Streaming services embrace bundling to combat subscriber churn

In May, several major streaming platforms announced new bundling strategies to attract customers and reduce subscriber churn.

Notable developments include Disney and Warner Brothers Discovery’s plan to bundle Disney+, Hulu, and Max; Comcast’s announcement of a bundle featuring Apple TV+, Netflix, and Peacock; and the introduction of the name for the upcoming sports streaming joint venture by Disney, Fox and Warner Brothers Discovery – Venu.

While bundling is a familiar concept for media companies, its importance has grown as the streaming industry evolves. Bundling is now seen as a key strategy to draw new subscribers and retain existing ones.

Antenna’s recent market research highlights the significance of subscriber overlap in creating effective bundles. Subscriber overlap measures how likely it is for individuals to subscribe to multiple services. For instance, Antenna’s data reveals that Max subscribers are 2.53 times more likely to also subscribe to Apple TV+ compared to the general population.

High subscriber overlap can indicate that bundling certain services could be beneficial because consumers are already interested in both. However, it might also suggest that offering a discounted bundle could reduce revenue if many consumers currently pay full price for each service.

To address this, Antenna introduces the concept of “Curious Customers” – those who have canceled a service in the past or have been subscribed for six months or less. At the end of Q1 2024, Antenna data showed Hulu had nearly 45 million Curious Customers, individuals interested enough to try the service but not yet committed to long-term loyalty. In contrast, Netflix had the fewest Curious Customers, indicating a more stable subscriber base.

Subscribers with a tenure longer than six months are termed “Committed Customers.” Most premium subscription video-on-demand (SVOD) services have more Curious Customers than Committed Customers. Max, for example, has only 28% of its subscribers with a tenure over six months, suggesting potential for growth through bundling strategies that encourage longer subscriptions.

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Netflix, however, has a higher proportion of Committed Customers, with two-thirds of its subscribers having a tenure over six months. For Netflix, bundling poses a higher risk of cannibalizing existing revenue, as these loyal subscribers might opt for a lower-cost bundle.

Antenna’s analysis suggests that the most effective bundles will pair services with a strong overlap of Curious Customers. These customers are open to paying for multiple services but have not shown strong loyalty. A discounted bundle could encourage them to engage more consistently with both services, providing significant growth potential for the companies involved.

Conversely, bundles that target Committed Customers could be less effective, as these subscribers already demonstrate a willingness to pay for a single service. Offering a discounted bundle might undermine the value of their existing subscriptions.

Antenna’s upcoming Q2 2024 State of Subscriptions report will explore these concepts further. 

“This suggests that Max has significant potential upside from using bundles to motivate Curious Customers to subscribe more loyally, with less risk of losing revenue from existing loyal subscribers ‘trading down’ to a lower cost bundle,” the Antenna analysis found. “For Netflix, on the other hand, bundles represent more cannibalization risk, with less upside potential.”

The researchers concluded that pairing services with a high overlap of Curious Customers offers the best growth potential, while bundles targeting Committed Customers could be counterproductive.