Streaming platforms have witnessed insane growth over the past couple of years, mainly fuelled by the pandemic, with many of us glued to our TVs more than ever before. In 2020, people watched more than 13.1 million days’ worth of content, exemplifying the scale of content consumption around the world during this period. With subscriber numbers skyrocketing and OTT platforms enjoying a period of immense growth over the last couple of years, 2022 has been somewhat of a different story.
Now in this post-pandemic environment, many of us are enjoying the freedom we so longed for, resulting in less time streaming our favourite TV shows and movies. As a result of this, combined with the recent cost of living crisis squeezing the UK in particular, people are unsubscribing from streaming platforms in their millions, with almost 1.66 million services dropped in Q2 of this year alone.
Another important factor to consider in this period of record subscriber churn is that competition has grown increasingly fierce as each OTT service provider battles it out for more subscribers. With the ability to easily cancel subscriptions and join new platforms that better cater to their needs, subscriber churn across the board has increased as people have more choice than ever before to do so, finding cheaper and higher-quality alternatives. Due to their “free to watch” nature, people are also switching to AVOD and FAST streaming services in droves, cancelling their paid subscriptions in the process, benefiting both users and services alike as they offer users content they don’t have to pay for, whilst giving services a way to maintain growth amid the current market turbulence.
With subscriber numbers falling across the board, managing churn and keeping people engaged has become a challenge. With such rapid movements continuing to shape the industry, how do you stay ahead of the game and effectively manage platform churn? In this blog, we’ll delve into what OTT churn rate is, how you can calculate your churn rate, and most importantly, detail 9 ways you can help to reduce churn on your OTT platform.
What is OTT churn rate?
Churn rate is an incredibly important metric for any OTT service provider as it indicates a loss of subscribers from a streaming video service within a given time period. Customer churn falls into two main categories:
Voluntary churn: Users who actively decide to cancel their subscription
Voluntary churn: Users who actively decide to cancel their subscriptionInvoluntary churn: Users who unintentionally lose access to your service (e.g. payment failures)
Calculating your OTT churn rate
Having a truly detailed insight into your audience is key, especially when it comes to understanding the performance of each audience segment in relation to others.
OTT churn rate measures the percentage of subscribers who have left your service within a given time period compared to the total number of subscribers in your service.
Before calculating your OTT churn rate, you must quantify the following variables for your chosen period of time:
- Active cancellations (A): The number of cancellations made by customers
- Passive cancellations (P): The number of cancellations resulting from non-renewals and credit card declines
- Win-back reactivations (W): The number of subscriptions from service reactivations by previous customers
- Total subscribers (T): The total number of paid subscribers in your OTT streaming service
Once you have established all of the above variables for any given period, you can now calculate the net churn rate using the OTT churn rate formula: 100 x [(A+P) – W] / T
Image and formula courtesy of Kirby Grines.
OTT experts have established that service providers should aim for between a 5 and 10% net monthly churn rate. It’s crucial to benchmark your churn rate against competitors and industry averages on a regular basis to ensure you have a deep knowledge and understanding of your audience and their motives.
9 ways to reduce churn on your OTT platform
1. Establish why subscribers are churning
Understanding why your customers are churning and cancelling subscriptions is vital in helping to reduce your churn rate as you will be better equipped to solve the problem at hand.
A key way to help you understand more about why customers are churning is by implementing a survey into the unsubscription process. Within this survey, you should include a set of carefully crafted questions that will enable you to acquire as much detailed information about the user as possible, in turn helping you gain a deeper understanding of the motivations and reasons for cancelling. But make sure that the survey is brief and easy to understand to gather more data from your audience. Once you have a better understanding of why customers are cancelling through surveys, you’re instantly in a better position to tackle the problem and take action.
2. Create and set goals
Once you have established why customers are churning, whether that be voluntarily or involuntarily, defining a set of customer retention goals is key in helping steer your OTT platform away from the issue of a high or rising churn rate.
Being specific with your goals is crucial. Be as scrupulous as possible, and define goals that are both measurable and achievable. Each goal should be informed by a detailed plan on how each will be achieved within a specific time frame. For example, you could set goals such as:
- Achieve a churn rate of below 10% by the following quarter
- Ensure that involuntary churn is reduced by 75% in one year by integrating a third-party payment solution into your service
3. Address involuntary churn
Unintentional payment failures are one of the main reasons for subscription cancellations, causing a headache for many OTT platforms. As touched on in one of the example goals above, working with a third-party payment solution provider allows you to gain a deep insight into billing intervals. Alongside this, many payment solution providers also provide options to alert subscribers when their payment on file needs to be updated, ensuring that their subscriptions don’t lapse.
