Churn has long been a dirty word in the subscription business, especially when it comes to streaming. That’s because it is easier to cancel a streaming subscription than to cut the cord with cable, as anyone who has been on the phone with Comcast can attest.

But new research from the consulting firm Magid contends that just like there is good cholesterol and bad cholesterol, there is bad churn and strategic churn and strategic churn is consistent with the long-term heath and growth for streaming services.

Magid’s Subscription Science practice also found that certain subscribers who are likely to drop a service and move on to a competitor are still worth appealing to because they contribute to the vitality and success of a streaming service, while other high-churn customers are not.

According to SubScape, an analytics tool introduced by Magid this year, one segment of consumers, dubbed “Hypers” will not only return and pay for a service when it has new attractive programming, but will talk about the shows they like with friends and on social media, creating buzz. 

These Hypers tend to subscribe to a high number of services. They also have high incomes, which also makes them valuable.

The other group consists largely of freeloaders who borrow passwords and drop services after signing up for free trial periods. They also tend to spend time on digital and social media, such as YouTube, TikTok and Snapchat.

According to Magid, in the first ten months of 2023, the top 20 streaming services in the U.S. had subscriber losses — or churn — of 8% and a gain of 8% a month, which averages out to net growth of zero. 

In that environment, streamers are fighting for share and fighting over subscribers and the key is reaching out to the right group of subscribers.

“The battle for the acquisition and retention of churn-centric subscribers isn’t slowing down which is why leveraging SubScape’s granular, solution-based insights have been mission-critical for our clients as they reimagine their streaming playbook for long-term growth,” said Brent Magid, CEO of Magid, and Kate Morgan, the company’s chief product officer and head of its global media, entertainment and games practice.

Magid found that streaming services that simply look at churn rates may be following the wrong metric. Instead, the better metric is total subscribed months. Getting high-churn subscribers to come back a few months sooner and stay a few months longer can generate millions of dollars in revenue.

Services that consistently deliver culturally relevant content will attract these transient, FOMO-driven consumers, Magid said.

Some programs are particularly good at attracting the right high-churn subscribers–and it’s not always the big budget series that do the trick.

Shows Magid found that attract Hypers include the World Cup, The Flash, Euphoria, The Walking Dead: Dead City, The First 48: Killer Confessions, Loki, Ginny and Georgia, the Kardashians, Gordon Ramsay’s Food Stars and Ted Lasso. 

One-third of premium SVOD users are “serial churners,” users who actively manage their video entertainment services, frequently signing up for and then quitting subscription streaming platforms, according to new data published by Antenna. 

The research company said that this quasi-loyal cohort has been steadily expanding since 2019, when its whimsical ranks stood at only 10% of users for 10 identified “premium” brands: Netflix, Hulu, Amazon Prime Video, Disney Plus, Max, Apple TV Plus, Paramount Plus, Peacock, Showtime and Starz. (Antenna didn't describe its methodology in the abstract sent to Next TV.)

Antenna also said that about a third of those who quit premium SVOD services were “won back” within a 12-month span. And nearly 25% of SVOD service cancelers returned to their respective services within three months after quitting. 

Among all U.S. premium SVOD users, the “survival rate” for those sticking with a service for 12 months was 45%. But that fell to 36% for users who had already quit a service once and signed up for it again. And it further descended to 26% for those who engaged in a third cycle of churn. 

Thirty-two million subscribers canceled what research company Antenna identifies as the 10 premium U.S. subscription streaming services in September, offsetting the gross addition of 37.2 million new customers. 

The overall 6% churn rate represented a significant uptick over the spring and was matched only by a similar spike in Q3 2021, during which U.S. SVOD industry churn reached nearly 7%. 

Two years is probably not enough to establish a cyclical trend similar to the pay TV industry, which has traditionally shed subscribers in Q2 as warming weather convinces consumers they don't need to say at home and watch TV as much. 

Still, it's interesting. 

Also read: Churn Is Back: 32 Million U.S. Households Are 'Service Hoppers,' Parks Says

Overall, churn for the "premium" U.S. SVOD services has been a lot higher in 2022 than it has been previously, with cancellations averaging over 25 million each quarter. 

While not the only driver of this increase, Antenna suggests that the biggest U.S. SVOD company, Netflix, could be largely to blame. 

Netflix, which experienced a significant uptick in Q3 churn in 2021, had an even bigger one this September, with domestic churn increasing to around 3.7%. 

The three charts below analyze churn for every major U.S. SVOD service save for Amazon Prime Video.

You got your double dippers. And then you've got your "service hoppers." 

You know who you are. You signed up for an OTT service. You canceled your subscription ... and then signed up again!

Churn for subscription OTT services, which ebbed a bit in the pandemic, is back, according to Parks Associates, reaching around 50% industrywide in the third quarter of last year. (Churn is the amount of subscribers cancelling the service in a given period represented as a percentage of the overall subscriber base.)

