This is the second post in a series on micropayments. At Unbounded Enterprise, we believe in leveraging the ability of emerging technologies that allow for the widespread adoption of instant micropayments as low as a fraction of a penny.
It seems like every month a new streaming service appears. In November of 2019 Disney launched Disney Plus, taking several popular shows and movies off of Netflix with it. Fast-forward several months to July 2020 when NBC Universal launched its own streaming service, Peacock, leading to the migration of one of the most popular Netflix shows ever, “The Office.” As more services arise with more choices, people have signed up for more and more subscriptions. On average, Americans subscribe to four streaming services, up from three just a year ago.
Signing up for and managing multiple subscriptions is painfully inconvenient. You know the drill. Every time you sign up for something, it is a multiple step process. You have to find your wallet. You need to enter your personal information and payment information. Then, you create a username and password AND have to remember it or use some sort of password manager. You have to remember when to cancel or pause a subscription that you are not currently using. And you have to do this every time you subscribe to a service.
As subscriptions pile up, complexity increases. Forget a password? Go through the multi-step process to reset it. What if you only use one of the services for a while to watch a certain show? You still end up paying for all of the others. What if you want to watch a new show on a service you don’t have? You could ask to see if any of your friends have a login you can use, but most services limit the number of devices that can watch at once and you don’t want to end up getting kicked off during the middle of watching a show. Plus, although widely practiced, it is technically a form of illegal piracy.
I have a longstanding Netflix subscription ($13.99/month) and Amazon Prime subscription ($12.99/month for videos and Prime shipping). Recently, I wanted to watch shows that aren’t on those services. “Ted Lasso” has been great, especially season one, but it is only on Apple TV ($4.17/month). I have watched many “Survivor” seasons on Netflix and Amazon Prime, but Paramount Plus is the only streaming service with all 40 seasons ($8.33/month). My friends told me about “Dave,” which released season 2 on Hulu (soon to be $12.99/month) this summer. Now, I’m looking at a monthly bill north of $50/month. I typically only watch about 30-40 hours of streaming a month, and much less than that in the summer.
I usually only use one service at a time, but I would like to have access to any show or movie in case something piques my interest. How expensive would that be?
Below is a table which includes the monthly cost of eight popular subscription services. Someone with a subscription to all eight of these services would likely be able to watch any show or movie they want. They would also be on the hook for a monthly bill of $84.12, or an annual bill of $1,009.44.
*See notes for reasoning behind each monthly cost as it may not be what is widely promoted
What if there was a better way? Instant micropayments, which include payments as small as a tenth of a cent, are possible at a global scale on certain blockchains. There is a reason many businesses have a minimum for credit card purchases and that is because of transaction or processing fees.
*Certain blockchains, like Bitcoin SV
So how could we capitalize on this technology? Imagine a platform that hosted every show and movie that the eight streaming services above do. An annual subscription could cost $100 plus a micropayment for every episode or movie watched, based on length, like $1.00/hour, with the ability to pay a prorated amount for shorter shows.
For example, instead of shelling out $9.99/month to Peacock (plus whatever you pay for other services simultaneously) to watch a couple episodes of “The Office” every now and then, with this mega-subscription, you could simply pay $0.33 for a 20-minute episode and still have access to all other shows. This is impossible with current infrastructure like credit cards and Square. As you can see in the table above, credit card processing fees for a $0.33 transaction could be as high as 33%, which would severely cut into profits. And since Square takes $0.30 from every transaction, companies using this method would barely break even. Don’t even get me started on how impossible this would be on some blockchains like BTC or Ethereum. With the high transaction and gas fees, you may not be able to watch one full season of “The Office” in this model before reaching the $1,000 you would spend today to have access to eight streaming services!
How Much Could You Save?
Before the pandemic, on average, Americans streamed for about 70 hours a month. During the early stages of COVID-19, this number went up, but it’s safe to expect this number to revert to a similar number as things return to a new normalcy. Now, $84/month (the combined monthly fee for the eight subscriptions services) for someone who watches 70 hours or more is relatively inexpensive. Paying $1.20 cents per hour for entertainment seems like a pretty good deal. However, the same study also discovered that 52% of Americans watch 10 or less hours per week, or less than 43 hours per month.
Now, the difference between paying $84/month to watch 40 hours of streaming versus 70 hours of streaming may not seem that much ($2.10/hour vs. $1.20/hour). Over time, though, it adds up. Let’s look at cost comparisons for someone with a subscription to the top eight streaming services ($84/month) versus our mega-subscription, micro-pay-as-you-go model ($100 annual fee + $1/hour). In this model, the mega-subscription allows access to all shows and movies permitted on the eight streaming services.
*You can watch as much or as little as you do, and the price would be the same.
More than 50% of Americans who watch less than 43 hours of television a week would save more than $400/year and still have access to all the great shows and movies they like. As you can see, the approximate break even point is 76 hours a month. Anyone watching 75 hours per week or less would save money, potentially hundreds of dollars.
This all seems great for the customer, but why would this make sense for a business?
Let’s use “The Office” as an example. In 2020, Americans cumulatively streamed 57 billion minutes of the show, or 950 million hours. Under the mega-subscription model with micropayments of $1/hour, “The Office” would have brought in $950 million in 2020. NBC Universal paid $500 million for five years of rights for “The Office” on Peacock, starting in 2021. Over those five years, assuming viewership of the show remained constant, “The Office” could have made $4.75 billion, nearly ten times as much as in the actual deal.
Another benefit for business is the ability to make more money from super-users. This survey found that 15% of Americans watch more than 20 hours of streaming a week, or more than 80 hours per month. Four percent of people watch over 60 hours per week, or more than 240 hours per month. With the new mega-subscription model, these extreme binge-watchers would pay more for using the service more, similar to SaaS services like Google Drive and iCloud. This would allow businesses to collect more revenue from the super-users while charging a fairer price for the 85% of Americans who don’t watch as much, a win-win for businesses.
Customers may also be more willing to stream their favorite shows more if they knew that the money would more directly benefit the writers, producers, cast, etc. that created the product. With blockchain-based micropayments, every time someone streamed their favorite episode, money could instantly be dispersed to the various parties thanks to low transaction fees and the security of blockchain technology.
The mega-subscription would also combat piracy. As noted earlier, while sharing logins to subscription services is relatively common, it is technically illegal and hurts the ability for businesses to make money in the current model. With the mega-subscription model, piracy would be near impossible as users would be required to send the micropayment each time they watched something, no matter the device they use.
Most shows and movies would benefit from this new model; some more so than others. I am not saying all shows would be like “The Office” and generate nearly $1 billion a year with this model. But just how the micro-pay-as-you-go model is more fair for consumers, it is also more fair for businesses. Money could flow more directly into the hands of the people who were a part of the production in real time as people watch. This would incentivize companies to make great shows that are worth rewatching multiple times. If a show-runner wants to continue to make money, he or she needs to continue to create great content.
The mega-subscription, micropayments-based model for streaming shows and movies would be a win/win for all parties involved. Consumers would pay their fair share for the products they enjoy without the hassle of managing multiple subscriptions. Shows and movies would also be paid more fairly based on the success of the show, which in turn would incentivize businesses to continue to create worthwhile products for consumers.
At Unbounded Enterprise, we are aiming to create products that implement micropayments as a core game-changer from current options. To learn more, check out our platform NFTY Jigs and our upcoming game, Duro Dogs.