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. ■

Today’s entertainment consumer has more choice — and more power — than ever before. 

Customers are jumping from one service to another, from AVOD (ad-supported video-on-demand) to SVOD (subscription VOD) to TVOD (transactional VOD), depending on which offer best suits their needs at that particular time. Churn is an issue and minimizing and mitigating it is more realistic than eliminating it. An active approach to customer-relationship management can curtail it and keep the customer under a larger company umbrella. By quickly developing a number of flexible options — in terms of both product and monetization — content providers can keep customers in the fold and reduce foreboding churn rates.

How to Meet the Customer Where They Are

The days of the aggressive cable-TV representative are over. To improve customer retention, content providers must deploy a nuanced, personalized approach that aims to meet the customer where they are. Here are four strategies that can lead to decreased cancellation rates and improved customer loyalty:

• Constant offers and promotions: Sales events and unique offers, previously a seasonal occasion for content providers, should now take place on a routine basis. Content providers must take advantage of the data and digital tools at their disposal, designing campaigns and experimenting with A/B testing to determine which promotions are most effective in boosting retention. 

• Flexible monetization strategies: Not every customer will want to maintain a video subscription indefinitely. Rather than lose that customer to a competitor, one content provider should offer multiple monetization strategies, allowing a subscriber to switch seamlessly to AVOD or TVOD without losing their business entirely. 

• Expanded payment options: A successful content provider will make it as easy as possible for a customer to pay for their service. In today’s sales environment, that means accommodating as many payment options as possible. Beyond standard credit and debit cards, content providers should consider adding online services such as PayPal, or even emerging payment methods like cryptocurrencies. 

• Innovative events and opportunities: The streaming video service of tomorrow doesn’t have to look like the service of today. New event formats can engage customers with enticing content and keep them coming back in search of new experiences. Over the past year, some content providers have experimented with a festival format, offering one-show, one-day or multi-day tickets to a package of premium content. Devising creative bundles and one-time opportunities will cause the customer to view a specific service as more exclusive than others, a vital consideration when it comes time to trim down the number of subscriptions. 

The consumer video experience continues to evolve rapidly, and without agility and an appetite for change, content providers will risk falling further and further behind. Active customer management will maximize lifetime value, boost brand loyalty, and keep a popular service top of mind amid a sea of competitors.

Recently launched streaming service Struum said it has selected Evergent to provide customer management and monetization tools.

Struum was created by former Disney and Discovery executives and backed by former Disney CEO Michael Eisner’s Tornante company. It aims to simplify the streaming business by enabling consumers to sample shows from multiple services under one monthly subscription.

Evergent’s agile tools will enable Struum to offer subscribers a range of options supporting a variety of business models. Evergent supports multiple payment methods and takes advantage of new opportunities while minimizing churn and risk.

Also Read: Evergent Platform To Support AWS For Media & Entertainment Initiative

“Struum’s mission is to provide customers with a curated streaming experience that perfectly matches their tastes and interests. Evergent’s monetization and customer management tools are essential to facilitate that service, enabling content providers to deliver against these tailored offerings in an increasingly complex streaming environment. We look forward to shaping the next generation of the streaming experience together with Evergent,” said Eugene Liew, CTO and co-founder of Struum.

Struum, Evergent is making it seamless for participating content providers to not only reach new consumers, but also monetize in new ways.

“Now more than ever, the consumer is in control as they choose between dozens of competing streaming services. Rather than force customers to make difficult selections with limited budgets for entertainment, Struum is breaking new ground by offering a credit-based, a la carte streaming experience,” said Vijay Sajja, founder and CEO of Evergent

"The values and mission of Struum’s new platform dovetails perfectly with Evergent’s goal to support flexible and agile monetization of digital video content. We are confident this partnership will reshape the streaming ecosystem and empower content providers to maximize the lifetime value of their customer relationships,” Sajja said.

Think back to how we chose and paid for video entertainment as recently as a decade ago. Depending on geographic area, consumers had to choose between two or three options for linear TV and on-demand video, packaged into bundles of channels that were often expensive or didn’t include the customer’s preferred content. Power rested in the hands of the PayTV providers, who developed a reputation for overpriced offers and aloof customer service.