In fact, according to Parks, 36% of OTT households -- 32 million households in all -- are defined as "service hoppers." These are "OTT subscribers who switched between services and resubscribed to services multiple times in the previous 12 months," according to the research company. 

The challenge, Parks Associates says, is to identify these customers via data so that streaming companies don't chase these unprofitable customers "in vain." 

Promoting its latest OTT-themed report, Data-Based Decision Making for Video Services, Parks abstracted loosely related -- but nonetheless interesting -- er, data points. 

> 80% of U.S. broadband households subscribe to at least one OTT service. 

> 57% of U.S. households still subscribe to a traditional pay TV service. 

> Only 29% of U.S. households subscribe to an OTT service directly via the provider's website. This is down from 41% in just one year, Parks said. 

"Given the enhanced value of subscriber data, some content providers are seeking to re-establish control over their viewers — and the data about them — by not offering subscriptions via aggregators," Parks said. "In 2021, a substantial group of OTT households subscribed to an OTT service via Amazon Prime Video Channels, but that percentage could drop in the future, as HBO and HBO Max were removed from Amazon Prime Video Channels in September. Likewise, Disney Plus is not available through major aggregators, and NBC recently announced it is moving many of its shows exclusively to Peacock and away from Hulu." ■  

With the economy shifting further and further towards e-commerce and digital services, it’s no surprise that 2021 saw a major increase in companies deploying subscription-based pricing. In particular, the subscription model has come to define the way consumers enjoy popular entertainment, from using services like Apple Music and Spotify for streaming music to an ever-expanding range of new video services like Disney Plus, Peacock and Netflix. 

According to an April 2021 report from Deloitte, the average consumer maintains nine entertainment subscriptions across video, music and gaming. With popular content fragmented across competing platforms, consumers must choose the services that meet their needs within a limited monthly budget. This market saturation is leading to frustration among consumers, with more than half of those surveyed by Deloitte reporting that they find it difficult to access content across so many services. 

As subscription businesses turn the corner into 2022, they’ll be forced to fight against a trend that is gaining momentum among consumers: subscription fatigue. And a trend that is gaining momentum among service providers: churn. Rather than pay nine or more subscription fees each month, many consumers are choosing to prioritize the services they use the most or those that offer the best value for money. This shift in consumer behavior is, in turn, giving rise to new technologies like artificial intelligence (AI) to meet the increasingly daunting challenges posed by customer flight and the increasingly critical need to focus on customer retention. 

The Churn Challenge  

As early as 2000, business experts found that customer retention would play a vital role in e-commerce success. According to a frequently cited piece from Bain & Co., a 5% increase in a company’s retention rate can drive profit increases ranging from 25 to 95%. On the other hand, the cost of bringing in a single new customer is significantly more expensive than holding onto an existing shopper.

More recently, the growing importance of customer data has provided more reason for companies to focus on retaining their best customers. With new insights into the behaviors and preferences of their shoppers, retailers and subscription service providers have made customer lifetime value (CLV) a guiding metric for their sales and marketing strategies. By maximizing the length of each customer relationship, the company enjoys the double benefit of increased revenue and decreased marketing expenses to acquire new customers.

So with retention — and AI — both becoming the name of the game, how can a subscription business optimize their operations in the coming year? Here are three key steps to applying AI to minimize churn:

1. Collecting and processing customer data: Every company will have a unique set of customer data based on the information they’ve collected throughout the sales process. Tackling churn with AI begins by cataloging and understanding each available data source, ensuring that the information is organized and accounted for. The data must then be preprocessed to clean and filter the information, separating out anomalies and arranging the data in a format conducive to analysis. For an AI solution to provide actionable insights, organizations must resist the temptation to cut corners during the tedious early stages of data collection: an algorithm is only as good as the data underpinning it.

2. Modeling and analyzing the processed data: Different data has different characteristics and requires a different approach for analysis. Whether a company is analyzing the total spend of a group of customers (numerical) or combining results based on shared characteristics (categorical), the data must be carefully inspected and modeled to produce useful insights. Of course, all personally identifiable information must be stripped from the data to achieve anonymity and maintain compliance with customer privacy regulations. Dividing the data into audiences and segments will allow the company to apply targeted marketing and sales strategies without compromising user privacy.

3. Interpreting the results and applying new strategies: To gain the insights needed to predict and reduce customer churn, the company’s data analysts must interpret the collected data. A strong customer churn model will be able to generalize the results of different data segments and apply those generalizations to potential future outcomes. Business leaders can ask questions of the model, for example, what will happen to customer churn if the subscription cost is reduced by a certain amount. The model will then determine the future results of that strategy, providing the end user with data-backed information to help drive future decision-making. As companies explore new products or business strategies, the AI-backed model makes it easier to predict the outcomes and move forward with confidence.

