Partnerships with content providers can unlock new business models

Consumers not only demand a choice of personalized services that are highly relevant for them. They also require flexibility to drop in and out of subscriptions at any time. Subscribers routinely move across different platforms when searching for the latest or best streaming series, or rejoin when incentivized by new live sports or music events.

Service providers are in a unique position to tap into these consumer needs and also offer content providers an alternative sales channel. Many service providers have a large customer base in their local or regional markets and are often regarded as a trusted partner. Therefore, they can leverage and make use of their established retail and digital channels and billing capabilities to drive sales of content and subscription services. Service providers are also well placed to explore B2B2C and aggregation opportunities and can incentivize content usage through discounts, service bundles, loyalty rewards and other customer engagement activities.

Service providers can offer more than a parallel sales channel

The unique ways in which service providers can offer content providers a parallel distribution channel can be seen in Figure 11. In addition to their retail channels, service providers have developed their own digital channels and apps, for example, to optimize self-services and billing as well as to provide personalized campaign offers.

Service providers often enjoy a relationship of trust with their subscribers and have a route to market through established processes, channels and billing mechanisms. Some 56 percent of European consumers say they would buy a service other than connectivity from their service provider.¹

This is particularly true for services like phone insurance, cybersecurity and home security, but also for products related to energy, healthcare and financial services.

The majority of service providers have developed a direct carrier billing relationship with their subscribers which not only increases B2B2C subscription revenues, but also reduces involuntary churn due to non-payment (such as expired credit cards and outdated or incorrect payment information). Service providers also hold a rich set of insights on subscribers and their usage patterns, which enables them to offer relevant and personalized services for their subscriber bases.

But the key to success is a fast and streamlined process for onboarding and provisioning of third-party content. One UK-based service provider has reportedly doubled the size of its partner ecosystem since 2018 by successfully defining APIs and onboarding practices.

Service providers can also help content providers by leveraging their core connectivity offering and designing complete service packages. These could include a defined amount of mobile data or sponsored data for a specific service. A service provider in Latin America, for example, includes two hours of unlimited data in its gaming bundle. Others sell add-on packages with data only to be used for services such as gaming or video streaming.

Content providers can improve quality of experience by forming technology partnerships with local service providers. This is especially relevant for real-time services, such as cloud gaming. Servers need to be located locally, and close to subscribers, to offer better ping times and improve latency for gamers.

Partnership models evolve with digitalization and aggregation

Figure 12 shows a model that could determine how content providers work with service providers. In practice, service providers use a blend of these models when working with different types of content providers and for various purposes. The level of investment needed, skills, risks and potential rewards vary across the models.

Regardless of the model, monetary compensation could be defined in a wholesale agreement in which the service provider is given a discount on the retail price. Alternatively, this could be done as a co-marketing agreement in which costs are shared, or as revenue sharing where an agreed percentage of the retail content revenue is shared with the service provider. Exclusivity could be an element of all three and then affect the level of monetary compensation.

The basic reseller model

A simple way to test the appeal of new content, which is also at the low end of the risk scale, is the basic reseller model. While it is straightforward to apply, it offers moderate rewards for service providers in terms of sales and customer loyalty. This makes it an easy starting point to try out the appeal of new third-party content (for example, home or cybersecurity, or new membership services) with consumers or residential customers.

Often, this model is applied to content sold as add-ons and with no links to connectivity services. Typically, service providers will sell these add-on subscriptions at the same price point as the content provider. While the basic reseller model has its merits in simplicity (quick to add or remove), it is also easy for other service providers to copy and does little to improve customer loyalty.

Reseller hard bundling

A common variant of the reseller model is to create static or “hard” bundles of content, coupled with one or a few of the top-tier plans that a service provider is offering.

Not only is hard bundling expensive for service providers (sacrificing margin), but it is also often hit and miss, as consumer preferences increasingly vary. It still has its place, such as including content with strong general appeal (for example, entertainment and music) into connectivity plans. It could also make good sense when introducing new, unique content on an exclusive basis in the local market for a specific target group (for example home security for the residential market), or for a limited time as an incentive for consumers to accept price hikes from their service providers.

Reseller – soft bundling

The likelihood of retaining customers increases with the freedom to make choices about which content to bundle with a plan. Although nearly 80 percent of all connectivity plans today are still tiered based on inclusive content and services, service providers are increasingly moving away from hard bundling. Rather than forcing consumers into paying for connectivity plans with defined subscription content, they are more often allowed to choose which content to put into the bundle, which makes it more relevant for their individual needs.

Reseller plus

Expanding on the reseller model with co-branded offerings – for example, in cloud gaming where service providers can help guarantee latency or queue priority – is an attractive proposition for providers and consumers alike.

