One thing that stands out in the increasingly crowded online video streaming industry is that every major streaming service uses the subscription model. This is where the consumer pays a fixed fee to get access to the available catalogue. Why is the on-demand model, where the consumer pays for the content they consume, not used?
It Offers the Consumer a Wide Selection of Content
With the subscription model offering consumers access to the entire available catalogue, they are encouraged to discover new things. Regardless of the amount of content they view, their subscription costs wouldn’t change. With an on-demand model, experimenting with new content is not incentivised since one can end up paying for content they did not enjoy. While this seems like something that only affects the consumer, it is essential to note that positive consumer satisfaction scores encourage customer loyalty.
It Is the Cheaper Option for Larger Households
Every person has different tastes and preferences, and these differences are also present within the family setting. With every member of the household consuming different content at different times, with an on-demand model, the entertainment costs would skyrocket. The subscription model solves all these issues by having a flat-rate charged regardless of usage. Higher tier subscription plans can also allow different members of the household to access the service on different devices simultaneously – albeit at a slightly higher subscription fee.
It Gives the Service Provider a Predictable Income
For a company to accurately budget and make long-term strategic plans, they need to be able to make accurate estimates of their current and future incomes. This is best achieved with a subscription model. Streaming companies can base their income forecasting on their subscriber numbers. It is impossible to do so with an on-demand system as consumer usage can be erratic. Corporate expenditure can also be better planned once incomes are accurately forecasted.