Entertainment and media companies shifted towards subscription models because of the predictability it brought to their operations — guaranteeing a set monthly fee from each subscriber. However, as customer behavior shifts as a result of subscription fatigue, the same companies are now dealing with new levels of uncertainty. With thousands of users in a subscription renewal cycle each month or year, companies must develop new strategies to ensure that their valuable subscribers don’t cut ties. And they can often benefit again from the enhanced predictability that can be surfaced from AI-generated insights. In 2022, we’ll see an increasing number of providers fighting over a finite number of consumers, and those companies with the strongest retention algorithms will be best positioned to survive. ■

So, Deloitte caused a stir in streaming ranks this week with a report that suggests 2022 will be “The Year of The Churn,” as customers flit between services like hungry hummingbirds working a botanical garden. The result: a projected 150 million service cancellations and an industry-wide churn rate of 30 freaking percent. 

That’s more churn than a butter factory, likely to be matched only by its similar impact on the stomach juices of marketing executives. Undoubtedly, it’s a big number designed to grab a lot of attention, and well, mission accomplished. 

But it also suggests that churn — particularly the kind Deloitte cites, where a significant part of the audience signs up for a month or two to watch a particularly buzzy show before cancelling and moving on to another intriguing show elsewhere — will require new thinking for services that still rely too much on programming strategies left over from the broadcast and cable eras.

The only two companies relatively immune to the churn concerns are Netflix and Disney Plus, Deloitte said, for very different reasons. 

Netflix plays flood-the-zone at an epic scale, offering so many shows of every kind that most audiences treat it more like a pay-TV smorgasbord, but for far less. Netflix, of course, is freed of legacy requirements and headaches, and makes everything available everywhere at the same time for the binge consumption lots of audiences love. 

Disney, by contrast, has the kids, or more precisely, their parents wanting repeat-worthy, family-safe programming. They won’t cancel until the kids discover Fortnite, Roblox and League of Legends. 

Unlike Netflix, most streaming services have legacy outlets that they keep feeding. But they also stretch out streaming releases of their best shows over many weeks, hoping audiences remember to come back the following Tuesday (or was it Thursday?) instead of watching 15 other interesting things somewhere else. Just keep paying the subscription fee. 

That approach is a leftover of the programming grid. It may make some sense when you have a show unspooling on NBC or CBS that run the next day on Peacock or Paramount Plus, but also diminishes the stickiness of the steaming service.  

Traditionalists say weekly releases allow shows to find an audience, and have a bigger cultural impact. But how many streaming-first new shows the past two years can claim that kind of zeitgeist payoff? I can only think of a handful: Mare of Easttown, Squid Game, Bridgerton, The Mandalorian, Hacks, The Flight Attendant, maybe WandaVision. 

Companies are trying other tactics to keep audiences around, including old-fashioned discount deals. Hulu sold one-year subscriptions over Black Friday weekend for 99 cents a month. Paramount Plus used corporate sibling CBS to advertise a one-month-free deal. They’re also creating tiers with cheaper or free ad-supported offerings, which seems like the worst of old and new. 

More bundling is likely too, even between services not owned by the same company. Expect more tie-ups like the European deals between Comcast and ViacomCBS involving Sky, Showtime and Paramount Plus

But traditional media companies also will need new strategies for programming and operations if they want to survive a time of omnipresent churn. The continuing fast decline of the traditional movie business only makes it more important. 

A new study by three marketing and branding agencies says roughly half of pre-pandemic moviegoers still aren’t going back to theaters. One in 12 likely will never return. Uncertainty over the omicron variant will only extend those sentiments well into 2022. 

“Before, maybe you went every now and again — overlooking the drawbacks,” said David  Herrin of film research company The Quorum and a former UTA head of research. “Now you add safety concerns to that mix, and you suddenly become a former filmgoer.”

That likely represents a fundamental reset of one of Hollywood’s financial bulwarks, with implications for all the home-entertainment outlets further down Hollywood’s elaborate distribution ladder. But it’s also an opportunity for streaming services that can feed an appetite for satisfying one-night watches featuring big stars, stories or franchises. 

For instance, HBO Max recovered nicely in 2021, boosted immeasurably by WarnerMedia CEO Jason Kilar’s audacious and hugely controversial decision to release all the Warner Bros. slate on the streaming service the same day they hit theater screens. 

That steady stream of more than 20 top-notch movies (Dune, Zack Snyder’s recut of Justice League, In the Heights, Wonder Woman 1984, The Matrix: Resurrection, etc.) made HBO Max a far more attractive proposition, especially given its steep price, lack of initial original shows, and audience confusion over the brand. 

