Optimal Subscription Planning for Digital Goods

Abstract

Alaei et al. consider the problem of a streaming platform that offers different set of contents with different subscription fees with the goal of maximizing revenue. They characterize the necessary and sufficient condition for the consumer preferences under which a single-tier subscription is optimal. In particular, they show the preferences of the consumers for different contents must be aligned for a single-tier subscription to be optimal. This condition is often violated in practice, establishing the suboptimality of a single-tier offering. They further show that a subscription fee proportional to the number of contents is near-optimal.