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Content bundling might be flavor of the month among mobile operators, but poor provisioning means that mobile subscribers sometimes struggle to activate the OTT services bundled with their tariff. Yet the heavy “breakage” fees charged by the labels for inactivated music subscriptions are what most threaten the bundling business model.
Have you switched to Vodafone UK recently to take advantage of the free content bundled with its 4G Red tariffs? A couple of my acquaintances have, looking forward to enjoying free access to one of the following: all-you-can-eat music service Spotify, pay-TV offering Sky Sports, or premium video-on-demand service Netflix.
Instead, they have had a nightmare trying to activate the offer and have ended up being charged the full subscription price for their service of choice. This is after numerous phone calls and live chats with Vodafone customer support staff, and repeated assurances that the problem had been sorted out, only to be faced with it over and over again.
My acquaintances are not alone in having this experience. You can find similar complaints from other Vodafone users online, spanning a period of at least six months.
Vodafone admits that a “small number” of its customers have had issues activating their content, but says that the “vast majority” have experienced no issues at all. It adds that offering premium content with its 4G services has been a great success, attracting more than 2 million subscribers.
It would also be wrong to say that Vodafone is the only operator with bundled-content provisioning problems. More often than not, the activation of OTT services bundled with operator tariffs is not as seamless as it should be.
Why is that? Because the provisioning systems of operators and their OTT content partners are not clever enough to communicate with each other and automatically identify bundle subscribers when they are trying to sign up to the free or discounted content services they are entitled to.
Content bundling deals – especially those involving music – are extremely complex to negotiate. They usually come at a significant cost to operators, which see bundling as a means of acquiring users, reducing churn, or increasing ARPU, rather than a revenue stream. And, in the case of music, record labels charge royalties for non-activated subscriptions – the infamous “breakage” fees. This additional cost can completely destroy the bundling business case if too many music subscriptions are left inactive.
On top of all this, user lethargy and disinterest means that the activation levels for bundled content tend to be quite low anyway – around 50% is seen as good going! So the last thing operators need to do is put barriers in the way of those users keen to activate.
Systems need to be put in place to allow OTT partners to automatically identify users entitled to bundle offers. Some operators have done that already. For example, Orange France offers partners an identity and provisioning API alongside its billing API to avoid precisely the kind of issues highlighted above. As one of the pioneers of content bundling, Orange knows from bitter experience what the costs of low activation can be – breakage fees accounted for 75% of royalties it paid for music-streaming service Deezer in its initial implementation.
Other operators have to learn the same lesson and make sure they support bundling deals with robust provisioning.
Exploiting the bundling opportunity, both for service providers and their content partners, TE0006-001050 (April 2015)
Music-bundle management: Activations, contractual obligations, and KPIs, ME0002-000523 (July 2014)
Music Bundling: Carriers Take the Biggest Financial Hit, but Royalty Discounts are Part of the Mix, TE0003-000759 (May 2014)
Guillermo Escofet, Principal Analyst, Digital Media
Consumer & Entertainment Services
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