Virgin Media Stream Flexible bundling dynamics for cost-sensitive consumers

TV-streaming has changed the power dynamics between pay-TV companies, broadband operators, and content providers. At their peak, pay-TV businesses were the gatekeepers. Customers wanting pay-TV and broadband bundles would be locked into a single, long-term contract of 12 months or more. Because they controlled the access, pay-TV providers would charge higher prices for larger content bundles, and then focus on retaining customers over longer cycles. Netflix’s disruption of the market changed all that. TV-streaming shifted subscription video content towards a more flexible model. Pay-TV content was unbundled into a myriad of video streaming services that prioritised monthly subscriptions over annual deals. This opened pay-TV content to a wider pool of consumers, but the shorter contracts made churn harder to manage. Content providers could also bypass pay-TV companies to build direct relationships with customers through streaming services on a global scale. It meant some pay-TV companies and telecoms providers now had a weaker position when negotiating commercial terms of their content and connectivity bundles.

However, some aspects of the old pay-TV model are now returning as consumers grapple with the cost-of-living crisis. Bundling can help TV-streaming services tap into longer-term contracts to help handle churn and support their profitability. Yet, this need is at odds with consumers who want greater flexibility to upgrade and cancel subscriptions based on what they have watched or can afford. This is particularly true of younger consumers who have been brought up with an entertainment ecosystem underpinned by short-term, monthly subscriptions. Content providers can find a middle ground by partnering with telecoms providers who are managing customers on long-term broadband contracts. Among those is Virgin Media O2, the UK-based broadband and cable provider that launched its Stream service in April 2022. For a one-off fee of £35, Virgin’s broadband customers are sent a Stream box where they can pay to access Netflix, Disney+ and Sky Sports on 30-day rolling contracts through their internet bill. Customers who transfer their streaming accounts over the Stream service get 10% credit back on each subscription, and the flexibility to cancel, or renew, monthly. 

This bundle provides benefits for Virgin Media O2 and the content providers. Virgin Media O2 gets the opportunity to upsell pay-TV services to a new generation of broadband customers who are now acclimatised to flexible TV-streaming contracts. By handling these contracts through the internet bill, they can also integrate customers deeper into their ecosystem and make it harder for them to churn. Content providers benefit from being aligned to a must have utility in the shape of a long-term broadband contract. These discounts not only incentivise loyalty but encourage lapsed subscribers to return. For consumers, it offers some reprieve from the recent round of price hikes to TV-streaming subscriptions.

Meanwhile, Verizon has offered its myPlan broadband customers a bundle of Netflix and Max’s ad-supported streaming services for $10 a month. The US telecoms giant said the offer, launched on December 7, 2023, would provide more than 40% of savings. It is the latest $10 monthly perk provided to those customers. Those perks range from a Disney+, Hulu and ESPN+ bundle to an Apple One subscription, or a Walmart+ membership that includes free grocery deliveries for orders over $35 and a free Paramount+ membership. With TV-streaming services wanting greater certainty in a challenging market, broadband providers can lean harder into the retention tactics that were used during pay TV’s heyday. By positioning themselves as white label retention providers, they can improve their negotiating hand with TV-streaming services by incentivising consumers against churning. Content providers have created a complex and fragmented market with streaming. The focus is often placed on the need to simplify the overwhelming amount of choice consumers. However, there is an equal need to offer value for money and make it easier to pay for multiple streaming services in one place. Broadband companies can streamline this process by handling the billing relationship, offering discounted services, and acting as a middleman between streaming services that want to bundle. After all, it is difficult for TV-streaming services to join forces to offer a cross-industry bundle because of the complexities surrounding who owns the customer data and billing relationship.

While the bundling may mark the end of the streaming wars, it also marks the beginning of a new battle to become the lynchpin of bundled services. Broadband providers have made a strong case to be that for content providers.