Flexibility, content are key to reducing OTT subscriber churn – but it’ll happen anyway

churn

I’ve said this before, but it bears repeating: Today’s consumers increasingly value flexibility, control and content when it comes to home entertainment. Making it easy for them to churn – to subscribe and unsubscribe – may be one of the biggest retention tools after quality content that an OTT service can offer.

New research suggests churn among SVOD subscribers in the US increased several points from 2018 to 2019, to about 35%. Churn rates have consistently been around 30% (except for a dip in 2018 to 18%). Whether that’s because there’s an increasing number of services from which to choose, tightening wallets, consumer’s becoming more comfortable churning in and out of services, or something also altogether isn’t clear.

But the research from Parks Associates found three of the top eight reasons for leaving a service, according to the Parks Associates data, were economic in nature.

The biggest reason?

More than 30% of respondents to the survey cited trimming household expenses. About one-fifth noted expiring promotional pricing and general price increases as their primary reasons.

Content + content + content = less churn

The second most-often cited reason for dropping a service was related to content: Users said they couldn’t find good content to watch. Actually, it’s not clear whether that was an issue of search, discovery and recommendation, or just a paucity of quality content.

All but one of the remaining reasons cited for churning also were content related.

  • Subscribers churned, they said because they:
  • Found a better, alternative service (~20%);
  • Like to change services occasionally to find new things to watch (~12%); and,
  • Were disappointed when the service took away programs they liked to watch (~10%).

Nearly one-fifth of respondents said finding time to watch was an issue for them (and that, frankly, could also be related to the appeal of the content a service carried).

So, why sign up? Again, content

As to why consumers subscribe to a service, three of the top four reasons cited were related to content, with each being cited about 30% of the time.

The top response (~35%) was the availability of a specific show or series, that was followed by a service having specific content genres available (~30%) . The availability of original programming also made the list at No. 4 with just less than 30%$ of respondents selecting it.

Promotional pricing drew about the same number of responses and was the only economic factor among the top seven responses.

Obviously, content remains a primary motivator for consumers when they sign up — and stay— with an OTT service.

Why flexibility and control matter

There’s not a lot of research around the psychology of the value proposition consumers see in Internet television, SVOD, OTT or whatever. But there’s plenty of anecdotal research when it comes to why pay-TV continues to lose subscribers.

Survey after survey has shown that pay-TV subscribers don’t believe they are getting their money’s worth from their monthly $100-$200, or more, investment in pay TV.

The value prop is just so skewed.

They’re rejecting 100 and 200 channel bundles because, as many surveys have shown, they watch less than a dozen of them.

And they have no way to create the bundle they want on pay TV. They’re given no choice because operators, often, have no choice but to carry the third-, fourth-, or fifth-tier channel baggage a key network comes with.

If an operator wants to offer the “Big Channel,” they have to take the multiple cable nets that belong to it. And, as we see more media mergers, options for operators — and their customers — get worse.

In the world of cable, a la carte is a long way off.

Streaming makes churn easy – and that’s a win

That’s not the case with streaming video.

Want Netflix? Just subscribe. HBO Max? Subscribe. Showtime? Subscribe. CBS? Subscribe.

And, when you’ve exhausted the content of interest to you in any of those services, churn out.

Former Sling TV CEO Roger Lynch, who’s now CEO of Condé Nast, knew that churn was just part of the business.

Churn for an OTT business has a significantly lower price than it does for operators. Pay-TV providers need to provide leased set-top boxes, send a tech to make a connection at the house and occasionally maintain it. Add in marketing to obtain a customer and customer service support to keep them and it’s easy to see why subscriber acquisition cost (in 2015) was $850.

That’s an outlay operator’s have to recoup (and it’s one of the very big reasons that getting out of a pay-TV service agreement can be so hard).

That’s not the case with OTT.

“It’s almost no cost to bring someone on,” Lynch said. Sling TV – and most other OTT make it very easy to sign up and – more critically – make it just as easy to quit a service.

Lynch’s perspective? If subscribers drop off… they can still come back.

“We make it really easy,” he said.

Easy churn? Not always

Easy, except when it isn’t.

Want to sign up for Netflix. Go to the website. Cancel service? Right back to the website. It’s painless, and it’s one of the things most SVOD services have adopted. Easy to join. Easy to cancel. Easy to come back.

You will, of course, find some SVOD services that make joining easy and canceling hard, hiding unsubscribe buttons 10 pages in or, worse, requiring you to talk to CSR. The likely are the offspring of traditional broadcasters and pay-TV services.

But there are fewer now than there were and “easy” increasingly is a best practice.

The bottom line

Churn is a part of the streaming world, and it’s going to be something providers grapple with for, well, maybe ever. That’s part of this next-gen TV we’re all so fond of… what you want, where you want, of what devices you want.

Making it difficult to unsubscribe, in the long run, will cost you users. Because it’s too hard.

OTT services churn more than 9X as much as pay TV services… but, again, that’s because operators make it painful. Early termination. Long waits for customer service. Annoying games with deals to keep you in place.

By the way, the churn rate for virtual pay-TV services (like Hulu and YouTube TV), Parks said, is 80%.

Now that’s painful.

Stay tuned and stay well.

Jim O’Neill is Editor of Videomind and Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and on LinkedIn