“It was great for the service, especially during a time where schedules were not fully populated because of COVID-related production delays,” said Casey Bloys, the HBO/HBO Max chief content officer, speaking recently to Vulture. “It was just a great steady source of movies that people loved. Going forward in ’22, hopefully we’re going to be in a world where people are going back to theaters and not worrying about the pandemic.” 

Next year will still feature a planned 12 Warner movies made for direct release on HBO Max. And output deals from Universal and Fox will end over the next two years, sending their movies to competing services (Amazon/Peacock, and Disney Plus/Hulu respectively).    

At least the pandemic gave WarnerMedia the market leverage to permanently shift its movie releases to a 45-day theatrical window before sending them straight to Max audiences.

“That is a massive shift because the pay-one window — which is what HBO typically got —  was eight months after release,” Bloys said. “So you’re going from eight months to 45 days. That’s huge. So I believe it’s going to work really well because people who want to go to theaters and experience a movie theatrically get to do that— and then 45 days later, it’s on Max. That, to me, seems like a really great situation.”

As WarnerMedia continues to ramp up its originals production, and adds Discovery Plus in some manner (bundle? new hub in a renamed HBO Max?), the company will have a better chance at attaining the goal all the services are seeking, even as they grapple with The Year of The Churn. 

“So my hope is that, a year from now, we’re cementing our place as one of the must-have services,” Bloys said. “Because we’re all in this race to end up as one of the top streaming services. It is a race. Not everybody’s going to survive, and my hope is that our programming makes us one of the must-haves.”

Peacock has the most churn among major U.S. subscription services, with 13% of its paying customers in Q1 ditching the platform in Q2, according to data compiled by Kantar Entertainment on Demand. 

The research company based the finding off surveys of "longitudinal panels" of 20,000 U.S. and 12,000 UK consumers. 

Peacock actually saw its Q2 paid subscriber churn metics improve slightly from Q1. But the NBCUniversal service also experienced an increase of churn for monthly active users of its free ad-supported tier in Q2, rising from 4% to 9%.

NBCU said during parent company Comcast's Q2 earnings report that Peacock has 54 million "sign ups," but only around 20 million active users. 

Notably, both Disney Plus and Apple TV Plus showed significant improvement. Disney Plus saw 6% of its users churn in Q2 vs. 11% in Q1; while Apple TV Plus saw its decline from 15% to 9% over the same span. 

Overall, Kantar said, churn among major subscription video-on-demand services was largely flat in Q2, with the biggest operators, Netflix and Amazon Prime Video, both experience 4% churn in both the first and second quarters of 2021.

Overall subscriber churn has remained flat, under 9%, for three straight quarters, according to the research company.

Notably, in its latest survey, Kantar found that the biggest rationale for churn was consumers seeking a specific film or show, then cancelling the service once they saw it.

In fact, with subscription services placing their their theatrical titles on their platforms day and date with the domestic box office, the percentage of respondents who listed the "specific show" reasons shot up from 17% to 23% in one quarter. 

Cancellation rates for U.S. subscription streaming video services increased from 15% - 20% in the second half of 2020, with consumers actively playing the field amid a surfeit of new service choices, according to a new report compiled by former Parks Associates analyst Brett Sappington, now flying the flag for Interpret as VP of research. 

Interpret’s Video Churn Today: Trends, Changes and Outlook 2021 report said that the amount of consumers signing up for subscription streaming increased by 14% over the last six months of the quarantined 2020 calendar year. 

But with these subscribers able to sign up, cancel, and sign up again, immediately and with no transaction costs, only 20% of streaming subscribers are content with their current alignment of providers. 

Notably, over the same six-month period, pay TV churn was only up two points to 7%.

Nearly 20% of OTT subscribers reported switching among services to watch platform exclusives, and 13% reported cancelling a service after watching a selected video series.

“Subscriber churn was a concern for many video service providers prior to the pandemic, particularly for pay TV,” Sappington said. The interruption in content, household income, and viewing behavior, along with heightened competition, has led to changes in how consumers value and evaluate video offerings. Users now realize that they can’t get all of their preferred content in one place. The industry is essentially training consumers to be churn tolerant. So, the question for the future is less about how to stop churn, and more about how to make churn work in your favor.”

If the media companies behind all the new streaming services thought it was a challenge just getting their pricey platforms launched and shows produced amid the pandemic, just wait. A new Deloitte study suggests the real headaches are just beginning. 

Users are subscribing to more services than ever (though slightly fewer than during the depths of lockdown), but also are ditching services regularly to watch a hot show somewhere else. That’s sent churn rates soaring 85% over the past 14 months, said Deloitte Vice Chairman Kevin Westcott, who oversees the company’s annual Digital Media Trends Survey. 

