Author(s): Raghu Gopal
Last Friday, Sprint launched a deal offering free subscriptions to the Hulu video streaming service, available to new and existing customers of the carrier's unlimited data plans.
The promotion isn't unprecedented in the market, but it certainly solidifies the trend of combining video content with connectivity. AT&T provides free HBO content to its unlimited data subscribers and T-Mobile US includes Netflix for customers that take an unlimited data plan.
AT&T can be credited with starting this trend back in April 2017, when it began giving its Unlimited Choice subscribers access to its DirecTV Now streaming service for just $10 per month. It was a significant discount to the $35 monthly service. The carrier also began throwing in HBO content for free, an indication of confidence that its planned $85.4 billion acquisition of Time Warner will make it through regulatory scrutiny.
In September 2017, in one of its Un-carrier announcements, T-Mobile started offering free Netflix subscriptions to customers with two or more unlimited data lines through an initiative called Netflix on Us (see Networks and Netflix: It's a Match). T-Mobile US CEO, John Legere, boasted about not having to acquire major media companies such as DirecTV and Time Warner to bundle content with its mobile service plans.
Sprint's move was predictable. As the budget carrier in the US, it needs to match the value of its rivals, while demonstrating that its network can handle the video traffic. Sprint correctly highlights that wireless service and video content are perhaps the two most important subscriptions in people's lives, affecting them almost every waking hour.
Bundling can be a clever strategy, particularly for carriers looking to fight subscriber churn. Combining multiple services on one bill means that customers are more likely to stick with the provider. However, this approach suggests to subscribers that there will be a discount, meaning a hit to margins in one way or another.
Sprint recently ended merger talks with T-Mobile and the carrier is now in the middle of a turnaround plan to cut costs. The agreement with Hulu will enable Sprint to offer an additional perk to its subscribers and should help deter customers from switching to T-Mobile.
Verizon, the largest wireless carrier in the US, now stands out as the exception among post-paid carriers in offering premium video content as an added benefit. We expect that Verizon will match the bundles of its rivals through partnerships or acquisitions, for example, by buying Dish Network (see CCS Insight Predictions for 2018 and Beyond).
Sprint together with Hulu will soon provide Sprint Unlimited customers with an upgrade option to Hulu's live TV service focused on news and sport content, which would include live games from major professional and college leagues — a major attraction in the US — as well as UK Premier League football.
Content and connectivity have become closely linked, particularly in the US market, and the line between the two is becoming blurry. Sprint has wisely created a bundle when some subscribers sitting on the fence are considering a switch. Video streaming draws customers to unlimited plans, exploiting network capacity. Carriers are looking for ways to keep average revenue per user up, while maintaining usage and interest. It's uncertain if the partnership with Hulu will have an impact, but Sprint has caught up with the competition at a time when there's growing uncertainly in the industry.