Addressing involuntary churn isn’t just limited to integrating third-party payment solutions, as other options include:
- Allowing subscribers to pause their subscription for a select period of time
- Ideating and executing win-back campaigns to notify churned users of the amazing content they’re missing out on
- Re-billing accounts with insufficient funds in the middle and end of the month
4. Offer an unmatched user experience
The success of an OTT platform comes down to a whole host of different factors, but two incredibly important factors to consider are the UX and UI. If your platform has a poor UX and UI with clunky features, unattractive typography, or is difficult to navigate, for example, users are likely to spend less time engaging with it, and if they’re that disappointed, they will have no hesitations in cancelling their subscription.
To improve customer retention and reduce churn, you must deliver a stand-out experience for subscribers that goes above and beyond. You must ensure that you are maintaining a high-quality UX and UI across platforms to engage users and ensure they keep on coming back for more, whilst also ensuring that you optimise the content discovery process to make your content easy to find within the app. Consumer choice is rising, so with the right content discovery strategy in place, you’ll gain a real competitive advantage.
We know a thing or two about UX and UI. Contact us to take your platform experience to the next level.Contact Us5. Produce and publish top-quality content
Without top-quality content, what do subscribers gain from subscribing to your OTT service? Users crave a constant stream of quality content that keeps them engaged, drawing temptation away from them even considering canning their subscription. Research suggests that almost 20% of subscribers churn due to finding a better content library elsewhere. In addition to this, around 10% churn when an OTT service removes their favourite shows or movies. These figures drill down on the sheer importance of a wide range of top-quality content for your audience, so ensure that you are always producing and publishing compelling content to reduce any chances of churn.
6. Create an engaging onboarding experience
To give your customer retention efforts a real boost, the creation and implementation of a well-rounded onboarding process is key. The onboarding process should enable a frictionless experience that leaves a long and lasting impression with the user, educating users on what to expect whilst also showcasing standout features.
For starters, keep it simple. The last thing users want once they’ve just subscribed to your service is to have to endure a long and arduous onboarding process that takes up more time than it’s worth. It’s vitally important to wow your users with a simple, short and engaging process that highlights and showcases the many benefits of your OTT service (as well as the awesome content!), provides clear instructions on what to do, and has a visually stunning and clean UX and UI that gives them a taste of what’s to come.
7. Review subscription prices
OTT services are easily dispensable due to the low cost of exit, meaning users can withdraw their subscriptions whenever they face even the slightest hindrance, in this instance, rising or high subscription prices. Due to their contractless nature, OTT subscriptions can easily be canned at the click of a button, and users can move on should they find a cheaper service offering a similar or even greater selection of content. As mentioned previously, users are tightening their belts more than ever, so reviewing the cost of subscriptions to offer users a fair but competitive price is worth considering.
8. Evaluate your streaming business model
As we mentioned in the introduction, subscriber churn has been impacted by users turning to cheaper or free alternatives, favouring tolerating ads over paying pricy monthly subscription fees. Incorporating an AVOD subscription tier could offer your audience a more affordable alternative to cancelling their subscription, keeping them on your platform while monetising their viewing hours in a whole new way. Two of the streaming industry’s biggest players, Netflix and Disney+, have already announced that they are introducing an ad-supported tier later this year.
9. Drip feed your audience episodic content
Is the time for bingeing episode after episode coming to an end? If a user has a subscription to keep up-to-date with the latest content, it could make more sense to drip feed this over a period of weeks or months to encourage them to keep their subscription, as opposed to giving them the entire series to watch in a weekend of bingeing and have them cancel immediately afterwards. Of course, there is a balance to find here, as one of the major appeals of paying for a subscription service like Netflix is the opportunity to binge watch a series. With that said, we are already seeing more and more of this tactic from Netflix, who have taken prolonged mid-season breaks with hit shows like Stranger Things and Better Call Saul.
Conclusion
With a large number of factors at play in recent months resulting in the decline of subscriber numbers to OTT platforms across the board, there has never been a more important time to drill down on the hot topic of churn and tackle the issue head-on.
In recent news, streaming goliath Netflix is tackling the issue of subscriber churn as they have recently lost almost 1m subscribers between April and July. As mentioned above, Netflix’s solution to this issue is to introduce a new ad-supported streaming service set to debut in early 2023. This new, cheaper service offered by Netflix has the potential to attract both existing customers inclined to cancel over recent price hikes, as well as new households reluctant to commit to a subscription. Understandably, not every business has a budget like Netflix, but Netflix is setting an example for the rest of the industry on how to stay relevant in a changing world.
With the strategies on how to reduce churn presented above, such as establishing why subscribers are churning, ensuring you have a stand-out UX and UI, and creating an onboarding experience, your platform can expect to see a reduction in churn and an increase in customer lifetime value. What’s not to like about that?