“Before the pandemic, churn rates were around 20%, and they actually went down early in the pandemic,” said Westcott, practice leader of Deloitte’s technology, media and telecommunications segment. “Now, we’re still seeing churn rates above 35% (actually 37%). What we see people doing is they’re signing up for a specific series or show they want to watch, then cancelling and signing up for other services.”

The good news amid the churn, Westcott said, is that “only 3% (of those cancelling) aren't replacing one service with another.”

People seem to be settling into a “budget” for subscription services of around four at a time. That’s slightly above the pre-pandemic rate, but actually down from mid-pandemic when the average household had five subscriptions, Westcott said.  

And it’s not going to be the same four or five services year-round. Audiences are taking full advantage of the increased ease with which they can cancel and move on. 

That’s bad news for streaming services trying to make back the billions they’re spending launching their shiny new services. In response, they’ve been ending free service promotions (except in bundles with carriers or handset sellers) while pushing discounted annual subscriptions. 

It’s a big shift from the heyday of pay TV, when cable providers reaped billions of dollars while making it notoriously difficult to cancel service, return the cable box, and all the rest (not to mention the lack of competitive alternatives).

The SVODs can’t afford to mimic that transactional friction in an era of higher expectations and wider options. 

Nearly half the survey respondents said they’d cancel a video service over rising prices, for instance. That’s easily the biggest reason for service cancellation among the survey’s nine possible reasons across film, music and game subscriptions. 

So, streaming services will need some other tactics. 

One, the study suggests, is consistently pumping out high-profile shows that can attract and retain subscribers. Nearly a third said they’d cancel a service if another had content they were more interested in. And one of the biggest reasons to stick around: the prospect of more good stuff soon. 

That has lots of implications. As just one example, what’s it mean for the WarnerMedia decision to end its experiment after this year with releasing Warner Bros. films day-and-date on HBO Max and in theaters? 

At $15 a month, subscribers may stick around to watch those first-run movies on top of the other offerings, but might be less forgiving once those movies don’t show up for weeks more. 

CEO Jason Kilar is already talking publicly about 2022’s release strategy, telling Recode’s Peter Kafka in a recent podcast that big films like The Batman will go to theaters exclusively for 45 days, while other films will stay there only 30 days, and still others will go straight to streaming. 

The industry has long needed a more nuanced approach to its movies, given the mounting costs for both production and marketing (“prints & advertising”) of even mid-tier movies. 

Will other studios follow suit? And what’s that mean for the battered theatrical exhibition industry, which won’t have as long to make money from blockbusters, and won’t get many of the lower-end movies that filled smaller screens in a megaplex? 

Regardless of those questions, the survey suggests there’s definitely appetite among subscribers for more nuance. 

The survey found overwhelming support for so-called premium VOD releases, at a surprisingly high level. 

“For those customers who've tried PVOD, the overwhelming majority, 91%, said they'd do it again,” Westcott said. “I've never seen a reaction that strongly on the positive side for an entertainment experience.” 

But there’s plenty else that needs cleaning up. 

Two-thirds of respondents said they’re “frustrated when content they wanted to watch is no longer available on their streaming video services,” the survey says. 

I can’t help thinking of the near-comical shuffle last year that saw Warner’s eight Harry Potter movies join the HBO Max debut, then slide back to Peacock by late summer. More recently, they’ve started leaving Peacock for still other destinations. 

That’s a temporary artifact of lingering (and lucrative) content-licensing agreements, but consumers don’t like it as much as company shareholders and accountants. 

Other frustrations include figuring out what service has a given show, the quality of recommended shows to watch, and the need to even have multiple subscriptions to see a broad range of programming. 

Streaming services need to be aggressive about showing new subscribers what else they can watch beyond that show that enticed them to subscribe. Westcott said that window of assisted discovery is all too brief.  

Services must do a better job “finding content (the consumer) wants, and figuring out how to expose the consumer to all the entertainment options I have on my platform,” Westcott said. “Am I doing a good job introducing them to other kinds of content that may be of interest?”

In the future, Westcott suggested recommendation systems could improve by relying on other indicators than just what other shows someone has watched on a service. 

Particularly, he said, knowing what games, books, audiobooks and music a customer also likes could provide far more relevant content recommendations. 

Tapping that information will be far easier for streaming companies including as Amazon, Apple and the sleeping giant, Alphabet, which already sell, stream or rent vast amounts of those other kinds of entertainment content (not to mention all the other things Amazon in particular sells).  

Westcott said the good news for all the streaming providers is that a majority of customers, especially younger ones, are open to mid-tier offerings with partly subsidized subscription costs. More than three in five respondents said they’d be interested in a service with a light ad load of no more than six minutes for hour. 

Paramount Plus, Hulu and Peacock are already there, and HBO Max plans to offer that sort of mid-price hybrid tier later this year.

More worrisomely for the long haul, for the first time the survey found a generation, the teens and 20-somethings of Gen Z, that prefers games, music, internet browsing and social media over TV and movies. 

