How Do OTT TV Subscriptions Work?

By Lisa VitaliseLast Updated Apr 25, 2020 4:25:11 AM ET
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"OTT" stands for "over the top" and refers to streaming video content viewers watch. It was initially named for gadgets that go "over and above" what cable provides to give consumers access to TV content. Through OTT networks, programming is distributed over an internet network instead of a standard cable broadcast service.

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OTT and video are interconnected but aren't quite the same. OTT is simply another medium through which end users are delivered video content and associated shows or advertisements. Usually, OTT services are monetized through paid subscriptions, but there are some variations on this. Many OTT services — like Netflix, Hulu and Amazon, for instance — may offer in-app purchasing or advertisements. Learn more about how OTT TV subscriptions work to understand what the various offerings can deliver to you.

Implementing a Competitive Pricing Strategy

Pricing and packaging are the most valuable competitive tools of an OTT TV subscription. These are directly related to sales growth because they’re often what attract new clients, grow the interest of existing consumers and reduce client turnover. After all, affordability is often what influences whether a consumer opts for a service or decides to forego it. But as it turns out, pricing and packaging of OTT TV subscriptions can be multifaceted.

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Often the price is based on the number of users or capacity, family plans or company plans, simultaneous streams or the device type a consumer uses to watch. In addition to the different payment intervals (daily, monthly, quarterly or annually), there are also incentive types such as freemium content or free trials. You should keep it simple if you're starting out getting OTT TV subscriptions. Begin with basic offerings and expand over time as you determine what’s worth it to you.

Increased Customer Subscriptions Across Platforms

OTT video-streaming companies have developed fast, efficient, simplified and integrated workflows across multiple platforms for people to use. The process of signing up customers for subscriptions is streamlined, particularly because consumers don’t want to encounter difficulties from the get-go with a service. You can watch streaming video across various platforms like your personal computer, mobile devices or smart TV.

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Traditional TVs weren't designed to support internet-centered OTT video subscription features, which has led to an increase in the number of people ditching these electronics. It's estimated that almost one-third of Americans now watch more streaming TV than traditional, linear TV programming.

Accurate Billing for a Subscription

In traditional businesses, the exchange of products and services is completed through one-time purchases. However, billing for an OTT subscription is more complicated. OTT video-streaming companies need to charge new and current customers at various times of the month and bill for usage. It can take weeks to generate bills without the right billing system, and mistakes can lead frustrated customers to unsubscribe — sometimes instantly, depending on the usability of the streaming platform.

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The emerging difficulties of billing for OTT video subscriptions require companies to not only guarantee accuracy but also to deliver that accuracy (along with services) to customers in an easy-to-understand manner. A billing system has to involve a programmable algorithm that takes all the various inputs and correctly calculates and generates a consistent bill that's also in line with the company’s branding.

Efficient Automation of Collecting Payments

Payments are relatively easy transactions in the retail world: Either you pay directly up front with cash, check or a credit or debit card before receiving the product, or businesses review your financial background and open a credit line for which payments are expected periodically and you owe the full amount after a certain term.

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That doesn't fit the subscription system for OTT video services, though. Streaming services operate with far more payment collections and have more complex structures. The key to optimizing the payment collections is automation. OTT media-streaming providers tend to gather cash efficiently, boost sales and reduce write-offs with their collection activity.

Fostering Long-term Client Relationships

The cornerstone of the OTT content-streaming business model is the creation of deeper customer relationships. Acquisition of new customers is essential, but the vast majority of consumer purchases include modifications to current subscriptions: renewals, withdrawals, add-ons and updates.

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Successful OTT TV subscription companies have efficient and detailed resources for their subscribers to monitor their accounts over each consumer’s entire subscription lifecycle. They give subscribers the access they need or face customer dissatisfaction, which in effect, leads to customers walking away — a loss of revenue. Companies still need to track client usage and implementation closely to reduce the risk of losing customers or find incentives for upselling. With the right strategies in place, it’s easier for OTT providers to foster positive relationships with consumers while offering an innovative, convenient way to consume entertainment.