for forward looking revenue, aka recurring revenue. CHURN: Churn refers to the proportion of your total subscribers who leave during a given time period. In a subscription businesses, in order for revenue to recur, your customers must renew at a rate that outpaces churn. Deducting your churn rate from your ARR is critical for understanding the minimum amount of new business you ll need to acquire every year to keep your company viable. CUSTOMER LIFETIME VALUE: This is the average revenue from a customer over the entire subscription period. This along with your churn rate is a useful indicator of expected revenue. SUBSCRIBER INSIGHTS: OTT Video Monetization is a subscriber-centric business and will require you to use data to gain insights into your customers in terms of usage, preferences and other behavior patterns.

29 Blueprint for a Subscriber-Centric OTT Video Business : Key Considerations & Requirements for OTT Video Monetization YOUR SYSTEM MUST BE ABLE TO UNLOCK DATA BURIED ACROSS YOUR COMPANY AND CAPTURE EVERY EVENT THAT HAPPENS TO GET A FULL PICTURE OF YOUR SUBSCRIBERS. IT SHOULD BE ABLE TO GROUP THEM BY COMMON TRAITS AND BEHAVIORS TO CREATE SEGMENTS THAT CAN HELP INDICATE SIGNS OF CHURN, LOW PRODUCT ADOPTION, POTENTIAL UPGRADES, AND MORE. Ideally you should be able to monitor four key attributes: Subscriber Identity You should be able to have real-time view of your subscriber identity. Examples of identity data include account balance, active subscriptions, past subscriptions, company data, demographics, recurring revenue value, social data, and user counts. Subscriber Moments You should be able to monitor what your subscribers are doing. Examples of moments include cancellations, new sign-ups, offers accepted, sent , service usage, tickets filed, upgrades, and consumption patterns.

30 Blueprint for a Subscriber-Centric OTT Video Business : Key Considerations & Requirements for OTT Video 2.0 Subscriber Segments You should be able to create dynamic subsets of the subscriber population that enable companies to identify and take meaningful action on those segments. Examples of segments include add-on targets, companies with more than 5,000 users, free users likely to convert to paid, high-volume users, new subscribers, population at risk of churn, upsell targets, and users with declining usage. IF YOUR SYSTEM PROVIDES YOU WITH THE ABILITY TO GENERATE REPORTS THAT DISPLAY THESE SUBSCRIPTION-ORIENTED METRICS, YOU WILL CERTAINLY BE EQUIPPED TO MAKE BETTER BUSINESS DECISIONS AND HAVE HAPPIER SUBSCRIBERS. BETTER BUSINESS DECISIONS AND HAVE HAPPIER SUBSCRIBERS. Subscriber Triggers You should have the ability to trigger engagement with subscribers through multiple external channels and applications. Examples of engagement capabilities include campaigns via marketing or customer success tools, in-app messages, mobile alerts, and tasks assigned to account managers in a CRM system. If your system provides you with the ability to generate reports that display these subscription-oriented metrics, you will certainly be equipped to make better business decisions and have happier subscribers.

31 Blueprint for a Subscriber-Centric OTT Video Business : Key Considerations & Requirements for OTT Video Monetization NEXT STEPS WE HOPE THAT THIS ZUORA BLUEPRINT HAS PROVIDED YOU WITH A GOOD SENSE OF ALL THE BUSINESS MODEL CONSIDERATIONS YOU NEED FOR A OTT VIDEO MONETIZATION STRATEGY.

32 62 Most of the leading media vendors that Zuora has worked with have faced similar challenges. By reading this blueprint, you have gained an early start in thinking through your OTT Video Monetization strategy from end-to-end, so when you make the transition, your systems are ready. You aren t alone in realizing that your existing systems cannot handle your transition to OTT Video Monetization strategy. Most of Zuora s media customers reached out to us when they hit the wall with their traditional media systems and realized that a further customization effort would be too costly, daunting and in many cases, ineffective. WE INVITE YOU TO CONTACT ZUORA TO LEARN MORE. AS THE LEADER IN SUB- SCRIPTION COMMERCE, BILLING, FINANCE AND INSIGHTS, WE ARE INTEREST- ED TO HEAR ABOUT YOUR BUSINESS AND DISCUSS HOW A PARTNERSHIP WITH ZUORA AND OUR PARTNERS CAN ACCELERATE YOUR PATH TO OTT VIDEO MONETIZATION.