Every other generation, especially Baby Boomers, said watching TV and movies at home is their No. 1 entertainment option. 

Among other responses, that suggests Hollywood’s new streamers will need to find more game- and music-related programming, and crossovers (think Taylor Swift making-of documentaries and Netflix’s hugely popular adaptation of The Witcher games and books).

The Metaverse being built by companies such as Epic Games, Facebook’s Oculus and Roblox (and Alphabet, Apple and Microsoft) will almost certainly be where Gen Z and its successors spend more of their time. 

That Metaverse in the making surely will have places to jointly and virtually watch long-form and episodic video programming. But it’s hard to see Hollywood studios being the center of that looming virtual universe. 

In the meantime, the streaming companies and their parent companies have plenty of work to do, making what they already have built more attractive, useful and sticky to all the customers they already have. 

The services most likely to thrive in the months and years ahead “aggregate a lot of entertainment, not just their own, and offer different models to different kinds of subscribers,” Westcott said. “I think that's the direction we're going to go.”

The customer churn rate for OTT services reached 35% in 2019, a 25% acceleration over 2018, according to research released today by Parks Associates. 

Churn rate is a measurement of how much of the customer base quits and starts a service over a designated period of time. Parks found that churn was particularly high among virtual MVPD services, measuring 81% in 2019. 

“OTT services are offering free trials and promotional offers to drive initial service uptake, but these tactics are also leading to sky-high churn rates,” said > said Steve Nason, research director for Parks. 

“To secure long-term subscriber fidelity, providers need to offer more, including original content and a personalized user experience,” he added. 

Notably, Parks found that economic imperative was the No. 1 driver of OTT customer churn, with the need to cut household expenses listed as the reason more than 30% of OTT customers quit  a service. “Couldn’t find programs to watch” was the second biggest reason.

While video consumers are increasingly dissonant to truck rolls and the two-year contract, there’s something to be said about the relative stickiness of traditional pay TV.

According to Parks Associates, churn rates for OTT services like Netflix and Disney+ are actually around nine times higher than they are for traditional linear TV platforms. And churn for subscription video on demand (SVOD) services is about 1 1/2 times greater than it is for virtual pay TV services like Sling TV, Hulu Live TV and YouTube TV.

As more consumers enter the SVOD market, and more services start competing with it, OTT service churn is increasing—from a rate of just under 30% at the beginning of 2018 to about 35% in the first quarter of 2019.

Speaking at Parks Associates’ “Future of Video” conference last week in the Los Angeles area, Marty Roberts, co-founder CEO of consultancy Wicket Labs, said OTT services that offer consumers the chance to sign up and quit instantaneously, and without penalty, must market effectively.

To combat churn, Roberts advises his OTT service clients to look for at-risk subscribers—those who have been inactive for a three-month period, say—and find ways to get them engaged.

Interestingly, however, he tells his clients to tread quietly around users who might have forgot they’re paying a monthly bill for video service.

“There’s causal relationship between inactive customers and churn after six months,” Roberts said. “The worst thing you can do is talk to those customers.”

While video consumers are increasingly dissonant go truck rolls and the two-year contract, there’s something to be said about the relative stickiness of traditional pay TV.

According to Parks Associates, churn rates for OTT services like Netflix and Disney+ are actually around nine times higher than they are for traditional linear TV platforms. And churn for subscription video on demand (SVOD) services is about 1 1/2 times greater than it is for virtual pay TV services like Sling TV, Hulu Live TV and YouTube TV. 

As more consumers enter the SVOD market, and more services start competing with it, OTT service churn is increasing—from a rate of just under 30% at the beginning of 2018 to about 35% in the first quarter of 2019. 

Speaking at Parks Associates’ “Future of Video” conference last week in the Los Angeles area, Marty Roberts, co-founder CEO of consultancy Wicket Labs, said OTT services that offer consumers the chance to sign up and quit instantaneously, and without penalty, must market effectively. 

To combat churn, Roberts advises his OTT service clients to look for at-risk subscribers—those who have been inactive for a three-month period, say—and find ways to get them engaged. 

Interestingly, however, he tells his clients to tread quietly around users who might have forgot they’re paying a monthly bill for video service. 

“There’s causal relationship between inactive customers and churn after six months,” Roberts said. “The worst thing you can do is talk to those customers.”

In a multi-country consumer study, TiVo found that one in four respondents who have had pay TV services for less than 12 months are “extremely likely” to cut or shave the cord within the next six months.

That was a big takeaway from an online survey of 8,500 pay TV and OTT subs across seven countries (2,500 in the U.S., and 1,000 each in the U.K., Germany, France, Brazil, Mexico and Colombia).

