India's subscription economy is booming, but there's one significant, persistent challenge that brands face: turning free users into paying premium subscribers. In our inaugural issue of Drip, we're diving into the monetisation journey within the entertainment subscription ecosystem, armed with insights from our research team at Kulfi and latest industry data.
The Premium Scene: Where India Stands
The entertainment subscription market in India is growing, but it's still not hitting the mark for most platforms. Take the audio streaming services like Spotify and JioSaavn; the space has ~7-8 million paid users (~4%) among a total of 185-200 million total users. In contrast, video streaming services like Netflix, Amazon Prime Video, Disney Hotstar and Jio Cinema are home to around 76 million (~16%) direct paying households out of a total of 481 million (i.e. 328 million using ONLY free streaming services). Despite some growth, there's a struggle to convert the vast free user base into premium subscribers.
The Subscriber Spectrum
While the price-point is a strong determinant of a subscription purchase for any consumer, benefits derived from paid subscriptions are ultimately the make-or-break. Consumers availing of subscriptions on streaming platforms or otherwise can broadly be categorised into the following cohorts based on value-seeking, willingness to pay and intended usage:
Partial or Non-Paying Users
- Prudent Value-Seekers: Primarily using only free features of a subscription service, these users occasionally pay for new brand trials or one-off features behind a paywall making them “microtransactors” from time to time. They don’t see enough value in making the switch to any level of a regular paid or premium tier. The regular subscription price point remains a point of resistance for them, independent of affordability.
- Convenience Free-riders: If there’s something we Indians nail, it’s jugaad and this cohort of users does it best. They get full access to a paid subscription for free by a mere connection to a generous family member or friend and don’t need to get their own. We all either know them and have them in our subscription accounts (or proudly are one of them).
All-In Users (Pay for the full subscription)
- Nonchalant Payers: With a high affordability in this group, these consumers aren’t bothered by how much they use the service or get out of it, but would love to have it in their back pocket “just in case”. Driven by social-emotional goals like leisure and social relevance, they have a high willingness to pay and feel comfort in having premium services available to them as and when needed or desired.
- Value Conscious Subscribers: These consumers pay in full for premium subscriptions and make sure they’re getting every penny’s worth. They’re invested, likely loyal and highly appreciative of what they get out of their subscription. Careful with these consumers though, their propensity to pay will decline as quickly as they see any drop in the value they derive out of the subscription.
What Will They Pay For?
According to a 2021 McKinsey study on creating consumer and business value with subscriptions, “high quality” and “good variety of experiences” were among top factors in subscription sign-ups. Another McKinsey report from 2020 about how paid loyalty programs can help bring consumers back to your brand, found that while hard-value benefits drive sign-ups, experiential perks drive retention.
The Current Gap: Streaming is missing cultural moments and artists and creators know it!
- Top creators and artists are going elsewhere to create moments for their biggest fans and streaming platforms might not ever be able to win them back.
- Creators and artists have super-fan bases and the engagement that superfans provide has been underutilised in the streaming era.
Fandoms - The Secret Sauce To Premiumisation?
Kulfi’s Take:
Platforms need to create vibrant communities and cultural experiences that make premium subscriptions worth the cost, especially in the entertainment world. Think of it this way: personal recommendations from superfans and evangelists—those die-hard fans (or ‘stans’) of artists, creators, and platforms like Spotify, Netflix, and Disney Hotstar—are more trusted than any ad out there.
To keep these fans excited and hooked for the long haul, platforms and brands should use membership fees to offer exclusive, emotionally-charged perks like personalised experiences and members-only content that ties into current cultural trends.
How Can They Do This?
- From Fans to Fam:
Host exclusive events and marketing campaigns that celebrate the creator-fan connection.
- Universal Music India hosted exclusive listening parties for “Swifties” to celebrate the launch of Taylor Swift’s record-breaking album, “The Tortured Poets Department.”
Partner with creators for exclusive content and behind-the-scenes insights, enriching the cultural experience. For example:
- Masterclass has emerged as a successful online education platform, leveraging its unique approach of featuring world-renowned experts and celebrities as instructors to walk audiences through their processes and knowledge of their relevant areas of expertise. In 2022, MasterClass reported its ARR to be $100 million, representing 270% growth from $27 million in 2021. As of 2023, it had over 2 million subscribers, with over 13 million monthly page visits. While the volume of users is not significant, it does showcase the willingness of people to pay a premium price point ($180) for exclusive content that can provide value.
- Buy Me A Coffee operates on a flexible revenue model that includes one-time donations, monthly memberships, and sales of digital products or services through its "Extras" feature. This model allows creators to generate recurring income and offers fans a way to support their favourite creators in various ways. As of 2023, the platform hit a million creators looking to monetise and create exclusive content for their audiences.
