Over-the-top (OTT) streaming services have become an increasingly popular medium for viewers to stream their favorite movies, sports, TV shows, and other entertainment content.
Statista estimates that VOD services will likely touch 1.636 billion users by 2027. With this bullish sentiment, it’s natural that the number of streaming platforms is growing.
While this means more options for viewers, the rising competition poses numerous challenges to broadcasters. For instance, customer churn is becoming a real roadblock. In 2023, Parks Associates evaluates it at 47%!
Why is tackling OTT subscription churn important
Managing and mitigating ott subscription churn is super important for broadcasters because it directly leads to revenue loss from leaving customers. It additionally counteracts the effort and expense required to acquire new customers and ensure a smooth training and onboarding process, alongside provisioning, and supporting them. Both hit profitability.
Statistically,
- Customer acquisition is 5 to 25 times costlier than subscriber retention.
- Loyal customers spend 67% more on a company's products and services.
- A mere 5% increase in customer retention can increase profits by at least 25%.
Therefore, controlling ott subscription churn is critical to driving growth for media and entertainment platforms.
What broadcasters can do to keep growing
The answer lies in first understanding your customer base and why they leave.
This is a crucial first step because you can’t improve what you don’t know. Once you have relevant insights, you can take proactive steps to prevent ott subscription churn and maximize customer lifetime value. But when you have so many subscribers, where and how do you even begin? The first step lies in assessing the status quo.
How to calculate churn?
You can ascertain where you are at with OTT subscription churn by calculating the percentage of streaming customers who cancel their subscriptions or stop using the video service during a given period.
Formula to calculate churn rate
Next, is going into the root cause of churn.
Why do users churn from video streaming services?
There can be several reasons for streaming service subscribers to churn - both involuntary and voluntary.
Involuntary churn usually results from declined payments from expired credit cards or other payment failures. An optimized payment and checkout solution could, therefore, reduce involuntary churn.
On the other hand, some of the most common reasons for voluntary churn may include:
- Content-related concern: If the platform content isn't interesting enough for the users, or if they've binge-watched whatever they like, the likelihood of churning increases.
- Pricing: Pricing is a significant factor influencing OTT subscription churn. With rising inflation, competitive pricing is gaining importance as people consider their expenses. They are quick to pass if they feel the subscription fee is too high or they need to get more value.
- User experience: A poor user experience, such as a messy interface, slow loading times, or even poor customer service, annoys users and motivates them to turn to other platforms instead.
- Subscription fatigue: Alongside specific reasons for churn, there's an overall force of subscription fatigue operating across the economy. In general, customers are feeling tired of paying for multiple subscriptions, which is feeding into churn rates for all subscriptions, including streaming services.
How do you know what’s causing churn for your OTT platform?
Machine learning can turn OTT churn into an afterthought
Data science and machine learning present a robust and objective way for OTT businesses to go into the root causes of churn on their platform. Machine learning is an AI application that can analyze and learn from enormous amounts of information in a fraction of the time it would take a human brain to complete the same task.
The use case for machine learning is the same for OTT companies: AI will digest data and turn it into relevant churn metrics for OTT players.
By simplifying the analysis of vast amounts of subscriber data, modern machine learning tools empower broadcasters to identify:
- Exact customers' patterns
- Customers preferences
- Behaviors at risk of churn
Combining these insights puts broadcasters in an advantageous position to take meaningful steps to reduce OTT subscription churn. Let’s explore how.
How Machine Learning can decypher OTT subscription churn for you.
First and foremost - as you start with churn management, note that it seldom occurs without warning.
Signs like a fall in customer engagement or a rise in inactivity always precede voluntary churn. You may also find sudden overconsumption of your content, usually followed by unsubscribes (commonly called "burn before churn.”) Machine learning and artificial intelligence step in here. They help identify these patterns from data and position you to act on them timely.
Using the right data analytics tools or churn prevention software, you can identify the warning signs highlighting at-risk customer segments. With this foresight, you can quickly re-engage the customer with specific churn management strategies before they churn.
For instance, if you find your customers turning price-sensitive, you can offer coupon discounts to entice them to stay. If a growing amount of customers are upset with the service and provide negative customer feedback, make sure you have the capacity to 1. hear the complaints and 2. deal with the root cause.
Churn prevention tools like ChurnIQ provide dashboards with metrics highlighting your ott subscription churn rates and the reasons for the associated subscriber cancellation.
An example of ChurnIQ’s retain dashboard
It presents a clear picture of what’s happening at your baseline level. You also get a synopsis of upcoming renewals and an analysis of renewal performance.