TiVo found that 55% of pay TV subs in the U.S. and 42% in Western Europe have had service with their current provider for four years or more, compared with 32% in Latin America. In the U.S., 51% of that group are Boomers, and just 11% are Millennials.

“As new, shiny OTT services and streaming devices continue to proliferate in the market and compete for consumer attention, there is considerable risk that younger generations may come to view pay TV as an antiquated service that doesn’t play a role in their daily lives,” Paul Stathacopoulos, vice president of Strategy and Research at TiVo, said in a statement. “Service providers must focus on delivering entertainment experiences that are compelling to a highly segmented viewer composition. “

The study also found that voice navigation is a hit with consumers, as 60% of those with a voice remote use it frequently or every day, and that 64% of those with a voice-controlled home assistant use it frequently or every day.

What should pay TV or wireless providers do when subscribers call to cancel? The obvious answer is to respond with an offer that will entice them to stay.

Retention offers are the most basic line of defense against churn, and communication service providers (CSPs) are becoming increasingly creative with such offers. Today, with advanced analytics technologies at their fingertips, service providers can even pre-empt cancellations by leveraging data to inform their retention strategies.

Retention offers cannot be one size fits all, and if providers want to truly stem churn rates and avoid giving money away to customers who don’t change their behavior, they must customize their responses. But with so many different levers to pull, how does one know which offers will be most effective with which customers? For many organizations, it is difficult to ensure the right callers get reached with the right offers and messaging, at the right times.

That’s why many leading service providers are taking a test vs. control approach to refine their outreach and offers to customers who are at risk of churning. By first testing various offers in subsets of the subscriber pool and comparing the response of those customers to responses from other, similar customers that did not receive a given offer, they can measure the offer’s direct, incremental impact. This method enables executives to establish a cause-and-effect relationship between new programs and any resulting changes, and to use these insights to better target high-risk subscribers and combat churn.

Even service providers who are already trialing various approaches are upping their game with sophisticated analytics software that enables them to truly test and better understand the impact of customer retention strategies.

For providers, rapidly testing programs to combat customer churn will be critical as they seek to refine personalized retention offers and responses based on caller profiles. Based on APT’s work with leading providers, key characteristics to consider when crafting custom offers include:

● Average revenue per user (ARPU);
● Home ownership;
● Tenure;
● Usage data, such as viewing hours, text message send and receive rates, data usage and more;
● Past customer interactions with the brand, including times they have issued complaints, requested service upgrades and more.

‘Right-Sizing’ Promotions
Using findings from test vs. control analysis, CSPs can take into account the characteristics of different customer segments to answer many key questions, such as: How do I offer this customer the right promotion without overinvesting in too large of a discount, or offering one that is too small to be enticing?

When trying to prevent customer churn, it can be easy to extend offers that are too generous — that is, an offer greater than what the customer would have been willing to accept. By testing different offers to learn which promotional threshold is best received by each customer segment, organizations can ensure they “right size” their promotions.

Another strategy that many providers turn to when customers call to cancel is offering free products or services, rather than a discount or promotion. These products or services can range from device giveaways like new phones to distinct offerings like home security services and free premium TV channels, and providers will need to determine which product and service giveaways will resonate with which customers.

Pre-empting Customer Churn
Some churn is inevitable due to outside factors, such as customers moving apartments, while churn due to factors such as expiring promotions is often preventable. Organizations have an opportunity to test many facets of an outbound offer, including the platform of communication, be it a call, text or email; its timing, in relation to the expiration of the customer’s contract; and the pairing of the promotion with add-on offers.

Testing also has the power to help pre-empt cancellation calls altogether by identifying which customers are most likely to respond positively to proactive outreach. For example, one effective way providers can reach customers likely to churn is through the common industry approach of trigger campaigns — outreach catalyzed by a customer hitting a certain threshold, such as calling three times to complain about service.

To inform elements of its retention strategy, a provider could test different versions of trigger campaigns — via different platforms, like mobile and direct mail, or with different offers — to identify which will lead to the highest retention rates among different customer segments.

As residential and wireless providers continue grappling with churn, many are experimenting with innovative new strategies. By taking a sophisticated test-vs.-control approach, CSPs can scientifically craft targeted retention strategies to maximize both customer satisfaction and long-term growth.

Jarred Brown is senior vice president at Arlington, Va.-based analytics software company Applied Predictive Technologies (APT).

Amidst the mind-boggling number of churn reduction strategies communications service providers (CSPs) have at their disposal, how are some leaders generating tens of millions of dollars successfully navigating the retention challenge? They are applying a test vs. control approach to answer questions such as: How should renewal pricing vary based on promotional price, tenure, PSUs, etc.? Which customers should we proactively call, and when? Can we profitably reduce the extent of save offers for some customers? Should we offer free streaming, a price discount or encourage a tier downgrade?