In this reseller-plus model, in return for hosting and maintaining local servers, service providers have the potential to reach an entirely new customer base, beyond their own subscribers. Doing so will grow both service provider and content provider revenues.

While service providers will be incentivized through additional revenue, it has a modest additional effect on customer loyalty, and the way to improve on this is to discount the offering for their subscriber base. Typically, these types of co-branded propositions – plan tiering, features and subscription pricing – are largely driven by the content provider. Nevertheless, the reseller-plus model helps service providers reach entirely new target audiences. Exclusivity is sometimes part of co-branded reseller agreements for a limited time, and therefore harder for others to copy. Usually, this would apply to new content or content providers in a market.

Service aggregation

Subscribers are often inclined to drop in and out of streaming and other subscription services. More than half of consumers say they canceled at least one streaming service in the first three quarters of 2023. However, 73 percent of these consumers went on to subscribe to another (or the same) streaming service during that same timeframe.²

Consumers want more flexibility to manage the increasing number of subscriptions from one place, on one plan and on one bill. Aggregation of ecosystem partners to one platform is an interesting proposition, as evidenced by service providers in several markets like the US, Australia, Singapore, the Netherlands and the UK.

Notably, 7 in 10 consumers say they value ecosystem and aggregated offerings that simplify the purchasing journey.2 The service providers in these markets are moving towards a B2B2C ecosystem and creating their own platforms to aggregate and recommend a wide variety of content, from big entertainment streaming brands and cloud gaming to productivity, security services and lifestyle subscription services. Aggregation is the partnership model that requires the most investment in resources, but it also has the potential to yield the highest rewards. By realizing economies of scale, an aggregation platform is a way for service providers to reduce the costs of, for example, onboarding, customer acquisition and marketing. It will also reduce the time needed for introducing new content or service partners to the ecosystem.

Ultimately a well-branded and established platform will improve customer retention for both service providers and content providers. By aggregating all content into one place, it also becomes easier for service providers to boost their engagement with consumers. Service providers can develop dynamic offers around exclusive streaming content (for example, live sports or music) combined with 5G connectivity plans and network priority. In doing so, they not only sell exclusive streaming services but also increase the sales of connectivity plans.

Reseller flow

In moving away from hard bundles, and introducing more flexibility and choice in the model, there is a risk of increased complexity and a need to position and market the offerings such that customers are exposed to the choices at hand. An efficient way of handling this is to place the content and bundle choices in the purchase “flow,” or journey.

Some service providers have invested in their digital sales flow by defining a set of open APIs that enable them to integrate new content partners in a matter of days. A well-defined digital sales flow – with a menu of content and services to choose from – improves ease of purchase and transparency. With more choices also comes better customer retention.

These service providers can quickly introduce new content and choices that are increasingly relevant for its subscriber base, while also saving time and the cost of onboarding. The reseller flow model therefore requires more investment from service providers, but also leads to higher customer loyalty in the long run. It is also a stepping stone into the service aggregation model.

Well-defined APIs are key to building an ecosystem and dynamic provisioning

In this context, APIs can essentially provide access to business support systems such as provisioning, billing and user account setup and integration. All the models described here are subscription based. The main, or key, financial incentive for service providers is the discount they receive when purchasing or committing to large volumes of these applications or content subscriptions. These discounts typically range from around 10–30 percent, or even more in some cases.

Along with the time to market and cost savings, well-defined APIs represent the dashboard that allows the content or application provider access to the service provider – without surfacing all the complexities in onboarding, provisioning and business operations in general.

Third-party providers may also need ways to access and interface with network functions through network APIs to, for example, define QoS levels delivered.

Such APIs can enrich the mobile cloud gaming experience by improving latency, jitter and mobility. They can also ensure secure connections for all online customers of a bank, or provide instant improvements for conversational video when the situation calls for it.

Exposing advanced 5G functionality through APIs will help service providers monetize 5G with their ecosystem of partners, as well as deliver new services with speed. APIs are a crucial element that makes service and content provider partnerships work in practice. But they will also unlock new business opportunities as developers have more freedom to innovate new use cases, services and applications for 5G networks.

The definition of “customer” will broaden with network slicing and dynamic provisioning. The business models used for APIs can differ from the traditional subscription model, in that they can be dynamic and transaction based. A developer of the application may be paying for the use of certain APIs, used only if and when there is a need. A bank may be paying for all the possible connections to their online service to make sure they are secure. A game developer may be paying for the use of APIs which allow the game to instantly adapt to network conditions. The opportunities for app developers, content providers and third parties to innovate in how their services are delivered – based on time, location and context – are endless.