For SVOD, churn much less of a threat than for pay TV

By Jim O'Neill on Feb 06 2017 at 8:15 AM
For SVOD, churn much less of a threat than for pay TV

OTT video viewers may be just about as fickle as traditional TV viewers, with roughly 19% churning some of their SVOD services during the past 12 months, which is down from 20% a year ago, according to a new report.

While that 1% reduction likely can be attributed to the margin of error, it’s really important to understand that the 19% churn itself just isn’t as dire – at least not for SVOD providers – as it sounds. For SVOD providers, that churn is just an indicator that consumers are trying new services, looking for the right mix, trying to decide on not only monthly spend, but on which services deliver content they really can’t live without. There are a plethora of services available and it’s just not unrealistic to imagine consumers picking up and dropping services as they as they “taste test” the massive menu of services available.

Netflix, Amazon Prime Instant Video and Hulu have reduced their churn rates over the past year, according to the report from Parks Associates. And that creates an interesting parallel: Subscribers are settling into the SVOD world’s version of the Big Four broadcast networks, CBS, NBC, ABC and FOX. It’s a natural evolution, especially if you look at the Internet as the next iteration of TV.

The SVOD “channels” that are part of that 19% churn? Liken them to small cable networks, further down the tier, that consumers are going to pick over as the season's change, munching on them like popcorn until they switch over to Milk Duds, then Skittles, before they dive back into the popcorn tub.

Like some smaller cable networks, there will be smaller SVOD services that hit it big… and some that struggle.

I know of one company, for example, that sees subscribers churn in a three-month cycle. For four or five weeks, subscribers spend huge amounts of time consuming everything on the platform. Then they churn and wait until there’s another block of content for them splurge on. Again, and again.

Obviously, one way to reduce that churn is to create a steadier stream of content – parceled out according to a shared content calendar -- to keep subscribers engaged. It also demands better marketing – something most smaller SVOD providers aren’t prepared for -- like sending emails that say things like “we think you’ll enjoy this title” which is very dependent upon data to help you know that a consumer will like a particular piece of content. And, it takes patience while a content library gets deeper.

Frankly, it also might behoove smaller services to cross market to each other, but that’s for another time.

My Strategic Media Consulting colleagues and I recently put together a free white paper that discussed why niche SVOD service fail that you can download here.

While there will be some who point to SVOD services’ 19% churn rate in 2016 as evidence the ecosystem has reached stasis or that pay TV is poised to rebound, the reality is the exact opposite.

SVOD is a huge piece of the future of television. Consumers have shown a willingness to pay for the content they want to watch, along with a desire to build their own ad-hoc bundles – very personalized and very fluid.

Services that keep that in mind – that users want to be able to add, and subtract content easily – will, in the end, be the winners.

As Parks notes, consumer monthly spend on Internet video has increased more than 114% since 2012, and that growth likely will accelerate as services better define how they interact with consumers, and how they add value. (Spend on transactional video one-demand, meanwhile, was down more than 41% in the same period.)

Churn is not the enemy of SVOD services, just one of the realities. As Sling TV CEO Roger Lynch has said, “we don't think of it as churn," just the cost of doing business, a much lower cost than for pay-TV operators.

I’ve said it before and I’ll say it again, trying to measure the success of an OTT service using metrics designed for traditional television creates metrics that are misleading at best.

Stay tuned.

Follow me on Twitter @JimONeillMedia and on LinkedIn

Posted in: 

READ THESE NEXT

LatAM, SVOD, Mobile
Latin America seeing golden age of TV in form of SVOD
Aug 22 2017 7:30 AM

Globally, subscription video on-demand (SVOD) is on a rocket trajectory and Latin America is deeply in the mix. While Netflix, Amazon and Hulu have been the leaders of subscription video on-demand growth, an increasing array of subscription services – there are more than 100 in the U.S. and Canada alone – are seeing fast subscriber growth and adoption across demographic groups.

SVOD, Pay TV, Millennials, Cord Cutting
Q2 likely to be miserable as operators brace for big customer losses; OTT anyone?
Jul 24 2017 3:00 PM

Could second quarter pay-TV subscriber losses in the United States top 1 million, the highest figure ever? In a word, yes.

The second quarter routinely is a weak one for operators and in the current environment – remember the first quarter saw more than 800,000 subscribers cut the cord, according to Kagan – reaching one million may be an easy task.

SVOD, Operators, Netflix
Should European operators worry about cord cutting as Amazon, Netflix push deeper into their market? Absolutely
May 25 2017 8:15 AM

When the Big Two come to play in your backyard, it’s time to up your game.

Netflix and Amazon have launched a push into Europe that will likely result in some bad nights of sleep for operators, pay-TV channels and broadcasters looking themselves to do more business over the top.

Live Streaming, SVOD, AVOD
Live-linear OTT viewing to exceed traditional TV by 2020
Apr 20 2017 12:30 PM

Just in time for the annual NAB Show, a new report has surfaced with a forecast that’s sure to prompt an antacid surge among broadcast execs in Las Vegas next week: OTT viewership worldwide will outnumber traditional TV viewership before the end of the decade.