The analytics tool uses a machine learning algorithm to track accurate ott subscription churn probability scores with a breakdown of the number of at-risk subscribers and their reasons for leaving your platform.
Here are five ways you can use ChurnIQ’s data intelligence capabilities to address churn:
1. Find out how urgent your churn problem is
The foremost step to counter OTT churn rates is knowing your exact risk status. The Subscription Churn Risk dashboard uses the graph above to illustrate the immediacy of your churn problem among the existing subscriber base. This information makes it an excellent starting point for assessing how severe your churn risk is.
For example, the graph above shows that 85% of the at-risk subscribers display “Very High” risk patterns. From this, you can deduce how quickly you need to start addressing your at-risk subscribers and with what intensity. Intuitively, high risk demands immediate action with greater force. On the other hand, lesser-risk situations can afford fewer resources to be allocated immediately.
2. Find out why customers are churning
Once you know the "what," the next important thing to know is the "why " to step in with a solution.
ChurnIQ’s algorithm analyzes subscriber data and detects churn causes, ranging from past behavioral patterns to current ones. It also notices streaming and pricing plan issues that cause dissatisfaction and churn. This understanding puts you in a position to intervene and address the exact cause.
Campaign Example A
In the graph above, we see that the primary churn causes for this broadcaster are:
- Not engaged with the content
- Payment is unreliable.
This is a precious insight as it can point you to do the following:
- Better promotion of quality content OR invest in new, more popular content
- Launch an email campaign to remind customers of outdated payment details
3. Know which customer segment to prioritize
Once you know the severity of your churn problem and its primary causes, it's time to get specific.
It's nice to know the general churn status of your entire customer base, but it's only useful if you can precisely locate the at-risk customers. An excellent way to do that is by creating segments based on churn risk levels and causes. You can use ChurnIQ to segment Very High/High Risk of Churning this month. Then, coupling this with the detected churn cause, you can narrow down your audience and develop a campaign to compel that particular segment to stay.
Campaign Example B
Suppose you notice that high-risk subscribers are often linked to price complaints. On the other hand, low-risk subscribers are frequently related to a poor customer experience. This should make it clear that prioritizing the price-sensitive group is a priority. Next, you can develop engaging pricing strategies or coupon campaigns that offer attractive discounts.
In the image below, you can see several examples of crucial segments recommended by the ChurnIQ dashboard.
4. Follow best practices for effectively targeting at-risk subscribers
Once you've located your at-risk customers, the next step is creating a plan to re-engage them and secure them as loyal subscribers. This is an essential step because a perfectly shaped message will differentiate between retained and lost subscribers for your platform.
To simplify this, we at Cleeng, have used historical subscriber data and industry best practices to create a catalog of recommended retention actions specifically for ott subscription churn. These actions are broken down per stage of the subscriber journey (Register vs. Experience vs. Winback, etc.). The goal outcomes, recommended segments, and actions are defined within each stage.
For example, see below the recommendations for the Retain stage:
Campaign Example C
If your Prediction dashboard shows "High Risk" associated with "Poor experience," the Segments catalog recommends an apology with a discount to show the customer that the error has been addressed and that their loyalty is valued.
Campaign Example D
If your Prediction dashboard shows "High Risk" associated with "Frequent churner," you may find the customer burning through your content quickly and then canceling.
In this instance, we recommend focusing on any upcoming content. The content attracted the customer first, so remind them that there is more to come.
No matter your churn concerns or your customer's stage, you can select relevant recommended actions to give you the best chance of retaining them to reduce ott subscription churn. Finally, you also need to implement plans, considering the time element.
5. Set up automated retention campaigns easily
If your execution of retention campaigns takes too long, you can lose customers from your net.
For example, consider a user who signed up for a hockey season pass with an end date in 2 weeks. If you wait for the season to be over before you convince them to spend longer on your platform, you could lose them for good once the season ends.
Therefore, acting quickly is essential. To that end, ChurnIQ Segments offers easy, automated campaign creation—no more hours of tiresome planning and list management. Using the integration with Looker, you can connect with any marketing tool. Simply set up a segment once, define the campaign frequency, and have it run automatically in the background.
Use machine learning to beat OTT churn proactively
As the OTT landscape competition is at an all-time high, pulling up your churn management performance is necessary to stay in the game and grow steadily. To that end, the best way to go is to be objective about your approach.
Machine learning presents a powerful data-backed way to identify at-risk subscribers, understand their behavior patterns, and take proactive measures to reduce OTT subscription churn.
