It should take you about three minutes to read this post. During these 180 seconds, mobile users will have spent around US$1 million on apps and games, according to data.ai, formerly App Annie. By the time you’re finished reading this, as an airline, you’ll also have a whole new outlook on how to generate ROI from your In-Flight Entertainment (IFE) content.
Hint: It’s not a pipe-dream.
Pre-pandemic, content streaming and in-app spending were already on a high-growth trajectory, then restrictions on movement imposed globally to curb the spread of the virus had a catalytic effect. Across 2020, UK consumer spent $3.35 billion on and within mobile apps according to the company, primarily on entertainment. During this period, revenue from paid-for video, such as subscription video-on-demand (SVoD), increased by 27%.
In its Online Nation 2021 Report, Ofcom suggests that 87% of all online audio revenues in the UK, now come from subscriptions to streaming services. Music streaming service Spotify saw Premium Subscribers grow 16% year on year to 180 million in Q4 2021, despite increasing its prices. Such increases in its subscription plan led to an average revenue per user (ARPU) within Premium, of €4.40 during the quarter, up 3% year on year.
News media hasn’t escaped this shift either. When the Wall Street Journal introduced digital subscriptions over 20 years ago, it was one of the first and only. In 2021, digital only subscriptions grew by 21% year-over-year, and now comprise nearly 80% of total subscriptions.
In a letter to shareholders last year, Netflix noted that “the greatest opportunity in entertainment is the transition from linear to streaming.” Clearly, there’s lessons that airlines can learn and implement here.
All about Access
Back in 2010, James L. McQuivey, PhD, VP, Research Director at Forrester was quoted as saying that people never have, and never will, pay for content. What they will pay for though is access to content.
Some 12 years later, behavioural economists are highlighting the trend away from content ownership to content access, as consumers place greater value on engaging, authentic experiences.
In Understanding Value in Media:?Perspectives from Consumers and Industry, The World Economic Forum (WEF) draws attention to the rising willingness to pay to access content in the future. Globally, WEF says the proportion of people willing to pay in the future is 53% for news and 70% for entertainment.
So how can airlines benefit from this increase of the subscription economy and monetise content which has traditionally been viewed as a cost centre? By providing a direct relationship with the paying passenger.
It may be obvious, but we must make passengers aware of the service. After all, people can’t buy what they can’t see or don’t know about. This can take the simple form of announcements from crew who could be incentivised to sell access through commissions, or messaging on the back of seats which could be used to cross-sell with offers like “Spend $35 on duty free and get access to our entire Hollywood film library for free.” This could easily be extended to co-promote with pre- and post-flight purchases or loyalty miles redemptions (which typically provide significantly higher margins!) which are redeemable against on-board content access. Such activity imbibes a sense of loss aversion within the passenger, especially if the offer is time-limited or simply, too good to resist.
Convenience is everything
Payments are often seen as the biggest barrier to conversion, particularly in-flight offline transactions. Non-cash transactions are rapidly gaining popularity thanks to their convenience, with digital wallets offering affordable implementation compared with a traditional banking system.
As Capgemini observes in its Payments Top Trends 2021 digital ID has become an essential invisible payments facilitator through seamless authentication and authorisation. It is also becoming necessary as customers demand fewer touchpoints, as offered by mobile–and QR-code payments. With some innovative workarounds, such payment options are distinctly possible to implement inflight (particularly if you’re using AirFi’s solutions!).
Increased biometrics integration into smartphones and Card-on-File (COF) capabilities is helping erode consumer reticence to hand over card details when around strangers.
As airlines increasingly move to a cashless environment, its essential to make the payment process as convenient and simple as possible, to reduce shopping cart abandonment and friction to pay.
Airlines should give subscribers creative subscription models, with customisable packages and seamless options to upgrade as happens in the cruise industry, where Wi-Fi services are not included in the cruise ticket price. Here, it’s common practice to offer tiered plans, often on a daily basis, giving guests degrees of access to websites and online activities. And people pay. Revenues received from onboard and other goods and services which include Wi-Fi can account for up to 45% of cruise revenues, as many sources have confirmed to us while researching for this blog.
Tip of the IFE iceberg
Our experience and projections show that it can work for airlines too. Utilising the same revenue management principles that power ticket pricing and profitability across Reservation Booking Designators (RBDs) for example, there’s enough modelling – particularly for Low Cost Carriers (LCCs) – to suggest that savvy retailing of access to IFE content could easily cover current content costs for airlines AND generate modest profits on top.
Such customisation, including offering content such as the latest Hollywood content, only available to those willing to pay, will enable an airline to scale its service rapidly. It has become an expected feature in the subscription economy.
Content can be offered based on specific customer segments (ie, business traveller, leisure, children, etc.) or specific customer needs, satisfying not only the interests of the individual but their community.
And as airlines create digitally-enabled passenger journeys, paid-for access to content helps build customer level data, which can then be used to cross-sell, creating opportunities to increase revenue per seat and margins going forward.