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The OTT industry has reached a tipping point. From the pandemic-fuelled subscription surge, major streamers are having to face up to a new reality. To win the streaming wars, streamers need to balance the high costs of content and subscriber growth by opening up their business model to new lines of revenue, while getting more sophisticated with combatting subscriber churn.
Most stark is the fate of Netflix, for whom the first half of 2022 has been a rough patch. The ‘King of Streaming’ lost 200K subscribers in Q1, followed by another 970k in Q2, which is a whole million less than predicted, but still a significant hit to the industry’s leading subscription streaming platform.
Its rush to launch an advertising supported option to stem the flow not only precipitated a re-evaluation of the company’s future, but that of the subscription video business as a whole.
OTT Churn Trends in 2022
All industries go through evolution and streaming is no different. Churn is endemic. Last year, 32% of U.S. respondents to a Whip Media survey said that in the last 12 months they canceled at least one of their streaming subscriptions. That number has now risen by 12 points–and no platform saw a decrease in their cancelation rates versus last year.
The figures chime with Deloitte’s Digital Media Trends report registering that 37% of U.S. consumers canceled a subscription video on demand (SVOD) service over the past six months. And as the number of services increases, so do opportunities for subscription-hopping: 33% of U.S. consumers said they had both added and canceled a subscription over the same timeframe.
While the industry sorts out how to make subscription video on demand profitable, there is no doubt that the consumer continues to demand SVOD. There is an inevitability about moving to cheaper ad-supported tiers but this represents a maturing of the OTT ecosystem, not one in terminal decline.
Online video subscriptions are on track to top 2 billion by 2027, reports Omdia. Analyst Rethink forecasts something similar. It suggests there will be $1.8 billion SVOD subs worldwide by 2027 valuing the market at $171 billion. What’s more, it thinks the AVOD market alone will be worth $91 billion in ad revenue by 2027 based on 8.6 million monthly active users.
Nonetheless, to retain a competitive stake in this market, streamers have to do something about churn. Offering differential content/price options is now the bare minimum.
The value of satisfaction
Satisfaction as a metric is more sensitive than just looking at subscriber counts. After all, many people stay with a service for a time, even if they are less than happy, before they cancel. Others cancel one subscription while acquiring another.
Satisfaction with the value a service provides is a key measure because it reflects the relationship between quality of content and price. A year ago, for example, Netflix was among the leading SVODs in terms of customer satisfaction and the runaway leader as the indispensable streaming service, according to Whip Media.
Since then, consumers started comparing Netflix’s content with that of rivals (notably HBO Max), taking into account its recently increased price, and the perception of the service took a hit.
Despite the fact that Netflix still scores most highly for both user experience and recommendations to subscribers. It fell down on Variety of Content (behind HBO Max) and Quality of Content (below HBO Max, AppleTV+ and Disney+). Certainly, Netflix price hikes have not gone down well. In Canada it inched up its prices twice in 2020 and again earlier this year with one analyst saying it was an experiment by the company to see “how much resistance consumers have to price increases.”
Well, now it knows. Nearly 70% of respondents to Whip Media’s 2022 survey who canceled Netflix said price increases tipped them over the edge.
The second reason given was value for money but this is not Netflix’ cross to bear alone. Lack of value was the chief reason given to leave HBO Max (48%) and Disney+ (45%), per Whip Media.
Users of these services were almost equally likely to cite “exhausting all the content they had interest in” as a driver to leave. The good news for Netflix was that only 22% cited seeing “all the programming I was interested in” as a reason.
In other good news for Netflix, its overall high rating for user experience means it has the most ‘elastic’ quality of the major streamers. Ampere Analysis found that Netflix leavers are most likely to boomerang: 23% of its churners resubscribe within two months. The comparable rates for other services are 11% for Disney+ and Hulu, 10% for Apple TV+, and 15% for both HBO Max and Paramount+.
Switchers are experimenting with different platform mixes within the home, moving spend to some of the newer and less penetrated services while maintaining a core base of services.
It’s complicated and it is impossible to keep track of, or do anything about, without accurate, comprehensive and granular information.
Predict And Prevent Subscriber Churn
The solution is to put data science at the heart of your subscription business. Cleeng’s ChurnIQ for instance has all the tools to help you understand all about your customer behaviors so you know exactly how to retain them.
ChurnIQ lets you anticipate risks by highlighting churn patterns on your platform. It will then segment your customers into different, applicable groups, and give you specialized retention analytics and AI-detected subscriber insights.
The platform features an easy-to-read dashboard that displays all essential subscriber data. These key analytics are translated into actionable numbers such as your monthly recurring revenue, total number of subscribers and their lifetime value and churn rate. These insights can better inform your decision-making and lead to more impactful and successful campaigns.
Proactive churn management is now one of the highest priorities for the best OTT teams, and why data is so crucial for OTT services. Being proactive instead of reactive saves both time and money.
The Shifting Sands of SVOD
Thankfully churn prediction is no longer just a tool for the streaming giants. Cleeng’s machine learning engine can predict your customer churn with 92% accuracy.
What makes Cleeng’s churn management system unique in the OTT sector is the combination of these usually separate customer data sources. This allows Cleeng to identify not only who is thinking of leaving your platform, but also why this will happen.
Every OTT service knows that seeing churn drivers and improving their retention rate is important. Only Cleeng’s subscriber management system puts advanced churn prediction tactics into their hands.
There’s no need to let the shifting sands of SVOD behavior escape your grasp.
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