Churn 'Unavoidable' as OTT Viewing Options Proliferate, Webinar Told
Apple TV+ leads over-the-top streaming services in monthly active churn rate at 15.6%, said Verimatrix Product Management Director Sebastian Braun on a Wednesday Parks Associates webinar. NBCUniversal’s Peacock (not including the free tier) was second at 9.5%, followed by Showtime (8.8%), Starz (8.4%), HBO Max (6.7%), CBS All Access (5.9%), Hulu (5.2%), Disney+ (4.3%) and Netflix (2.5%).
Netflix’s industry leading churn rate is due to loyalty developed over the years as one of what Parks terms the “big three” services, also including Amazon Prime Video and Hulu. The average Netflix subscription is 48 months, said Parks analyst Liam Gaughan, citing Netflix’s early entry into OTT and customers' perception that it’s an “essential service.”
“Content is king,” said Braun, saying services with lower churn are those that own, produce and distribute content. Other contributors are quality of experience and involuntary churn causes such as credit card expirations.
Calling churn “unavoidable,” Braun also noted the average number of services consumers subscribe to is up to five, from three at the beginning of 2020, reflecting the increase in options due to more services overall and more direct-to-consumer offerings from media companies. More services leads to fragmentation, leaving consumers “no choice” if they really want to watch a particular series.
In February, 33% of OTT subscribers added and canceled video subscriptions, said Braun, citing Deloitte figures. Some 22% added a subscription in the month, and 3% reported canceling without adding a service. Churn rate was similar in October when 20% of survey respondents added and canceled an OTT service, 34% added one and 4% canceled, he said.
Price sensitivity topped the reasons for canceling a paid video service, at 49%, followed by content-based decisions, said Braun. Thirty-one percent said removal of content they liked was a reason for ending a subscription, the same percentage who moved to a different service with content they wanted more. About 17% left a service due to an increase in advertising, and 14% changed services for one that offered more interactive content experiences, said Braun. Nine percent dropped a service due to irrelevant ads.
Parks data showed 26% of subscribers quit a service to cut expenses, the same percentage as those ending a subscription because they finished watching a particular series such as Game of Thrones. HBO Max “struggled” to retain customers at the $14.99 monthly fee, prompting it to add a limited-ad $9.99-per-month service, Gaughan noted. Some 21% of survey respondents cited flexible pricing options and availability of a lower priced tier as motivation for keeping a subscription VOD service, he said.
Lost customers aren’t necessarily lost for good, said Braun. It's important “to try and stay in touch with them” via social media, ad buys and email marketing to re-engage customers with relevant content based on first-party data. It costs less to reactivate an existing subscriber than to find a new one, he said. He also noted third-party data is becoming harder to rely on and collect due to new privacy features enabling consumers to block ad tracking, such as iPhone users’ ability to turn off personalized ads in iOS.
Real-time data can be used to help retention for features such as statistics in sports programming and watch parties, said Braun. That could be useful if wagering capability comes to TV. For non-sports content, service providers should look at the type of real-time data they can use to “enhance the experience and get more engagement” and help reduce churn and boost retention, he said.
With more fragmented content, discoverability is more challenging than ever, said Braun. Verimatrix believes a “super-aggregator” will emerge, said Braun, referencing Amazon Prime Channels, where consumers can get various video subscriptions through their Prime membership. The value for the consumer is a single-billing relationship, he said. Some “cutting-edge telcos” are going in that direction, too, he said.
On the impact of AI, Braun said algorithms help companies get data for questions they don’t know to ask and to recognize patterns that “don’t come intuitively.” Matt Smith, Symphony MediaAI vice president-business development, said AI and machine learning are transforming how data companies define insight and helping them “explore the unknown.” He cited an algorithm for a media company client that detected 15,000 subscribers with no expiration date, which accounted for about $1 million of revenue. “That was something we didn’t ask the algorithm to look for. It found it on its own.”
One trend to emerge from the COVID-19 pandemic -- when viewers had “more time on their hands” -- was trial-hopping, Smith. He cited a “big swath of users” binge-watching every show of a particular series within the trial period, some as long as 14 days, and then “jumping off the platform.” He advised services using a free trial to obtain subscribers to “think carefully about where and how you place the content,” how it will be monetized and how the payment gateway meshes with the length of time a viewer has to consume content: “You want them to engage with your platform for a piece of content, or different pieces of content, but give them a reason to stick around, too.”
Parks data showed 61% of OTT subscribers never subscribe on impulse and half didn’t have plans to cancel soon thereafter. Viewers are “looking for OTT services that are worth a long-term investment,” said Gaughan, but content has to be “compelling enough” to warrant a long-term investment. The “unprecedented level of churn” in 2020, due largely to an exodus from services when live sports weren’t available, slowed significantly this year, with vMVPD cancellations down 39% in Q1, he said.