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How to Combat Churn in Today's OTT Market

While a high churn rate is always a threat for OTT platforms due to the ease of subscribing and canceling streaming services, customer churn is especially problematic during this time period due to increasing competition trends and economic pressures. According to Paul Erickson, Research Director, Entertainment & CE at Parks Associates, the key to subscriber retention comes down to developing and maintaining a high-quality content library in tandem with cultivating a customer perception of exclusivity and high value. Erickson says that content is a key factor across all the major components of the subscriber journey: acquisition, retention, and churn. Users who may have reservations about maintaining a subscription are heavily influenced by value and content.

These particular factors represent a unique moment for growth and disruption in the streaming industry, as consumers are increasingly comfortable with subscribing outside the major streamers such as Netflix, Hulu, and Amazon Prime. “We have 61% of households now subscribing to not just one or more of the big three, but also other services as well, which is a huge turnabout from pre-pandemic,” Erickson says. This puts the newer streaming services in a good position for customer acquisition while maximizing the type of original, demographically targeted, unique content that keeps people subscribing for a higher time period. This approach is essential to churn management and reducing voluntary churn by combating the overall sense of content overload that has been driving the recent surge in cancellations.

Erickson also emphasizes that while churn has been on the uptick for OTT platforms, the churn rates for virtual multichannel video programming distributors (vMVPDs) is actually going down. “The appeal of aggregation and bundling is hitting with consumers,” Erickson says. “And that's not just for vMVPDs. We also see it happening with increased interest in subscriptions via service provider bundles and offers.”

“Content is king,” Erickson says, but “the industry needs to look at cost and value as collectively the ‘queen,’ if you will.” This focus on cost and value is especially crucial going forward due to the current inflationary pressures that consumers are experiencing. What is most important at this point is for OTT platforms to explore ways to diversify content while also taking a more dynamic approach to subscription models. Streamers much incentivize retention by looking at possible ways to bundle their services to reduce the sense of overload that customers are now experiencing in conjunction with rising prices and economic uncertainties.

Learn more about OTT and churn at Streaming Media West 2022.

 

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