The power dynamics of today’s video ecosystem have shifted substantially. Over the past ten years, the rise of on-demand video services—subscription-based (SVOD), ad-supported (AVOD) and transactional (TVOD)—has created a buyer’s market, with an ever-growing number of streaming services competing for audiences and entertainment budgets. While it may seem unthinkable to the former cable behemoths, agility is now the name of the game.

Spoiled for choice

While consumers are choosing from more services than ever before for video entertainment, content providers also have options to choose from with regard to monetization. SVOD structures allow streaming services to leverage the quality of their content library, trusting that consumers will want to commit a monthly fee to maintain access to popular programming that can’t be found anywhere else. But as subscription fatigue sets in and consumers reach the limit of their entertainment budgets, AVOD presents an appealing alternative for platforms that cannot yet stand on their own in terms of content; over time, these platforms can use advertising dollars to fund further content acquisitions, deepen engagement and dependence and lead to potential long-term conversion to SVOD. They can also attract viewers through their AVOD services and then convert them to SVOD once they are hooked.

While these two payment structures offer some flexibility to emerging content platforms, the high-stakes, oversaturated marketplace doesn’t leave room for competitors to remain idle. 

Finding solutions with agility

Beyond basic AVOD and SVOD structures, streaming services aim to stand out through any number of promotions and products, from free trials and discounts to new programming and content packages. But while these strategies can make a difference in reaching and holding onto new subscribers, a misstep can prove costly. Content providers must be able to implement changes, measure performance and make adjustments quickly to ensure optimal returns.

For even the very largest streaming platforms, agile monetization is essential to stay fluid and nimble in a hypercompetitive marketplace. In the current market, consumers are choosing between dozens of entertainment options based on content and cost. Deloitte’s 2020 “Digital media trends summary” demonstrated the extent to which this marketplace has exploded: the average consumer maintains 12 entertainment subscriptions, with millennials averaging a whopping 17! However, the consequences of this saturated marketplace are fatigue and churn. According to the same Deloitte research, 43% of millennials intend to cut down on their entertainment subscriptions; 36% of those who cancelled a subscription cited the expensive cost as the reason for pulling the plug. 

Agile monetization is the ability of a company to rapidly introduce, roll out and support new business models, promotions and packaging. In this case, agile means flexibility and taking decision-making that previously would have been considered and implemented over a period of months and instead condensing the entire process into a matter of days. In practice, agile monetization allows content providers to apply techniques typically associated with digital advertising: AB testing, small sample groups, and decision-making backed by rich data. Whether it’s changing pricing models, exploring new geographies, or tweaking billing cycles, agile monetization enables content providers to make small, rapid adjustments until they hit on the winning formula.

Focusing on a more agile monetization strategy allows platforms to deliver more efficient and more personalized services to their customers. Whether it’s quickly deploying new promotions to boost customer acquisition or adding functionality for new payment methods, the ability to seamlessly make changes has a direct impact on boosting subscriber numbers, reducing churn, and improving the bottom line. As the market for streaming services evolves on a seemingly daily basis, it’s up to the platforms themselves to “think quick”, stay ahead of the curve and double down on their audience.

Evergent’s Integrated Revenue and User Management platform helps media, and entertainment companies reduce time to market for products and services, simplify complex monetization models, and run back office processes more efficiently.

Evergent said its revenue and user management platform will support the Amazon Web Services for Media & Entertainment initiative.

The collaboration will enable Evergent clients to leverage AWS capabilities and services to improve customer management and monetization.

“Our mission at Evergent is to enable our customers to more effectively manage their relationships and improve their monetization processes through a pre-integrated platform tailored to each customer’s business needs,” said Vijay Sajja, founder and CEO of Evergent. 

“Our collaboration with AWS aligns perfectly with this mission by connecting our customers not only with Evergent’s agile monetization solutions, but with the full portfolio of products and solutions available through the AWS for Media & Entertainment initiative,” Sajja said.

For media companies focused on launching and rapidly growing direct-to-consumer (D2C) services, time to market is critical. Working with AWS helps us enable flexible and agile monetization in weeks, not months.”

AWS for Media & Entertainment is an initiative featuring new and existing services and solutions from AWS and AWS Partners, built for content creators, rights holders, producers, broadcasters, and distributors.

The initiative focuses on five areas: Content Production; Direct-to-consumer and Over-the-top (OTT) Streaming; Broadcast; Media Supply Chain & Archive; and Data Science & Analytics. 

