Reducing churn and increasing subscriber engagement is at the heart of most mobile operator content strategies, according to a new report from Strategy Analytics.
With global mobile service revenue stagnating and 5G on the horizon mobile operators need to evaluate their role in content and entertainment. Key drivers for content bundling in tariffs includes churn avoidance, boosting stickiness in mature markets, upselling users to higher priced tariffs and monetizing premium content.
However, the majority of MNOs have stepped back in fear of fierce competition from over-the-top services.
Mobile operators have fared poorly in mobile content, whether through own branded content services or with their own app stores. Excluding pay TV services offered by multiplay operators Strategy Analytics estimates content contributes to single digit share of service provider revenue on average, though churn avoidance remains a key benefit. Phil Kendall, Director, Strategy Analytics, noted “Bundling popular premium subscription content in to wireless plans is a popular strategy for operators. Content bundling has potential to dramatically cut churn by almost half , while the impact of reducing the churn rate by 1% leads to 2.5% revenue growth over a 5 year period, assuming the operator acquires subscribers at the same rate.”
Operators with pay TV services typically report a higher share of content revenue.
– NTT DoCoMo’s Smartlife division accounts for <10% of its service revenue but is in decline; Vivo Brazil’s digital services account for 13% of revenue and is the fastest growing segment; Singtel’s Digital Life Group contributed 6% to its overall operating revenue; Verizon’s Oath accounts for 6% of overall revenue.
– AT&T, Verizon are leaders in content with both vertically integrated though AT&T’s acquisition of Time-Warner and Verizon’s purchase of Yahoo. Airtel, China Mobile, Reliance Jio and Singtel also have content ambition, though not to the same extent as AT&T or Verizon.
Churn improvements should underpin operator content strategy
Mobile operator objectives and aims for content extend beyond revenue enhancement with a model driven by bundling content, upselling to higher priced data tariffs with larger allowances, driving engagement and traffic, and monetizing premium content – all underpinned with the goal of reducing churn.
Most operator are focused on data monetization
App-centric tariffs, which provide zero-rated access to specific classes of service, e.g. video, music, social and messaging are growing in availability as operators look to monetize demand for popular applications.
– As highlighted in our previous content strategies report, partnerships with popular premium (subscription-based) content providers, to differentiate tariffs and retain subscribers, have been popular over the past five years.
However, since the success of T-Mobile USA’s BingeOn, application specific zero-rated tariffs have grown in momentum as a means to monetize increasing data consumption across a variety of applications.
– Strategy Analytics’ research on T-Mobile USA‘s Binge On indicated 20% of T-Mobile subscribers traded up to higher priced tariffs to get Binge On and 46% of non-T-Mobile subscribers indicated some level of interest in TMobile in order to get Binge On.
Nitesh Patel, Director, Strategy Analytics, commented, “The majority of operators remain focused on monetizing data. However, both AT&T and Verizon demonstrate leadership in content because of their position in content distribution and content creation which enables them to take a greater share of content revenue. Operators that want to be aggressive with 5G consumer propositions need to use content to demonstrate the value of 5G networks to users beyond an improvement in data speed. Operators must address issues such as how to convince subscribers to migrate from 4G to 5G, who they should partner, and impact of 5G on the content distribution value-chain.”