COVID lockdowns brought about a boom in subscriptions to video platforms, as consumption grew exponentially, and users were able to devote more time to discovering the different kinds of content on different platforms.
Juniper’s Research report from June 2021 estimated that in 2020 there was an average of 4 SVOD subscriptions per household in the US. Yet with the return to normalcy it looks like there may be a reversal in this trend, according to some studies including one by Deloitte, which estimates that there will be 150 million cancellations in streaming services next year, with a global churn rate of 30%, with approximately 35% in the U.S. and between 7% and 23% in Europe as of mid-2021 and an increase next year, as competition in this market is expected to remain well below 25%. This means that video companies will need to make a major effort in 2022 to retain as many subscribers as possible.
Jana Arbanas, the U.S. Telecom, Media and Technology sector leader at Deloitte says that “while that cancellation number seems high, churn is about cancelling but also potentially adding new services, so we do predict that more subscriptions overall will be added in totality than cancelled, and that the overall average number of subscriptions per person will rise”. She explains that “in some cases that is because one individual is subscribing to obtain access to specific content, cancelling that service once that content has been consumed, and potentially re-upping that service again [later on].”
The growth in churn is driven by Gen Z, which makes up a majority of the so-called churn and return subscribers. Deloitte research suggests that some 25 percent of consumers have engaged in this habit.
This phenomenon is strengthening due to the enormous variety of video platforms offering different content and the ability of users to bop from one to another so they can view the content that most appeals to them at any given moment. It is essential to keep users hooked on a service precisely because they will no longer naturally stay loyal to a single platform, but rather to subscribe and unsubscribe as they see fit and until they find a content mix that best responds to their tastes.
What can we do to retain OTT subscribers for longer amounts of time?
For years already, reducing churn and increasing CLTV has been a big headache for video streaming providers, and will continue to be one of their major challenges in 2022.
There is no magic formula, and each platform will have its own particularities, but the general approach to increasing user engagement and loyalty is through the effective use of data. So you see, there’s no magic, just science! And the good news is that video services actually have mountains of data to help them understand what their users want, their consumption habits, devices they use and what type of content they view on each one and at what times, trends among similar viewers, etc.
This understanding of users and ability to personalize content suggestions is also helping “freemium” models –ad-supported free and hybrid models that have gained popularity in Latin America and Asia Pacific and are expected to expand globally. So it looks like ad-supported models will be leading market growth, while OTTs will continue to derive profits from their totality of services and sources.
Big Data and Artificial Intelligence are your allies to combat churn once and for all.
Machine Learning algorithms make it possible not only to analyze the individual behavior of users but also to predict their future behavior, so that you can take action before they leave and impact them with hyper-personalized content, promotions and marketing campaigns that hook them to your service and stay on for longer periods of time.
To reduce churn, it’s important to consider all phases of the user’s lifecycle, beginning with acquisition. Spending too much on attracting the wrong users may not be a good investment, whereas getting to the “ideal” users can really help increase the ROI of acquisition campaigns.
Rather than selecting users at random, by analyzing these ideal users that have a higher rate of engagement and greater CLTV, it is possible to define similar groups on whom to focus hyper-personalized acquisition campaigns that will attract the kinds of subscribers that are much more likely to remain with the service.
To address engagement and retention challenges you need to have a deep sense of your customers’ journey. You need to know exactly WHAT is happening in your video service, WHY it is happening and WHAT’S NEXT in order to offer your viewers individualized content recommendations, launch hyper-segmented campaigns and make an impact only on the specific group of users you want to address at a specific time with a personalized offer.
In this fierce market, understanding the customers’ journey is key to attracting new ones, but retaining customers for as long as possible is even more crucial.
It is common knowledge that it is much more expensive and requires a much greater effort to attract new customers than to build loyalty among the ones you already have; and loyalty is built only by engaging them with the video service by providing them exactly what they want, for a truly great viewing experience. This cannot be accomplished without the smart use of data to measure the insights that have a real impact on your entertainment business ROI and improve your customers’ experience.
To retain and keep your users engaged you need to make their experience on your platform as smooth as possible, make content discovery as easy as you possibly can and recommend your users exactly what they want to consume at any specific time. If they find value in your service, they’ll stay.
In order to offer the best customer experience, you need to fully understand your users’ needs and wants, track their behavior on your platform, be able to predict their next moves and offer them an individualized experience. Machine Learning and Artificial Intelligence can be really helpful here, to understand your users’ behavior, segment them, and predict their future actions.
Read our whitepaper to lear how to prevent churn and skyrocket your video business!