Pricing
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Written By
Peri Elmokadem
Peri is the SEO Content Manager at Uscreen. She writes to teach the world about the ways of video monetization. She’s also a visual artist, traveler, and dog lover (although she’s starting to warm up to cats).
How to Price Your Subscription Video on Demand [Calculator Included]
This is actually one of the most asked questions we get from customers.
The reason why it’s so hard to price video content on a subscription basis is because it goes against the traditional way we’ve always been taught to price a product. The cost-plus pricing method is where you add all your direct material, labor and overhead costs for a product, then add a markup percentage to reach the ideal price of the product or service you’re offering.
As we explained in the previous section, the beauty of the subscription model is that you work on creating ‘forever’ transactions of long-term recurring revenue, rather than immediate one-time transactions for products and services.
That’s why trying to price your subscription VOD content in a cost-plus pricing method will only confuse you.
Analyzing our customers, we’ve found the average cost of a monthly VOD subscription to be between $7.99 and $9.99 a month – but every business is different, that’s why you want to think this through to make sure this price is right for your business and customers.
To help you out, we’ve studied our customers’ pricing and developed an easy formula to use to give you a starting point for pricing.
Before playing around with this pricing calculator, scroll further to understand the variables.
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Variables of this formula:
Revenue Goal:
In a perfect world, how much would your video business be making in monthly revenue? Be sure your goal includes your overhead costs.
Existing Followers:
How big is your current audience? How many followers do you have on social media? How many emails do you have on your list? For this formula, either use the total number of followers from each individual platform, or the main platform your active on.
Your existing audience, the ones you’re currently not monetizing, is the main pond you’re going to try to fish in. They’re your biggest supporters, the ones who already know your credibility in your field.
Conversion rates:
Conversion rates are the percentage of people who will arrive at your website and buy into whatever it is you’re selling. These rates differ from business to business, content type to content type, even social media platform to social media platform. But to make it simple for our purposes, let’s consider the average range of 2-5% conversion. Use the scale in the calculator to pick the conversion rate you want to pretend you’re at.
Word of advice: if this is your first time monetizing your followers, aim low in the pricing formula (then pick 5% just to see what that would be like to be a baller!).
Set the elements of your equation and put it in the calculator. Play around with the numbers until everything makes sense.
Wait, you’re not done yet.
Keep in mind – this formula is just somewhere to get you started. We’ve found that our most successful customers offer monthly subscription prices anywhere from $2 to $50 – that’s a pretty wide window!
There are so many different factors that place these subscriptions where they’re at right now – more than a calculator can tell you. Luckily, we know what these factors are.
Paying VOD Subscribers:
This variable is simply the number of subscribers you would have based on the assumed conversion rate percentage of the existing followers you have.
Whatever our magic pricing calculator yields, take it and apply the following factors to it to see if your price should be higher, lower or exactly what the calculator tells you.
Remember:
Industry and Genre
The nature of your content will really impact how you price your content.
The best place to start here is doing your basic market research to see what subscription video services similar to the one you’re offering charges their customers. If you’re going to charge higher than your biggest direct competitor, you have to be sure your service is well worth the difference and that the added value is reflecting in your brand.
The next thing to take into consideration is your content’s type and genre. From what we’ve seen, each type of content has an industry price average that you should consider and possibly abide by unless you offer content that’s very obviously more valuable and worth the difference in cost:
Entertainment usually runs lowest, at between $4.99 – $6.99 a month. The main reason that’s the case is that giants like Netflix, Amazon Prime, and Hulu that offer new and popular entertainment video content each week. Don’t let that intimidate you – charging lower than they do and offering content they don’t is a sure way to compete with them. And remember, just because you charge lower, doesn’t mean you’ll make less. Kweli TV, a VOD for Black culture entertainment videos, charges $5.99 a month and currently has 20,000 subscribers.
You don’t need to price high. You need to price right.
If you’re offering health and fitness related videos, you would be able to charge more per subscriber. Top fitness instructors selling content using Uscreen are charging between $9.99 and $14.99 a month – and sometimes even more. The important thing to remember with fitness videos specifically, is that you’re really saving your customer the costs of a personal trainer, gym membership and/or fitness classes. Having these perks in the comfort of their living room for a much cheaper price makes paying for health and fitness content really worth it.
Instructional, informational and inspirational content (outside of fitness) has shown the widest range of subscription pricing from $9.99 to $50 a month – the more niche the content, the higher you can charge per subscription (we’ll talk more about this in the next part of the article).
Niche and specificity
Niche content that’s specific and unique is valued higher because its ideal audience, while small and limited, is likely very focused and dedicated to this niche, and is usually willing to pay that little extra bit.
Take Total Immersion, for instance, teaching people how to swim at $49 a month with approximately 2,000 subscribers. The reason why they’re able to pull that off is because of how specific, niche, and actionable its content is.
Video content alternative
Another thing to consider is what we like to call the “video content alternative” – for instance: if you’re selling a subscription for SAT video tutorials, how much would your customer be saving if they opted for your video content rather than hiring an actual tutor? If a tutor costs 50 to 80 dollars an hour, you can actually charge 40 to 50 dollars a month for full access because that fee will offer more than an hour of tutoring.
Discounted Annual Subscriptions
Discounted annual subscriptions are always a great way to entice people to sign up and get paid for an entire year up front. The most effective discount with an annual subscription is 20 to 25% less than the regular month by month subscription fee. If you offer discounted annual subscriptions, make sure you make the savings bluntly obvious in numbers!
Don’t expect more than 10% of your customers to opt for the annual subscription option – but even 10% is a great reason to offer an annual fee at a discounted rate.
Test test test!
Pricing videos will always be a work-in-progress. We really don’t think you’ll ever be “done” with it. The market will constantly change and as your business grows, so will your audience and content. Be flexible and always test your pricing and marketing. You’ll get to know your customers more and more as time goes by, and you’ll know their content consumption and spending habits like the back of your hand.
Planning: Lesson 1:
How to structure your video content
Go to Planning: Lesson 1