While provider executives know the importance of answering these questions — and most are invested in using data to curb churn — many still fall short in answering them accurately. Isolating how business actions affect churn over its natural rate is challenging. A few issues at play are:

• Home ownership: Apartment dwellers are naturally more likely to churn than homeowners as they have expiring leases that cause relocation.

• Tenure: Subscribers with less tenure are more likely to have promotions up for expiration.

• Seasonality: Customers who moved into a new apartment in the summer versus winter may behave differently.

Without accurately identifying each customer’s baseline churn, CSPs often incorrectly predict the impact of their retention efforts (accidently measuring differences in baseline churn for various customer segments instead of incremental churn caused by their actions). As a result, concessions are made to subscribers who would have renewed anyway; meanwhile, investments aren’t made in subscribers who could have been saved with the proper offer or outreach.

A growing number of CSPs are applying test versus control analytics to understand which retention initiatives are incrementally effective. The “test group” consists of subscribers who experience a given action, such as a price increase at the end of a promotional period. The control group is then constructed from subscribers who are similar to test customers across all other dimensions (e.g., age, tenure, homeownership), but did not experience that action (e.g., still on promotion). When highly similar subscribers are compared, any resulting performance differences can be directly attributed to the business action taken.

Knowing the overall impact of a retention program is important. Even more critical is understanding which resulting actions should be deployed to profitably retain each customer.

In an industry faced with an onslaught of new competitive threats, accurately understanding the impact of your business actions is critical. Before you incorrectly target more subscribers, consider using advanced test vs. control analytics.

Marek Polonski is a senior vice president at APT, an Arlington, Va., based provider of cloud-based cause-and-effect analytics software.

RELATED:Survey Says: Netflix Has Best Content

When it comes to acquiring subscribers and keeping them, Netflix has found the right recipe. 

Netflix is by far the largest subscription OTT video service provider, with 52% of all U.S. broadband homes taking it by the end of last year, but it also enjoys the lowest churn rate as a percentage of its total sub base, Parks Research found in a new study focused on the over-the-top video sector.

In the past 12 months, just 5% of U.S. broadband homes cancelled their Netflix account (up from 4% in the firm’s Q2 2015 study), including those that left after the end of a trial period, Parks Research said, noting that the figure represents 9% of the provider’s current sub base.

The study also found that 5% of U.S. broadband homes also unsubscribed from Amazon Prime in 2015, representing 19% of those who claimed to have churned off the offering.

Meanwhile, 7% of those homes said they canceled a Hulu subscription in 2015, representing about half of Hulu’s current subscriber base, Parks Research said.

Among other findings, the study found that 24% of U.S. broadband homes get a subscription to  Amazon Prime for the video streaming benefits.

On a broader basis, 20% of U.S. broadband households had cancelled at least one OTT video service in the past 12 months. About 18% had done so in 2Q 2015, noted Parks

The research firm estimates that there are at least 113 OTT video services currently available in the U.S, a group that includes CBS All Access, Sling TV, HBO Now and Crunchyroll.

About 33 new OTT service entered the U.S. market in 2015, Parks said, adding that 64% of all U.S. broadband homes take an OTT video service now, up from 59% in 2015.

Notably, just 5% of U.S. broadband homes subscribe to more than one or more of those 110 options beyond the big three of Netflix, Amazon and Hulu.

Parks Associates said OTT services can be major targets for churn because they allow for experimentation and try-before-you-buy and no-contract models that don’t lock consumers into long-term commitments. And some consumers like to swoop in to watch specific content and then terminate the service when they’re done.

“Several factors contribute to OTT video service churn by consumers. In some instances, consumers are experimenting with new services, trying a service and cancelling before the trial period ends or within a few months,” Brett Sappington, director of research at Parks Associates, said in a statement. “Popular shows or events, such as HBO’s Game of Thrones or WWE Network’s Wrestlemania, can be beneficial in terms of attracting users. However, there is a risk that consumers will unsubscribe once they’ve watched these popular items.”

The churn challenge for OTT services, he said, is that they continually validate the value of what they provide because it’s easy for consumers to discontinue service. 

Authenticated TV everywhere services are driving higher customer satisfaction for pay TV providers and serving as an effective-churn buster, but awareness issues — specifically consumer misconceptions about extra costs — have stymied the multiscreen offerings.

Those are the key findings from Hub Entertainment Research’s annual TVE study, based on a survey of 1,202 U.S. TV viewers with broadband service.

On a positive note, 73% of respondents said TVE drives higher satisfaction, and 84% of frequent TVE users said they plan to stick with their current provider for the next year, vs. 66% of consumers who don’t use the authenticated platform.

Despite that, 53% of users said that not only have they never used TV everywhere, but they weren’t even aware they could access it. And though TVE platforms are part of a monthly subscription, more than half of respondents (54%) assumed there were extra costs.