Marek’s Take: Mobile operators revive the digital content bundle

Verizon is giving new and existing unlimited plan customers free access to video games through subscription services like Apple Arcade or Google Play Pass. (Image by allinonemovie from Pixabay)
Marek's take

Mobile operators are putting a new twist on the digital content bundle by offering free streaming services and games as a way to encourage stickiness and also get customers to upgrade to higher priced unlimited data plans that include 5G.

This isn’t the first time mobile operators have tried content bundles. In the 3G era, many service providers started combining ringtone packages, games and other content with their rate plans to promote stickiness and prevent churn. But that model soon took a back seat with the advent of the iPhone and Android devices in which customers were able to use app stores to purchase their mobile content directly instead of relying on operator-curated content.

Now, we are entering a new era of content bundling where service providers are partnering with streaming services to not only attract new customers but also move existing ones up to higher tiers of services. And the streaming and gaming services benefit because they can build their audiences and attract new customers. Plus, wireless service providers have a direct billing relationship with customers, which makes it convenient for the consumer.

Look for mobile operators to move beyond just streaming content and games. Tammy Parker, senior analyst with GlobalData, believes mobile operators could also use this model to offer subscribers virtual gym memberships, e-learning classes and even discounted access to telemedicine. “I like the digital bundle, in general, because it is so easily customizable,” Parker said.

Verizon and T-Mobile are particularly bullish on the bundle. Verizon calls the bundled content “Plan Perks” and includes various types of content with its $80 per month Play More Unlimited and $90 per month Get More Unlimited plans. For example, the company is giving new and existing unlimited plan customers up to a year of Apple Arcade or Google Play Pass for free. This is in addition to the other content such as streaming services like Disney Plus, Hulu, ESPN Plus and Discovery Plus and music services like Apple Music.

Verizon CEO Hans Vestberg has said on investor calls that he believes that bundles help strengthen the value of 5G and that the company will bundle its services with other brands that match Verizon’s brand in terms of quality and targeted audience.

T-Mobile also offers some bundled services, including Netflix, which the company calls “Netflix on Us.”  Parker said that the “Netflix on Us” strategy has been very successful for T-Mobile, and she likes how the operator is leveraging the “On Us” branding with other products, such as “Microsoft 365 on Us” and “Facebook Advertising On Us” for business customers. “There is a lot more that T-Mobile can do with the ‘On Us’ approach,” Parker said.

RELATED: T-Mobile’s new unlimited 5G plan promises 4K streaming

So far AT&T has primarily just bundled its mobile services with HBO Max, which is part of the company’s WarnerMedia division that it is in the midst of merging with Discovery and spinning off into a standalone company.

In Verizon’s case, many of the bundles have an expiration date. For example, the Google Play Pass and Apple Arcade services are free for 12 months, and then subscribers will be charged around $5 per month. In theory that free trial period is intended to get customers hooked on a service but to eventually convert them to paying subscribers.  

Parker said that it’s too soon to say how well the strategy is working because there are many factors to consider. For example, while she believes Verizon has been instrumental in the early success of streaming services such as Disney Plus, it’s hard to say whether the Disney Plus bundle has helped Verizon attract or keep customers.

However, she does believe there are some indications that the bundles are working and helping Verizon get existing customers to move up to higher-tier rate plans. Parker noted that in Verizon’s first quarter earnings the company reported a net loss of 225,000 phone customers, but Verizon did report wireless service revenues were up 1.5% year over year and Verizon attributed that increase to customers moving to their unlimited and premium unlimited rate plans that include the “Plan Perks” streaming services. “Verizon’s effort to sweeten higher-tier plans is helping make a customer’s decision to move up the value chain even easier,” she said.

The revival of the mobile content bundle appears to be a smart move for wireless operators, particularly as new 5G networks with their higher speeds and lower latency seem a perfect fit for streaming video and gaming. Consumers, meanwhile, appear to value the bundle because they perceive it to be a good deal, and it’s convenient.