- Rooter is an emerging video platform for gaming and eSports content. It operates with a content, community, and commerce flywheel - tying up with eSports teams like GodLike to create exclusive content on the platform, in addition to allowing creators to interact with fans live and set-up donations and fan leaderboards.
- Stationhead - People usually use this to engage with fans, try to get artist attention and up the stream counts of their favourite artists (and these get counted in stream counts for ex: In May 2021, over 400,000 BTS fans united on Stationhead for one day to celebrate the release of the new single “Butter” during its release week. At the end of the day, over 5.4 million streams were counted from Stationhead alone.
2. Personalisation and Community Building:
Implement "Super Fan Badges" (or other identifiers that highlight their status as super fans) and create exclusive, creator-specific communities for premium users.
- Consider Nothing's approach. The company started its YouTube in 2021 and a year later, its discord channel, signalling massive intent for community creation. The YT and Discord channels are examples of creating a community through a feedback loop of interacting with the brand via comments - with mods playing the part of Community Board Observers bringing community feedback into the company’s focus areas.
- Bigo Live’s implementation of Super Fan Badges allows fans to show their loyalty and support by displaying a badge next to their username. Fan Groups enable fans to join exclusive communities where they can interact more closely with their favourite streamers. These features foster a sense of community and loyalty, potentially enhancing user retention. As per Q3 2023 results, effective execution of our operational strategies to optimise users' content and social experiences drove BIGO's enhanced user engagement and monetisation.
Foster fan interactions through social and product-related community activations, enhancing cultural belonging. For example:
Korea-based entertainment giant HYBE, which runs Weverse – a fan platform that, since its launch in 2019, has attracted 10 million monthly active users (MAUs) as the end of Q2 2023. HYBE took Weverse to the next level, with the introduction of Weverse DM, a private messaging service that enables fans to communicate with artists. It also has other features like Jelly, a payment system that allows fans to pay for Weverse DM, on-demand videos and Fan Letters, a feature which enables users to send personalized digital letters to artists.
3. Pocket Perks- Microtransaction Conversions:
Enable fans to give virtual gifts to creators they love, receiving direct recognition and exclusive experiences like virtual meet-and-greets.
Provide access to creator-curated content with options for special requests or shoutouts, deepening community ties. For example:
- Pratilipi’s creative subscription model - If you want to support a creator, you can subscribe to the creator and get some exclusive features like early access to content, and through this, some money goes to the creator, and some money comes to Pratilipi.
- Other examples include YouTube SuperChat, Bits on Twitch, Chingari Live.
Most brands can harness superfandom to build thriving communities and drive premiumisation. Customer experience expert Brittany Hoddak notes that superfans are enthusiastic advocates who in turn create more customers. Brands can and should engage these fans, listen to their feedback, and integrate their stories into the brand narrative, fostering a financial relationship rooted in cultural engagement and community spirit.
The Cultural Economy in India
India's path to monetisation in the entertainment subscription ecosystem is driven by what creator and comedian Tanmay Bhat termed the "hopium economy” (hope-premium). Indians prioritise premium experiences offering hope, social credibility, and emotional fulfilment over mere functional upgrades.
Applications of hopium experiences are being seen across industries. Take for example, the case of Radico Khaitan’s approach to building premium vodka brand “Magic Moments”. The company saw the growing consumption of the spirit, especially amongst younger consumers but also a trend: groups of consumers would take pride in showcasing the bottle of liquor they would consume on their tables, if the bottle had a certain premium look and feel to it; “a piece of art”. Therefore, a premium design was a part of the overall packaging for Magic Moments. Consequently, the brand clocked 25% sales value growth YoY to become world's 7th largest vodka brand, selling over record 6 million cases, amounting to sales worth Rs 1,000 crore in FY24.
Similarly, Royal Enfield has successfully positioned itself as a premium and aspirational motorcycle brand in India, appealing to riders' desires for adventure, freedom, and a growing sense of self-expression in the machines they buy. Consider, the Classic and Bullet 350, which have contributed significantly to RE’s near 90% market share in the <= 350cc motorcycle market, have also featured across several movies depicting shots of power, self expression, and travel, as a means to represent the bikes in an individual’s journey. The brand's success isn't just about the motorcycles' performances, but the image and lifestyle it represents.
Conclusion:
The Indian consumer is complex, driven by the experiential value a product or service offers. In the subscription economy, simply listing features is no longer enough. Brands must tap into and align with the emotional and cultural aspirations of desi consumers, showing how their service can bring joy, deeper connections, and self-expression. The transition from free to fee hinges on creating experiences that resonate deeply, fostering a sense of belonging and offering unique, personalised benefits.
In essence, focusing on cultural relevance and personalised experiences will help brands succeed in navigating the path to premiumisation and achieve the growth they envision.