Evergent said it launched a new customer care and billing platform, CCB 3.0, that manages direct-to-consumer content and service provider businesses.

CCB 3.0 enables agile monetization, handling a variety of product configurations, promotions and packages. It supports companies looking to shift from subscription video on demand to ad-supported video on demand.

The platform also allows customers to grow and accelerate revenue, the company said.

“Evergent’s mission is to make it easier for our customers to maintain and grow relationships, streamline monetization processes, and reduce time to market for products and services,” said Vijay Sajja, founder and CEO of Evergent.

“CCB 3.0 represents a significant step forward in customer relationship management by taking the guesswork out of monetization and empowering each customer to create a solution tailored to their business needs,” Sajja said. “When we look at how the video marketplace continues to grow and evolve, agility and flexibility will be key to meeting and exceeding business goals.”

The new platform makes it easier for users to access information, provides personalized account summaries and allow user to create a custom search form for each client.

“Agility is essential to the success of our business, especially when it comes to our approach to monetization. Any solution that allows us to speed time to market and deploy differentiated products faster delivers tangible value for us,” said Alexander Elorriaga, chairman of Simple TV. “Evergent’s revenue and customer-lifecycle platform is essential to our growth strategy, as it allows us to make quick adjustments and constantly refine our monetization strategies.”

The Meteoric rise enjoyed by Netflix, Hulu and other major direct-to-consumer (DTC) streaming platforms is threatening to eclipse traditional television networks entirely. According to a recent forecast from research firm The Diffusion Group, every major TV network will turn away from expensive linear TV bundles and toward a direct-to-consumer streaming model in the next five years.

Traditional media and broadcasters have spent years creating their brands and products, and to support their services, they have set up an extensive web of back-office systems and processes. In spite of their efforts, though, the American Customer Satisfaction Index reports that subscription TV satisfaction has fallen 3.1% from 2017, hitting an 11-year-low score of 62. Traditional broadcast networks need to make bigger changes if they want to reclaim consumers — and it will start with a shift to a direct-to-consumer model.

Spiraling Satisfaction

TV broadcasters haven’t been able to deliver a superlative customer experience for a number of reasons, but one that stands out is the inability to reach international customers. Broadcasters traditionally operate domestically because they’ve purchased licensing rights in their home countries and their systems don’t readily allow for international consumption. Still, expanding reach across borders can be a high-margin opportunity because it allows them to leverage assets they’ve already created — and demand is increasing.

The Pew Research Center reports that more than 200 million expatriates are currently living and working abroad. That’s millions of potential customers who want to stay connected with their homelands through television. They might not be able to take their cable boxes abroad, but they can watch TV online anywhere with just about any device. Unfortunately, while broadcasters are great at TV production, they typically don’t have the technical development resources to distribute and sell their products in multiple geographical locations.

Accepting payments and collecting revenue internationally can also be a technical challenge. Both require multiple payment gateways, extensive knowledge of tax laws and the ability to process different methods of payment. While credit cards might be the most common payment method in the United States, it’s a different story in many other countries.

International customers might write checks, use vouchers, rely on online payments with PayPal or Apple Pay, or even pay in cash. Despite what you might have heard about cash falling out of use, researchers from the Federal Reserve Bank of San Francisco have found that the share of cash in circulation in 41 out of 42 countries actually went up between 2006 and 2016. For broadcasters to win a share of the vast potential revenue around the globe, they must prepare to make big changes.

Overcoming the Obstacles

Whether a traditional media company decides to build new systems on its own or to seek third-party help, catching up with the direct-to-consumer streaming giants will be a challenge.

To start, for each new region, the company should weigh the new cost of operations against the potential revenue brought in by the expanded customer base. It’s important to account for costs such as billing and revenue management systems, demand for new support staff in specific locations, and potential changes in daily operations. Setup costs might apply only initially, but it’s important to pay close attention to cost per product once a new system is up and running.

Traditional media isn’t dead, but it is facing a crisis that can be overcome only with action. Creating direct-to-consumer services is a promising step for broadcasters because it allows them to tap into a global market and compete with existing rivals. It won’t be an easy transition, but there isn’t much choice: To survive into the next decade, these providers must analyze costs and start building profitable systems now. There is little doubt that their future depends on it.

Vijay Sajja is the founder and CEO of Evergent, a Sunnyvale, Calif.-based provider of lifecycle management services for cloud video providers.