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Churn closes in on customer acquisition as the priority for streaming services

March 12, 2020 | By Michelle Manafy, Editorial Director – DCN @michellemanafy

About a third of households are likely to adopt a vMVPD service within the next year according to Parks Associates research service OTT Video Market Tracker, which analyzes the impact of new and existing video services in the OTT space. Pluto TV, Crackle, and The Roku Channel are the leading ad-supported OTT options, though Parks finds that no single service currently dominates the vMVPD market.

Parks latest report finds that one-third of broadband households have trialed an OTT subscription service in the past six months. The good news is that two-thirds of those trialing OTT services subscribe to one or more of the services that they test.

That said, this is competitive market filled with an ever-growing number of choices. Thus, Parks finds that churn is “particularly intense in the pay-TV sector.” They advise that “building a strong customer base over time and continuing to serve its needs through content” is the best way to prevent churn. Netflix, Amazon, and Hulu have substantially lower churn rates than less-established OTT players. However, they point out that, particularly where differentiation is limited (as in vMVPDs), tenure in the market may not be enough to produce loyalty.

Parks also finds that:

  • Given that vMVPD services are relatively new, service churn is high as consumers test the different options available. Significant subscriber losses by DIRECTV Now (AT&T TV Now) contribute to this figure.
  • A preference by some consumers for pay TV, service contracts, bundling discounts, and the hassle of switching providers all contribute to lower annual churn rates for pay-TV providers compared with OTT or vMVPD services.
  • The Pay-TVchurn figure for Q3 2018 includes all pay-TV services, including both traditional and vMVPD.

OTT services are increasingly moving beyond customer acquisition as they seek to build a sustainable customer base. The upcoming market entry of Disney+, Apple TV+, HBO Max, and NBC’s Peacock (among others) has caused many industry players to reassess their approach to retention and consumers’ interest in subscribing to multiple streaming services.

By better understanding consumer attitudes, motivations, and habits related to churn, service providers can more effectively create service experiences will reduce churn and create a loyal customer base.

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